The latest actions in the price of silver have helped confirm the newly emerging bull market.
In early January, silver prices twice tested $15.75 to close above $15.70. The second time they tested that level they quickly reversed, with silver dropping back to $15.55, then gradually falling even further.
As stocks enjoyed a healthy rebound, accompanied by a relief rally for the dollar, traders rotated out of the metal and into assets enjoying upward near-term momentum.
But last week's dollar relief rally came to an abrupt end, while markets began looking ahead to this week's Fed meeting.
The DXY dropped off considerably as investors turned their interest toward earnings season and began pricing in continued dovishness from the Fed.
That drove a dramatic rebound in silver above $15.70. Here's exactly how the price of silver is moving now...
Although silver prices enjoyed some mild strength through most of last week, the real action was back-end loaded.
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The metal traded in a narrow $0.15 range between $15.28 and $15.43 from Tuesday, Jan. 22, through Thursday, Jan. 24.
Meanwhile, the DXY was consolidating with a downward bias, trending from 96.45 to 96.10. But on Thursday the dollar rallied, pulling the DXY up to 96.67, and the silver price retreated to $15.29.
Here's the DXY action of the past week.
Friday's morning sell-off in the dollar torpedoed the DXY, which dropped from its Thursday peak to near 95.75 late Friday.
Silver prices initially weakened then reversed on Monday thanks to safe-haven buying, further dollar weakness, and more softness in stocks, ending the trading day at $15.72.
Now, here's where I see the price of silver heading after this week's FOMC meeting...
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The dollar's moves have helped confirm what I expect from the DXY.
In fact, last week I told you:
"With Monday's action, we've seen the DXY bounce up to the 96.45 level on an intraday basis. But I think the 50-day moving average near 96.35 is likely to act as overhead resistance.Concerns about trade wars, the slowing of global economic growth, and a more dovish Fed are all likely to keep pressure on the dollar and ensure the prevailing trend remains downward.
And that should be supportive for silver prices."
Sure enough, the DXY has so far tested the 50-day moving average as overhead resistance, then reversed by about 90 basis points.
If the Fed does indeed continue to lean dovish, then the dollar's likely to continue its path south. As the Fed continues to shrink its balance sheet, it will likely be forced to telegraph a dovish stance to help counterbalance. We'll know more in the next couple of days.
As for silver, it continues to look healthy.
And this chart says it all.
After surging above its 200-day moving average in late December, silver's latest retreat found the 200-day level as support, as I suggested last week. Friday's big surge from that level is notable, especially accompanied by big volume.
The Fed telegraphing a continued "data dependent" approach and dovish demeanor could be the catalyst to push silver prices higher.
My next obvious target is the psychologically significant $16, then the $16.25 level, which was support for an extended period.
Looking at my recent silver recommendations, the 2x leveraged ProShares Ultra Silver ETF (NYSE: AGQ) has reversed and is now up 2% and remains a buy.
The Global X Silver Miners ETF (NYSE: SIL) has also reversed its minor loss and is up 1.75%. SIL is a buy.
The SLV January 2021 calls with a strike price of $15 quickly recouped most of their losses and are now off about 3%. Given their long term to expiration, they too remain a buy.
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