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The XAU Gold
Silver Index closed 2.69% higher on Tuesday at 190.63. The Gold Bugs
Index (HUI) closed 3.36% higher at 495.99. December gold closed 1.835
higher at $1,268. December silver ended 1.71% higher at $20.50.
Throughout the
last few weeks of summer there has been a slow, steady migration into silver
as an investment. Investor worries over the state of the global economy
have helped silver gain traction in the face of a low-volume stock market
this summer. The white metal has built some fairly strong forward
momentum this summer as a secondary safe haven among investors who desire the
protection of precious metals without the heftier price tag of the yellow
metal.
Silver stocks
have also benefited from this growing attraction among investors seeking
safety. The strong demand for silver shares can be seen in the internal
momentum indicators shown below. These indicators track the rate of
change (momentum) in the incremental demand for silver mining shares by
measuring the daily new highs against the new lows among actively traded
silver stocks.
As observed in
the previous commentary, crowd sentiment on the metals and mining stocks is
obviously running high but one get the sense it has quite yet reached the
dangerously high proportions seen at major tops. The number of articles
dedicated to the gold and silver in mainstream news publications has
increased in recent weeks but we still haven’t seen the enthusiastic
spotlight coverage that has always been the accompaniment of trading
peaks. At minimum, the increased coverage is a sign that investors
should exercise caution on the near term trend, using the favorable publicity
gold and silver achieves as a warning to tighten up stop losses on existing
long positions. Yet we don’t have a contrarian “sell”
signal yet since we haven’t seen those extreme levels of excitement
over gold and silver yet.
From a
fundamental standpoint, seasonal demand factors also bode well for
silver. The September-October time frame typically sees increased
demand for silver jewelry for wedding gifts. Silver has also enjoyed a
resurgence in the wake of higher gold prices, making silver more attractive
on a cost basis compared to other precious metals traditionally associated
with the fall wedding season.
The iShares
ishaers Silver Trust ETF (SLV), our proxy for silver, gave us an immediate
term buy signal in early August and has since taken off to new highs, closing
at a new rally high of 20.05 on Tuesday, Sept. 14. As long as SLV
remains above its rising 15-day moving average the main immediate term trend
is up. As long as the silver stock momentum indicators shown above are
rising, the path of least resistance for SLV and the silver shares is also
up. The SLV appears to be benefiting from not only the growing demand for
physical silver as a financial safety hedge but also from growing short
interest. Some high profile financial analysts have been recommending
short sales of the precious metals and mining stocks and this has only fed
the ongoing market rally.
Some of the technical
indicators have suggested a top was imminent in recent days, but technicals
mean very little in a runaway momentum market (as the short sellers are
learning to their chagrin). An unusually high number of silver stocks
made new quarterly highs on Tuesday; in fact, 20 of the 40 or so stocks on my
list made new highs. This is abnormally high and suggests an
immediate-term correction is imminent (likely needed to work off the
excessive internal “heat” generated by the latest rally).
But as long as internal momentum remains up, higher highs are likely
notwithstanding the immediate term corrections along the way.
Silver Trading
Techniques
With the precious
metals long-term bull market well underway, many independent traders and
investors are looking for ways to capitalize on short-term and interim moves
in the metals. Realizing that the long-term “buy and hold”
approach isn’t always the best, many are seeking a more disciplined,
technical approach for realizing gains in the market for metals and the PM
mining shares.
It’s for
that reason that I wrote “Silver Trading Techniques” back in
2005. My goal in writing this book was to provide traders with some
reliable trading indicators for anticipating and capturing meaningful moves
in the price for silver and the silver mining shares. Included in this
guide are rules for using the best moving averages when trading silver
stocks, how to spot a turnaround in the silver stocks before it happens
(best-kept secret!), how to tell when a silver stock has topped and which
moving average crossovers work and which don't . Also explained
are the best technical indicators for capturing profitable swings in silver
and silver stocks and how to apply them.
You won't find
these techniques in a copy of Edward's & Magee's book on technical analysis
or anywhere else. These reliable "tricks of the trade" are
available to you in Silver Trading Techniques. Click here to order:
http://www.clifdroke.com/books/silvertrading.mgi
All orders for
the book will also receive a FREE copy of the recently published, “Gold
Stock Trading Techniques,” which contains reliable strategies for
short-term technical trading in the gold mining shares with an emphasis on
safety and capital preservation.
Clif Droke
Editor, The Daily
Durban Deep/XAU Report
Clifdroke.com
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