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Silver breaks out

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Silver breaks out

Silver prices broke higher above resistance despite a reduction in futures positions by hedge fund. Silver prices gained tractions on Monday even though the dollar gain ground against most major currencies, as interest rates continue to move lower for the US after moving as high at 2.75% on the 10-year yield.  Traders are focused on the FOMC’s potential tapering which is not scheduled to occur until after the Fed meets during its September 2013 FOMC meeting.

Hedge funds reduced long positions and simultaneously increased short positions in a combination of futures and options contracts according to the most recent commitment of traders report released on Friday by the CFTC.  According to the report, managed money reduced long positions by 965 contracts while increasing short positions by slightly more than 1K contracts.  Managed money is now long more than 28K contracts while short slightly more than 20K contracts.

Silver prices broke out above trend line resistance near a downward sloping trend line that comes in near 2.05, and then a horizontal trend line near 20.63.  Resistance is now seen near 22, while support is former resistance at 20.63.

The relative strength index (RSI) has shot higher along with prices and is printing near 61, which is in the upper end of the neutral range but still well below the overbought trigger level of 70.  Momentum is higher as the MACD (moving average convergence divergence) index is printing in positive territory after generating a buy signal late last week.  The signal occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.  The trajectory of the MACD is higher, reflecting accelerated momentum and potentially higher prices.

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