Silver markets fell rather rapidly during the session on Monday, testing the result of anyone left willing to buy. The market went as low as $17.25 or so, and then found enough buyers to come back into the marketplace and bounce significantly to form a nice-looking hammer. However, I feel that this market will continue to be very negative, and I have no interest whatsoever in buying silver, at least in any of the leveraged markets. (That’s not to say that I wouldn’t buy physical silver, and I am in fact “averaging in” as the markets drop. I do believe that eventually silver will become an excellent retirement vehicle, and I am looking at it more as an investment than anything else.)

The shape of the hammer does suggest a perhaps we could bounce from here, but really I think there is a significant amount of resistance at the $18.50 level, which is an area that has been supportive in the past. Because of that, it should now become resistance, and we also have seen a bit of clustering in that general vicinity anyway. So with that, I believe that the market probably won’t go any higher than there.

Massive downtrend, don’t see any change coming.

I don’t see any change coming in this massive downtrend, and quite frankly I don’t feel like fighting it. That’s not to say that we won’t have bounces from time to time, but I believe that selling rallies in this marketplace should continue to be the way going forward. Looking at the longer-term charts, I believe that the recent breakdown was a collapse of a descending triangle, and that triangle measures for a move down to the $12.00 level. With that, I look at the longer-term charts and recognize of the $12.00 level should be supportive anyway, so I think it’s a nice target.

If we bounce above the $19.00 level, I would start to think about possibly going long at that point in time. Truthfully, I would prefer to see some type of longer-term buy signal, such as found on a weekly candle or even monthly. At this moment in time, I believe that selling leveraged instruments will be the way to go, but buying physical silver will be a solid longer-term play.