Broad Selloff Early In Overnight Session, 5/6/12: Conservatism on the S&P500 & Less Short Banks in AG

Precious metals are down early in the Sunday overnight after a turbulent end of the week for the S&P 500 futures. There is broad overhead resistance at the 1350-1400 price level, much like there was in August 2011, when a big sell off sent stocks down towards 1100. This is a price level at which commercial hedgers went very long the stock market and rode this current 6-10 month stock market rise. Currently they are even, neither long nor short. The following month, September, saw gold break its record price in dollars at $1920.

In a broad selloff the nearest resistance is the 1100-1200 level but this thing could fall down to 700 over the course of a few days if not fewer. Once again silver edging towards the $30 price level, through which it broke last week experiencing resistance at $29.80. In early overnight trading, the metal is again pushing down towards the $30 price level, but obviously this number holds considerable resistance.

On Friday, silver rallied late to close the week shy of $30.50, which considering the near-term price action was optimistic. The cartel did not have much success pushing the metal below $30 except for the thin trading of the early session Thursday of last week.  Silver is modestly lower this Sunday currently trading at $30.11, and provided the stock market does not see a huge selloff, it should prove to be the toughest market on silver, as the near-term trend in busier trading sessions would be for silver target $31.50.

Commercial hedgers have lightened up massively on their silver short position, similar to their position of September 2011 when they took the opportunity of a drop from shy of $40 to $26.00 to lighten their shorts and go…less short. Right now they are approximately 100 million ounces of silver short, opposed to their often 250 million ounce short position.