It’s been a rollercoaster ride to start 2021 for the Silver Miners Index (SIL), with the index beginning the year with a 9% return, only to see this turn into a (-) 9% year-to-date return a week later. This disappointing reversal has occurred due to a massive U-turn in metals prices, with the silver price (SLV) sliding 12% in two weeks just as many were proclaiming the metal was on its way above $30.00/oz.
Fortunately, while this has been a very nasty reversal, we haven’t seen any significant technical damage to the index just yet. This is because the Silver Miners Index remains above its key support level at $39.80, which is the key to the bulls remaining in control of the bigger picture. Let’s take a closer look below:
While the incredible start to 2021 for the Silver Miners Index was certainly exciting, it was quite short-lived, with the ETF running into sell signals near $50.00 per share, just shy of a strong resistance level. A normal correction of 5-10% from this level would not have been alarming at all and would have suggested we were seeing accumulation.
Unfortunately, we’ve seen a nearly 20% correction instead in less than ten trading days, which is a bit of a red flag if we can’t see these losses recovered soon.
While this doesn’t mean that the index has to continue lower, the bulls must start to play some defense here. This is because the index is now coming into a key support level at $39.80 weekly, and a drop below this area would be a negative development for the medium-term picture (3-6 months).