by Turd Ferguson, TF Metals Report: We've been watching CDG climb all week toward the important level of $1250. With price butting up against some key technical indicators, we'll want to watch price into the close to see where we end the week.
First of all, I'm at MamaFerg's house this morning and will be here again for a day next week as we work with PapaFerg. So, unfortunately, we'll need to keep this post somewhat brief.
You've no doubt seen the action so far today in both USDJPY and CDG. With USDJPY falling to new weekly lows (I have a last of 111.32), the pressure to move CDG up and through the important 50-day and 100-day MAs is building.
As far as USDJPY goes...Let's see what the rest of the day brings. DO NOT be surprised is another "hook" develops over the next hour or so as the G-3 almost always try to rally this pair during NYSE hours. However, the damage has been done and, unless a huge rally and bounce develops today, the pair are set to paint a weekly close below their 200-day.
And so here we are. The falling USDJPY has allowed HFT buying on CDG. We bested the 200-day MA back on Monday and we mentioned than that the next, critical test would be the confluence of the 50-day and 100-day MAs near $1250. Why is this critical? Because many of the Large Specs take their trading cues from the positioning of price versus these indicators. By moving price back above all three MAs, the Large Specs will begin to cover their massive GROSS short position and even switch to being long. The result is considerable NET buying pressure and the potential for a steadily (maybe even rapidly) rising price.
If you've been following along, then you know that we've expected a steady climb in Comes Digital Silver until it finally encounters its own 50-day near $16.60. Well, finally, we're getting close. Just as in CDG, climbing above the MAs will be the key to setting off some Large Spec short covering and, WHEN this happens, price could really accelerate upward for a few days. So, keep your eye on that 50-day as that's the first hurdle that needs to be overcome.