Covestor model: Technical Swing
I turned bullish on silver on January 17 and added the silver ETF (SLV) to my Covestor portfolio. On Friday (3/2), I finally closed the position.
Prices of the metal are highly correlated to the US Dollar. The 10 day correlation is currently at -0.85, which essentially means that if the Dollar goes up, silver is likely to go down.
So from a technical perspective, one needs to analyze the greenback when trying to understand silver’s moves. The Dollar had weakened during the first two months of the year, but has recently put in a bullish “double bottom” pattern on its daily price chart. This action suggests a short-term trend reversal and could lead to a stronger US currency in the next weeks, which likely would pressure silver prices due to the inverse correlation of both assets.
The metal can be very volatile, so one has to move fast when engaging in the silver market. On September 23 for example, prices declined by 14% on a single day. Currently, silver futures are trading at a very important support level around $34. A rapid decline could follow should silver break these levels. These risks didn’t justify staying long.