Are Gold and Silver Ready for a Momentum Breakout?

Although we are watching for another step up in the major indices, we are also looking at safety plays in commodities. Specifically, analyzing precious metals such as gold (GLD) and Silver (SLV), one thing stands out when using our Real Motion indicator. While both symbols have similar price action, one is showing a potential breakout in momentum.

In the above two charts, you can find our Real Motion indicator (RM) under the price chart. When using this indicator, we teach people to watch for divergences between price and momentum, since they can give great trade setups or lead to them. Currently, SLV is looking to break over its 200-DMA (green line) in RM.

After a fair amount of time trending sideways, if SLV can clear and stay over this level, we could see a shift in price, which has also been stagnant for the past 3 weeks. With that said, what makes this move over the 200-DMA so important in RM is how far the price is from its 200-DMA at $21.40.

Turning our attention to GLD, although gold is not clearing over its 200-DMA in RM, it has a potential lead over SLV, since its price is already over the 200-DMA. This shows that price is stronger than momentum and we should look for both price and RM to align for a potential GLD trade.

Another thing to note is volume. Yesterday, we talked about how decreasing volume in the major indices could lead to a big move. This can also be the case for the precious metals, as we can see volume has been drying up. Therefore, we need to keep an eye on GLD if it holds over its 200-DMA in price and eventually clears the same moving average in RM. On the other hand, watch for silver to breakout in RM, along with price clearing over its recent high of $20.65.

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ETF Summary

  • S&P 500 (SPY): 417.44 to clear.
  • Russell 2000 (IWM): watch for second close over 50-DMA at 190.
  • Dow (DIA): 334.73 the 50-DMA resistance.
  • Nasdaq (QQQ): 314.56 resistance.
  • KRE (Regional Banks): 65 resistance.
  • SMH (Semiconductors): Watch for a push towards 250.
  • IYT (Transportation): 241 next area to clear.
  • IBB (Biotechnology): 112 support area.
  • XRT (Retail): 68 to clear.

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education