White Lightning

Parabolic prices attract traders like flames attract moths. The effect is often the same as well.

The past few weeks saw silver prices go vertical. Last week they touched levels not seen since the Hunt Bros episdoe in 1980. Recently, volume on the ishares Silver Trust ETF (SLV) has been eclipsing volume in the SPDR S&P 500 ETF (SPY).

Over the past 4 days, prices have reversed hard. Silver is down about 25% in four days. Part of this can be attributed to margin requirement increases for trading silver contracts on futures exchanges. A more likely rationale, however, is that silver prices experienced classic trend exhaustion.

An old trading saying goes 'Don't catch a falling knife.' Despite the warning, I'm taking a stab (pun) at SLV from the long side as there appears to be some technical support around the $36 level. More significant support lies below in the $30-32 area which may be the place for a serious position if/when.

This is a classic 'fast market' right now, and trading it is not for the faint of heart. Silver didn't earn its White Lightning monicker by accident...

position in SLV, SPX