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As we await the end of this silver correction, it is
appropriate to stand back and look at the bigger picture. To that end, take a
look at this chart which shows silver’s Bollinger bands, but in particular
the midline which is also the 20 month moving average.
(Click on image to enlarge)
Going way back to November 1998 after the Warren Buffett spike, the OHLC
bar range of silver dropped below this moving average. With that silver
re-entered its long-term bear market and what one would have been looking for
with this indicator was for the silver’s OHLC range to complete one full
month above and clear of the 20-month moving average.
This did not happen until May 2002 when silver’s low range for the month
was a mere one cent above the moving average and silver closed the month at
$5.02. This signaled the beginning of a silver bull market and the metal was
to trade above this moving average until September 2008 when the OHLC range
of silver traded fully below the moving average. That meant this moving
average kept you right on silver for six years and four months.
Having said that, I regard this setup as more of a buy signal as the
collapse below the moving average can be quite dramatic and swallow a lot of
your profits. I prefer to use more targeted indicators to identify the sell
points.
But getting back to this moving average, as the Credit Crunch of 2009
progressed, one would again patiently wait until monthly silver fully traded
above the average. That signal came one year later on September 2009 when
silver closed out at $16.62. The end came in May 2012 when the opposite
happened and silver fully traded below the moving average and closed out at
$27.69. That adds up to a two year and eight month bull run.
Now we come to the present day and having spent exactly four years under
the moving average, silver broke clear this May with monthly silver closing
at $15.99. Based on our prior examples, this suggests silver has now entered
a new multi-year bull market.
Further analysis of silver can be had by going to our silver blog where readers can
obtain subscription details for the Silver Analyst newsletter. A free sample
copy can be obtained by emailing silveranalysis@yahoo.co.uk.
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