Technical analyst Clive Maund charts silver and
finds it is still quite a long way from breaking out of its base pattern.
The charts for silver look nowhere near as strong as those for gold, but
that is normal for this stage in the cycle, as at the start of major sector
bull markets investors tend to be cautious and conservative and favor gold
over silver. Before going any further note that many of the observations made
in the parallel Gold Market update, particularly regarding the
dollar and precious metals stocks, apply equally to silver so there is no
need to repeat them here, which is why the Silver Market update tends to be a
lot shorter than the Gold Market update.
Starting with the 10-year chart we see that the giant base pattern in
silver appears to be taking the form of a Double Bottom, instead of the
complex Head-and-Shoulders bottom that we saw in gold. Silver certainly looks
weaker than gold here and is still quite a long way from breaking out of its
base pattern, and it will take a break above $22 to finally break clear out
of it.
The shorter-term 6-month chart looks more similar to that for gold with the
same kind of parabolic slingshot move building. Within this curved uptrend it
has tracked sideways since early January, which has allowed its earlier
overbought condition to almost fully unwind and the rising 50-day moving
average and parabolic uptrend to come into play, setting silver up for
another upleg imminently, which is made more likely by the dollar looking set
to drop soon, as we saw in the Gold Market update. We have just seen a
bullish cross of the moving averages, which helps.
As with gold, no recent COT charts are available due to the disruption caused
by the U.S. government shutdown.
Finally, we are going to take a look at the silver relative to the broad
stock market chart, as we did with gold. On a 6-month chart for silver over
the S&P500 index, with silver at the top and the S&P500 index at the
bottom, there are two very important observations to be made. The first is
that silver performed well when the stock market tanked in December—this is
important to know, because it means that if the market tanks again soon,
silver will likely do well as a safe haven, unlike in 2008, which will
probably be due to the dollar being weak at the same time. The second key
point to observe is that even though silver has held up well so far this
year, it has still taken a back seat to the stock market, against which it
has underperformed, resulting in a correction on its relative chart back to
relative support, which again suggests that silver will shine if the stock
market turns and drops hard, as in December.
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Charts provided by the author.
CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr Maund, based on data
available to him, at the time of writing. Mr. Maund's opinions are his own,
and are not a recommendation or an offer to buy or sell securities. Mr. Maund
is an independent analyst who receives no compensation of any kind from any
groups, individuals or corporations mentioned in his reports. As trading and
investing in any financial markets may involve serious risk of loss, Mr.
Maund recommends that you consult with a qualified investment advisor, one
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with financial ramifications. Although a qualified and experienced stock
market analyst, Clive Maund is not a Registered Securities Advisor. Therefore
Mr. Maund's opinions on the market and stocks can only be construed as a
solicitation to buy and sell securities when they are subject to the prior
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