Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Happy Anniversary Silver Investors!

Commodities / Gold and Silver Stocks 2018 Apr 23, 2018 - 03:14 PM GMT

By: P_Radomski_CFA

Commodities

The silver volume that we saw last week was huge and we don’t mean only the one that accompanied the sizable daily price spike. The volume was huge also if we take the entire week into account. In fact, there was only a single week when silver rallied on volume that was bigger than what we saw during last week’s rally – ever. That was the 2011 silver top, when the emotions reached their zenith. But surely that was just a coincidence as there’s nothing else that connects these cases, some will claim, forgetting about the thing that is more important than price – time. The 2011 top formed on Monday, April 25th. You’re are reading this on Monday, April 23rd. Time is almost in perfect tune. Will this be a happy anniversary? It will, for those who are prepared.


Let’s take a look at silver’s long-term chart for the details (charts courtesy of http://stockcharts.com).

We marked the two biggest volumes that we saw during weekly upswings with red arrows. There were also two weeks when the volume during a rally was similarly big (but not as big) as the last week’s one. These were the weeks that preceded the 2011 top. In other words, the only situation that is similar to what we saw last week is the 2011 top and what we saw immediately beforehand. The implications are obviously very bearish for the following weeks. The less clear – but just as important – implication is that the decline that is likely to follow is probably going to be very sharp. This is what we’ve been expecting anyway based on several other techniques (i.a. silver’s oscillating characteristic and the similarity to the 2012-2013 decline), so the odds for this kind of movement increased further.

This well-confirmed expectation has important implications. If it wasn’t likely for the next big downswing to be volatile, it could make sense to focus on short-term price moves. But, since it is indeed the case that the decline is likely to be volatile, then it overall doesn’t seem worth it to engage in more short-term trading. It’s much better to lose a smaller fish and catch a much bigger one than the other way around. Of course, it’s not pleasant at the moment of losing the small fish, but it’s still the right and prudent thing to do.

In 2011, silver did two major things on Mondays that we saw at this time of the year. It topped on April 25th in intraday terms and it started its huge decline on May 1st.

So does this mean that silver will still rally for a week?

This could be the case and let’s keep the above analogy in mind in case the white metal moves close to Wednesday’s intraday high. However, we wouldn’t bet the farm on this particular silver forecast. History doesn’t have to repeat itself to the letter, especially that the rally that preceded the 2011 top was much bigger than what we saw recently, and it took more time. Therefore, back in 2011 it seemed necessary for the market to take a few extra days to cool down the enthusiasm and this doesn’t have to apply this year. The decline could start shortly – and in a profound manner – without the few additional days of higher closing prices.

Silver’s Outperformance Continues


                                 
On Thursday, we wrote the following on silver to gold ratio:

The silver to gold ratio shows that the ratio moved back to the rising black resistance line which it broke earlier this year. That’s the third time that that we’ve seen something like that in the recent history. Each breakdown below the rising black line was followed by a correction back to this line. Then the ratio moved lower once again.

That’s not the most important thing about the silver to gold ratio, though. The most important thing is that the RSI based on it moved very close to the 70 level and whenever the RSI gets above it and then declines, we see a major decline in the precious metals sector. To be clear, there are no certainties in any market, but please look at the areas marked on the above chart for details.

Now, the RSI is only at 66.84, not above 70, but let’s keep in mind that there were cases when the RSI didn’t move to 70 and we saw tops in its proximity. For instance, the early 2013 top and the late 2015 top.

This means that the precious metals sector could slide right away, but if silver outperforms just a bit more today (taking RSI above 70) and then declines in the following days, we’ll have a major and extremely effective confirmation that the final top is in.

On Friday (based on Thursday’s outperformance), we added the following:

Silver has indeed outperformed once again yesterday, but the outperformance in terms of the daily closing prices wasn’t significant enough to push the RSI above 70. It moved to 67.98, though, so it’s much closer to the key 70 barrier. It seems close enough to say that if we saw a sizable downswing in silver and in the ratio here, it would serve as a very strong confirmation that the final top is indeed in from the medium-term perspective.

Silver is declining so far today, so we could be seeing the start of the above.

Silver did decline, but it was still strong relative to gold, thus pushing the ratio a bit higher. The same goes for the RSI indicator based on it, which moved to 69.29. It’s almost right at the critical 70 level.

Combining this with the analogy to the 2011 top, we see a situation in which silver once again outperforms for a day or two and then slides erasing the entire previous week of gains, and then declines further.

On a very short-term basis, we see that silver declined, but as we discussed earlier, it would not be impossible – or bullish – for silver to test the Wednesday’s high once again before plunging.

Before moving to gold, let’s take a moment to consider what the likely effect of the upcoming price moves in silver will be on those who trusted silver’s outperformance directly and went long. Based on many years or working with investors and traders, we know this effect – people are likely to think and react to certain price moves. Naturally, there are always exceptions, but on average investors and traders often act similarly.

Those who went long silver are likely very happy with their positions right now, feeling very confident and dismissing anything that could make their position seem incorrect. Some of them would even respond very emotionally (even to the extent of being aggressive) to the suggestions that they should short the market. They are also likely to dismiss the decline initially and then to argue that the outlook remains bullish. Once the position is under water, they will convince themselves that their trading position is actually a long-term investment because of silver’s positive fundamentals (forgetting that silver’s fundamentals will not stop a short-term slide, just like they didn’t in 2008) and this will go on until the losses are unbearable, which is when they will capitulate. For the entire time they will likely be blaming everyone else and silver price manipulation in general.

Let’s keep in mind, however, that regardless of how you viewed the silver rally initially, it doesn’t have to work like in the above example – it’s not too late to get out of the market before the huge slide and re-enter at much lower price levels.

Summary

Summing up, silver’s anniversary is approaching, and many signs point to a scenario in which its celebration will take a rather grim turn for those who believed in last week’s sharp rally. At the moment of writing these words, it’s still not too late to get out of the precious metals market for some time in order to buy back and much lower price levels, but it may soon be. The funny thing about investing is that what is often difficult to do emotionally is usually also profitable. It seems that this is the case once again. Your patience and persistence are likely to be well rewarded.

Please note that the above is based on the data that was available when this essay was published, and we might change our views on the market in the following weeks. If you’d like to stay updated on our thoughts on the precious metals market please subscribe to our Gold & Silver Trading Alert.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com
Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules