The last time we discussed silver prices (last Wednesday) we made note of the short-term downward trend within the range dating back to the beginning of July. The sequence of lower highs and lower lows seen on the intra-day time-frame (2-hr chart) signified the path of least resistance as being – down. Our ultimate target before possibly seeing buyers step in was at 19.20, or the low-end of the multi-week range.

On Monday, silver tested 19.20, but barely held this level by the close of the session. Yesterday, selling pressure pushed it through with little support from buyers. This was not the test and rejection of support which piques our interest from the long-side. A test or drop below 19.20 and strong close back above would have given indication the bottom of the range was likely to hold. But that was not the case.

The drop below 19.20 exposes silver to further selling, but we need to be mindful of long-term support which exists from current prices down to the low-18s.

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The short-term trend remains lower, and as such a retest of the 19.20 level and failure may offer a good short set-up, even if only for a hit-n-run trade as silver falls into meaningful long-term support.

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From a long to intermediate-term standpoint, we have discussed on several occasions the belief that until record long positioning by large speculators in the futures market corrects with price, we believe silver will find it difficult to move higher. The weekly Commitments of Traders (COT) reports include activity from Wednesday to Tuesday and are released on Friday’s. This most recent drop should show a material decline in long holdings as large speculators have likely reduced their holdings during the past week. We will soon take a look at this dynamic and how it may impact the future direction of silver.