The EWLS Indicator
HOUSTON -- One of the signs we are on the lookout for is a daily pattern of early weakness followed by late strength (EWLS). Ideally the late strength is stronger than the early weakness so that the issue ends up closing green despite a momentum-driven move lower in the early going.
Just below is a 15-day, 1-hour volume candle chart of SLV (the silver ETF). On Wednesday, April 25 we witnessed a close facsimile of what we look for, so we thought we would mention it. That it was on higher than usual volume lends credibility to it.
SLV 15-day volume candles.
No sign or signal by itself is ever enough to overwhelm all the other signals we watch, but it is interesting that silver attempted to “run the stop table,” so to speak, on Wednesday, and instead of tripping a giant wad of sell stops, breaking the precious metal much lower, silver fetched up in a “V” pattern on 1-minute and 5-minute tick charts.
At least for now silver is not yet willing to break to the area we have been targeting for reentry on subscriber charts.
That is all for now, but there is more to come.
Gene Arensberg for Got Gold Report
Edit Saturday, April 28 to update the SLV chart to see what followed.
Silver (and SLV) followed through to the upside, but on dwindling volume. The volume is not critical, but it (the case for reversal) would be more convincing had the volume been increasing rather than the opposite. As one might imagine we have witnessed reversals that have occurred on less than convincing volume in the past, with the volume only picking up once the apparent reversal has been in play for a few days to a week or so.
It is not entirely fair to expect the volume on follow through to exceed the volume immediately preceeding the reversal, but it is "fair" to expect the volume to be higher than the average volume for the period shown. That is what is missing from the chart above, although the price action suggests ample bidding/support just below Friday's close.
Absent a shock over the weekend, we would expect that most any dip in silver will be quite heavily bid again given the tight "V" signatures on 1-minute and 5-minute tick charts on Wednesday, April 25.
That silver's potential reversal was "answered" by an exhaustion style gap and reversal on both the HUI and XAU, and further answered by modest bounces on the GDXJ, GLDX and the CDNX, we'd have to assign a better than even chance that this is indeed a reversal attempt for silver underway.
Unfortunately, that means that silver may be fetching up above our green "add-to" targets. This is disappointing from our short-term trading point of view while good for our holdings of physical metal.
We'll see soon enough if this is the "Real Deal" reversal, or just a warning shot.