Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Seasonal Trend Analysis, Sell in Early May and Lose Average $1 per Ounce Each Year

Commodities / Gold and Silver 2010 May 14, 2010 - 02:17 PM GMT

By: Przemyslaw_Radomski

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleWe would like to begin this essay by touching on the popular belief that precious metals - and especially silver - tend to drop heavily this time of the year. The saying suggests selling in May and going away - is this really the best way to go? At Sunshine Profits we're rather reluctant to take the common knowledge for granted - we prefer to dig deeper and check ourselves if every fact is really fact, not just an opinion.


So, while the "sell in May and go away" phrase does appear close to being true, we would still prefer to provide you with details before making final calls. This week, we will provide you with two seasonal silver charts, as the white metal is known for is seasonal tendency do decline in May. Let's begin with the May chart, and then we will move to the June one.

If you are not familiar with the way of reading these charts - you will find a quick reminder below.

While the idea of seasonality is nothing new - for instance, most investors are aware of the summer doldrums pattern, which means that virtually all markets tend to trade sideways in the middle of the year, we are taking it to the whole new level not only by focusing on the precious metals sector itself, but also by taking a very detailed approach allowing for the seasonal patterns to be used also in short-term trades. Additionally, we are measuring the quality of projections made using this tool. As you will soon see, there are times when these patterns are really reliable and there are times when they are to be approached with caution.

The way the below chart "works" is this - we've checked silver's performance in each May/June from 2002 to 2009 and extrapolated silver's average performance to where it was at the beginning the month. If the history is to repeat itself then perhaps the average performance of silver in May provides us with a "road map" to where it is likely to go during the whole month. Of course gold does not move in the same way each year at the same day, but at times these tendencies could provide a valuable confirmation or (which is even more important) non-confirmation.

Surprising, isn't it? Based on the way silver performed in Mays from 2002 to 2009 we see that silver has used to move over $1 higher during May with the top being right at the end of the month. Yes, there is also a tendency for the white metal to move lower in the middle of the month, but it tends to rise once again in around the third week of the month or so. Then, the local top is formed around the end of the month.

So, does the above chart say that silver will go above $20.60 at the end of the month? No. No promises here, of course, but it does say that this is what used to happen on average so the "more average" this May is, the more reliable the above "roadmap" gets.

Taking a look at the green slope (quality of projection), it tells us that silver being 80 cents above the May 1st level is more certain at about May 27th, than it is at May 13th - the quality of projection is slightly higher in the former case.

Therefore, although it may seem like a no-brainer to dump one's silver holdings right now, seasonal tendencies don't scream "sell" at this point yet, as silver tends to rise during the whole month of May. In other words, while we may move slightly lower from here, seasonal tendencies suggest that PMs are going to be higher in about two weeks than they are at this moment.

Now, June the situation in June is quite different...

While the second half of June is nothing to call home about, the first two weeks tend to wipe out May's gains. While silver used to rise about $1 in May or so, it also used to decline about the same amount in June. Please note that we used Thursday's close as the beginning price for June. The goal was to put percentage moves into proper perspective, not to tell you that we expect to see silver at that price on June 1st.

The first 10-15 days of June are most likely to provide us with lower silver prices - still, the white metal didn't use to plunge before the end of May.

Summing up, silver - and also the rest of the PM sector - is not likely to plunge severely now - odds favor a decline in a week or two. Still, the main point here is that the "sell in May and go away" is slightly inaccurate, as the top is usually formed right at the end of the month. If one took this advice to the letter and sold in early May each time during the past 7 years, one would on average miss out on a $1 rally each year in silver. Therefore, let's keep in mind that there's much more to the analysis of the seasonal tendencies than just suggesting to "sell in May and go away."

Now, let's take a look at how we could translate the above analysis to the current situation. As you may know, this is just a small version of the whole analysis, so we will not cover everything here - instead, we will focus on PM stocks. Let's begin with the long-term HUI Index chart (charts courtesy by http://stockcharts.com.)

With respect to the mining stocks, last week we mentioned that the HUI was ready to move above its resistance level. As we know now, this finally happened for the first time since its February bottom. The strength of this move and the resulting momentum are significant. We may, in fact, see the whole PM market move higher. The RSI, slightly above 70 suggests that we are close to a local top but not necessarily at one.

What we see in our analysis of the charts leads us to believe the local top will be at or near the 2009 high. This reasoning is based i.a. on the fact that this level proved to be a very strong resistance level during both 2008 and 2009 highs.

Turning to the short term GDX ETF chart, we can analyze volume, which recently has seemed to be on the low side along with lower values of the ETF. This is normal during small pullbacks - not a signal of coming decline. So, we are bullish at this time to see a small move upwards.

Still, mining stocks do not show as great a potential as silver and gold at this time. In the Wednesday's Market Alert we wrote the following:

Given the strength of the momentum (confirmed by volume) it seems that PM stocks may need to slow down before the local top (also in gold) is reached. This is what we usually see before the top is in, and we didn't see it so far.

One other fact, which we wish to make note of here, is that the bottom, which we forecasted, took place exactly as stated (marked with the blue ellipse on the chart). 

For a final chart in this essay, the GDX:SPY ratio often forms tops and bottoms along with PMs and PM stocks. Therefore, what's bearish for the ratio is partly bearish for the whole PM market. As we have mentioned in the previous updates, tops are often accompanied by a huge volume, and they take place when the RSI is right at the 70 level.

The latter has been the place recently, so the question is if the volume has been high or not. We have marked it on the chart with a big red arrow as it is visible on a relative basis, but if we take into account the volume that we've seen from November 2009 to mid-April 2010, we see that the very recent volume is quite normal.

Comparing the current situation to what we've seen in November 2009 (final stage of the rally), it seems that perhaps we might need to see more significant spike in volume before we can state that the top has been confirmed.

Summing up, we are presently less bullish on PM stocks than on PMs, and we believe that they are not going to perform as well in the final stage of the rally, which by itself will serve as a confirmation that it is - in fact - the end of the rally.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski 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, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, 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