Technical Analysis

Trading is closed for the CAC40 today, however traders are looking forward to the resumption of trading this week with a series of high importance economic events. Euro CPI figures and Unemployment data for Germany are set to be the major fundamental drivers for European stocks and exchanges this week. In addition, traders should watch for the US NFP (Non-Farm Payrolls) release on Friday. Expectations are set at 242k for the event, but a strong deviation from this value may directly influence European Indices such as the CAC40.

Going into this week’s trading, the CAC40 technically remains in a consolidation pattern. This ongoing consolidation can be clearly seen using the point and figure chart above; as the pair has yet to significantly break to new highs after February’s bullish three box reversal. With the absence of a new high or low, this presents traders with two distinct possibilities. In the event of a bullish advance, traders will look for the creation of a new bullish box above resistance. Conversely, in the event of a bearish reversal, traders should look for a fresh bearish 3-box reversal and for prices to then challenge existing 2016 lows.

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This morning silver prices slid below the March 16 low of $15.22, which has triggered losses and a short-term bearish trend. The business press reports that precious metals are softer on a stronger dollar.

The short-term trend defining level for silver is the March 28 high of $15.39, as it’s the latest swing high and preceded by the March 22 high of $16.02. The next level of support is the March 3 low of $14.87, followed by the March 1 low of $14.75.

Data which may disrupt the down trend this afternoon are U.S. Home Price Index and Consumer Confidence. The former is expected to show an increase of 5.75% YoY, while the latter is projected to rise to 94 from 92.2 (according to a Blomberg survey).

By the end of today’s London session, Fed’s Janet Yellen speaks to the Economic Club of New York, and may hint what’s next for Fed’s Funds rate.
U.S. Overnight-index-swaps are currently pricing in 32 bps of rate hikes over the next 12 months.

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Talking Points

• Silver ends its short-term bearish trend by taking out the March 28 high of $15.39.
• The boost to silver prices occurred on a softer USD following a speech by the Fed’s Janet Yellen.
• The ADP Employment report is expected to show that 195K new jobs were added to the U.S. economy.

Silver prices are higher by 30 cents from yesterday’s low of $15.08. The surge in silver prices occurred on the back of dovish comments by the Fed’s Janet Yellen. Following these remarks, which suggest that the Fed may be cautious about future rate hikes, silver prices took out the March 28 high of $15.39.

The breach to the March 28 high of $15.39 ended the very short-term downtrend as the $15.39 high was the latest swing high before the boost to silver.

Silver prices are now trading without a strong trend in the short-term. The longer-term trend is also flat as silver prices have been oscillating around $15.38 since February 8.
We note the following resistance levels: $16.02, $15.72, and $15.46 with support being found at the following levels: $15.08, $14.87, and $14.75.

With the price of silver heavily influenced by the demand and supply of the U.S. Dollar, today’s ADP report may yet exert more volatility on the silver position.

The U.S. ADP Employment report is expected to show that 195K new jobs were created in March from 214K in February, according to a Blomberg news poll.

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The US Dollar is attempting to build upside momentum against the Chinese Yuan in offshore trade after pushing off support guiding price higher over the past week. Positioning is inconclusive however and gains may yet prove to be corrective in the context of a larger down move from the late-March swing high.

A daily close above the 38.2% Fibonacci retracement at 6.4845 opens the door for a test of the 50% level at 6.4931. Alternatively, a reversal below the 23.6% Fib expansion at 6.4767, a level bolstered by trend line support, paves the way for a challenge of the 38.2% threshold at 6.4662.


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The DAX 30 (CFD: GER30) has stalled below the critical resistance level and March high of 10,118. A break to the March high would have exposed the January 5 high of 10,400 and kept the bullish momentum going; instead, price remains trapped in the 9437 to 10,188 range.

The 9437 to 10,188 levels have kept the DAX 30 trapped since March. A break to the lower end of the range, the April 7 low of 9437 may expose the next support level, which is the February 24 low of 9123.
Macro-economic events, which may introduce some volatility to the DAX 30, are U.S. Industrial Production and University of Michigan Confidence. The share price of DAX firms tend to react to U.S. data as these firms source much of their gains from overseas and the U.S. business cycle tends to lead the European.

Industrial Production, due today, will help us to know better where U.S. GDP may be headed. Currently, it is one of the trouble spots of the U.S. economy, and the year-on-year growth has been consistently negative since September of last year. Development is primarily driven by the suffering energy sector and the strong USD.

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On Friday, silver prices attempted for a second time to breach the critical October high of $16.38, but the price had problems establishing itself above this level.

The October high remains significant from a technical perspective, as a break here would expose the next major high, namely the May high of $17.80. We do note that the $17.80 high is 8.6% higher than the October high of $16.38. An interim resistance level beyond the October high is the June 2, 2015 high of $16.88.
The short-term trend remains bullish above the April 14 low of $15.92. The trend is bullish, as the price has been creating higher swing lows over the last few weeks and the April 14 low of $15.92 is greater than the prior swing low of $15.81 (formed on April 12).

Potential support levels below the April 14 low of $15.92 are the April 12 low of $15.81 and the March 31 high of $15.55.
There are no major market moving events on deck today.

However, a theme, which has been dominating the markets today, is the steep decline in Crude oil prices. The lower prices occurred, as there exists no deal between major crude oil producers to freeze their output. This might play a role on the price of silver given that soft crude oil prices may affect risk-appetite worldwide, which in turn may affect the demand for haven assets such as silver.


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The CAC 40 is trading up 0.11% this morning, after an initial gap lower on the open. Of the 40 listed components on the Index, 33 are currently trading higher. Arcelor Mittal is again leading the pack trading up 3.16%. Of the seven listed declining stocks, Kerring has the largest loss on the day trading down -.93%.

Technically, the CAC 40 is again testing key resistance at the March 2016 high at 4,582. I have been watching this value, because graphically this point represents a lower swing high in the CAC 40’s 2016 downtrend. In the event that prices break above 4,582, it may suggest a significant turn in market momentum. I should mention that the CAC 40 is currently down -1.33% YTD. If prices breakout higher, it opens the Index to attempt to trade above the current 2016 high at 4,653. Alternatively, if resistance holds and prices fail to breakout higher, price action would suggest that the CAC 40’s current rise in price is just a retracement in an ongoing downtrend. In this scenario, I will be looking for price to potentially test the April low at 4,211 and then move on yearly lows under 3,890.

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-Quite the week for silver. The industrial/precious metal traded within 10 cents or so of its May 2015 high before tapering off. COMEX futures changed hands the most since the week that ended 4/19/13 (exactly 3 years ago). The volume on 4/21 was the most done in one day since 4/15/2013. Activity of this magnitude may indicate at least a short term market top. If weakness does materialize then watch for support in the mid-15.00s over the next few months (top side of former trendline resistance levels on log scale and a horizontal level). I’d want to see that level hold if silver is in the process of forming a major bottoming pattern.


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Silver COMEX Continuous Contract




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When a range has trapped price, the price may experience further consolidation until a break occurs and a potential trend emerges.

The upper end of the above-mentioned range is yesterday’s high of $17.62 and above this level the next resistance level are the May 3 high of $17.70, followed by the May 2 high of $18.00.

The lower end of the range is the May 4 low of $17.15. Below it, the April 27 low of $17.03 and April 25 low of $16.78 are acting as support levels.

The general tendency is for a higher than expected NFP outcome, lower unemployment rate and higher wage growth to force the Fed to raise rates, which may lift the Dollar and generate lower silver prices in anticipation of the Fed taking action.

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