May Comex silver futures on Monday spiked to a fresh 31-year high of $49.82 an ounce and came within a whisker of touching major psychological resistance at the $50.00 level. However, prices Monday then backed well off the daily high and closed near mid-range. Market action in silver Tuesday is seeing strong downside price pressure as May futures are presently down over $4.00 an ounce from Monday's high. If May silver futures prices on Tuesday close nearer the session low, it would confirm that a bearish "buying exhaustion tail" has occurred on the daily bar chart. A buying exhaustion tail occurs when prices push strongly higher and then promptly reverse course to back well off the high as the buyers became exhausted at the higher price levels. A confirmed buying exhaustion tail in the silver market would be one early technical clue that a near-term market top is in place.
At the very least, Monday's and Tuesday's price action in May silver futures now puts very strong technical resistance for the bulls to overcome at Monday's high of $49.82. Key for the silver market bulls now is to see if bargain hunters soon step in to "buy the dip" in market prices. Such has been the case in recent months as a three-month-old uptrend remains in place on the daily bar chart. It would take a move in May silver future prices below strong psychological and trend-line support at the $40.00 level to produce more serious near-term chart damage and to negate the aforementioned uptrend on the daily chart. Stay tuned!--Jim Wyckoff