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Possible Blow Off Top On Commodity Silver

The United States stock market may be closed, but commodities are still trading. What a session it was overnight with silver potentially putting in a blow off top. What is a blow off top? This term is used to describe the height of greed, where common sense and logic goes out the door and buyers rush in with reckless abandon. Almost always this is a near term top signal. In addition, this epic pop usually is caused in part by a short squeeze. A short squeeze is the term used when shorts panic and cover. Covering a short means they must by the commodity back, thus it increases net buying pressure.

Silver futures (September 2016 SIU6) spiked over the holiday session almost 10%. The commodity surged from $19.54 to a high of $21.21 before backing off to close at $20.41. Silver has been outpacing recent gains in all other commodities. From June 1st, 2016 to July 3rd, 2016, the commodity went from $15.83 to $21.21. This is a monthly whopping gain of 34%.

If the blow off top is correct, look for silver to retrace to a technical price target of $18.00 in the enxt week or two. This quick pull back usually follows a blow off top.