This is turning out to be a massive engulfing bearish candlestick that could create more selling, and if we drop below $70, I think things could get ugly quickly.
Silver
The silver market initially did rally a bit during the trading session, gapping higher as soon as Asia came on board. Unfortunately, we’ve probably seen a lot of people blow up today as they started chasing this thing to the moon, only to realize gravity is a real thing. The $70 level, so far at least, has offered a little bit of support, and that makes a certain amount of sense, but you have to keep in mind that at one point, the futures market was at $82.67.
That is a shellacking. This is turning out to be a massive engulfing bearish candlestick that could create more selling, and if we drop below $70, I think things could get ugly quickly. Does that mean that we have just witnessed the end of the uptrend? Probably not, but I think that sooner or later, something have to give. This cannot continue, and you can see that a lot of money has been made in this market, and it makes a certain amount of sense that maybe people are willing to take profit out of the market before the New Year starts.
Banks Trapped in Shorts?
Think of it this way: if you’re a money manager and you just made a massive amount in your silver futures, which were leveraged, you’re willing to report that to your clients and take a couple of days off. There are also rumors, although I don’t know the reality, but supposedly, the Fed had to inject liquidity somewhere due to somebody blowing up in silver shorts. Do not take that as gospel or even a reason to place a trade because I’ve been hearing about banks trapped in silver short positions for about 5 months now. And clearly, banks have stop losses and most certainly have risk managers. So that is more likely than nonsense.
With that being said, I suspect that a lot of banks actually front-run the short squeeze, and they’re probably taking some of the profit out of the market. I think that makes more sense. Ultimately, this is a market that’s still in an uptrend, but I think you need a couple of days for this thing to cool down. I wouldn’t touch this if my life depended on it. Quite frankly, I’ve been saying for two or three days now, this is one of the most dangerous places to live if you’re trading markets, and you’ve just seen why. I remain bullish longer term, but we need to really come back to reality.