As a newsletter writer who keeps an eye on the long term prospects for
silver, there are a few indicators I follow which have proven reliable over
the years past. When each indicator issues a buy signal in succession, the
probability of a long term silver bull market increases and so does my
confidence as a precious metals investor.
You will read various commentators who start pumping silver as soon as it
makes a big move. That is not good enough if a reason is not given. We have
seen big moves rise and fall these past five years, but none of them issued
the buy signal that occurred yesterday in the silver market.
I am referring to the 20 month moving average for silver which is shown in
the monthly chart below as a blue line threading through the silver candlesticks.
The thesis is simple, when a given month’s trading range for silver moves
above and fully clears its current 20 month moving average, a long term bull
market in silver has begun. There are only three times this has occurred for
silver in the last 18 years – May 2002, September 2009 and now in May 2016.
When the two previous buy signals occurred, silver started bull markets
which lasted 6.3 and 1.6 years respectively. The bulls ended when the silver
prices did the opposite and fully traded for a month below the 20 month
moving average; indicating a bear market was in force. These happened in
September 2008 and May 2012.
Note that silver may yet flirt with this moving average and may track it
for months (as it did through 2002 and 2003). However, the expectation from here
is that silver will not fully trade below this moving average for a long
time. There is still at least one long term buy indicator I am waiting on for
further confirmation, but from here, it is increasingly looking good for
silver in the long term.
After that, I move over to the long term sell signals, but that is another
story.
Further analysis of silver can be had by going to our silver blog at http://silveranalyst.blogspot.com
where readers can obtain subscription details for the Silver Analyst
newsletter. A free sample copy can be obtained by emailing silveranalysis@yahoo.co.uk.
