Chart usGOLD   Chart usSILVER  
 
Food for thought
There Ain't No Such Thing As a Free Lunch
Robert A. Heinlein  
Search for :
LATEST NEWS  :
MINING STOCKS  :
Subscribe
Write Us
Add to Google
Search on Ebay :
PRECIOUS METALS (US $)
Gold 1232.040.58
Silver 17.220.04
Platinum 1251.002.00
Palladium 780.504.70
WORLD MARKETS
DOWJONES 16678210
NASDAQ 445370
NIKKEI 15292153
ASX 539929
CAC 40 4140-18
DAX 9025-22
HUI 1850
XAU 760
CURRENCIES (€)
AUS $ 1.4404
CAN $ 1.4192
US $ 1.2647
GBP (£) 0.7884
Sw Fr 1.2058
YEN 136.7570
CURRENCIES ($)
AUS $ 1.1389
CAN $ 1.1219
Euro 0.7906
GBP (£) 0.6233
Sw Fr 0.9536
YEN 108.1220
RATIOS & INDEXES
Gold / Silver71.55
Gold / Oil15.18
Dowjones / Gold13.54
COMMODITIES
Copper 3.060.01
WTI Oil 81.14-0.61
Nat. Gas 3.60-0.02
Market Indices
Metal Prices
RSS
Precious Metals
Graph Generator
Statistics by Country
Statistics by Metals
Advertise on 24hGold
Projects on Google Earth
In the same category
Timing the Final Bottom in Silver
Published : May 25th, 2013
965 words - Reading time : 2 - 3 minutes
( 1 vote, 5/5 ) Print article
 
    Comments    
Tweet

We would like to start with a question from one of our subscribers today, as we believe that it is a good way to show the distinction between tools that help you spot what direction the market is about to move and those that are better suited to time the exact reversal point, which is – in current circumstances – the final bottom in gold, silver and the whole precious metals sector.

Q: (…) One thing that I do is to look for price divergence with RSI and MACD and that is evident in the charts. Price has hit a lower low and RSI and MACD have hit a higher high/low. To me that indicates a possible good time to buy GDX, GDXJ and mining stocks. This is a volatile time so it would be difficult to hold through this period. (…) Also $BPGDM is at zero and can't go any lower. (…)

There are divergences in numerous indicators now - such as RSI and MACD - on numerous precious metals-related indices and for individual mining companies. This, however, has been the case for some time. For instance on the GDX ETF chart you can see that the early April low was accompanied by a higher low in the RSI indicator, and preceded by a move higher in MACD. The early March bottom was also accompanied by a higher low in the RSI indicator.

The point is that divergences are good in showing that a given move may be running out of steam, but are not that good when it comes to determining whether the bottom is in or not. With a reverse parabola in gold and a long-term cyclical turning point that we wrote about in our last essay, we are quite certain that the end of the decline is near, and that's all that the divergences confirm. They don't suggest whether or not the bottom is already in.

The Gold Miners Bullish Percent Index was indeed at the 0 level and it couldn’t go any lower (it’s a bit higher today). That's true. But miners can. This index was at 0 in 2008 when the final bottom was formed - that's true. However, that's just a one-time event. It has some predictive power, but it's not all that strong as it's not a tendency. Statistically, we would have to see about 30 cases or more to speak of an existing relationship. But putting statistics aside, we would have to see at least a few cases with the same or similar outcome to say that this could be a tendency. Consequently, while the Gold Miners Bullish Percent Index being at 0 is a contrarian bullish factor, we think that other methods of analysis are more important right now.

Having briefly discussed some of the tools to time the final bottom, let’s see such tools in action. Let's move on to today’s chart section with the analysis of the silver market. We will start with the very long-term chart (charts courtesy by http://stockcharts.com.)

24hGold - Timing the Final Bot...

In this chart, we saw particular intra-week volatility but prices overall are not much higher, increasing by just $0.25. The week was pretty much flat and very little changed with respect to price or outlook.

Getting a closer look at this chart shows further similarities with the declines of 2008. We saw a 3 week consolidation period after the initial plunge before prices moved lower once again. Note how silver moved lower back then after initially correcting and closed the week close to the previous local low that ended the previous sharp decline. This is about where we are right now.
Based on weekly closing prices, we already have a breakdown below the early April low which is another confirmation of the similarity between now and 2008. The self-similarity now suggests increased volatility and a big decline ahead.

Now, let’s turn to silver:gold ratio as it is yet another tool that – thanks to self-similarities – helps us time the upcoming bottom.

24hGold - Timing the Final Bot...

We saw no significant underperformance of silver this week. The ratio has pretty much traded sideways for several weeks now. Although there was a bit of inter-week under- performance, it is much less visible than what we would expect based on the declines seen in 2008. The implication is that the final bottom is probably not yet in.

24hGold - Timing the Final Bot...

In the short-term SLV ETF chart, once again we see that prices moved higher early in the week and this move was strongly invalidated on Wednesday with volume levels nearly as high as Monday and Tuesday combined. Prices did move higher on Thursday but volume levels were pretty much average, actually a bit weak if compared to volume levels of the past week, and less than one-fourth of what they were the previous day, so the move to the upside did little to change the overall outlook here.

Summing up, the situation on the silver market does not look all that bullish. The cyclical turning point suggests a bottom in a week or so but we feel a need to see this confirmed by other markets. Placing our trust in this tool alone does not seem sufficient at this time. Even though we see divergences between many indices and particular mining stocks and main technical indicators, they only support the claim that the final bottom is about to form, but give no direct clues as to when exactly it is going to be formed. Here, the self-similar patterns seem more reliable and the best idea in our opinion is to wait for more decisive signals. In order to read the full version of today's commentary with our price targets for gold, silver and mining stocks and start receiving our commentaries on a daily basis, please sign up.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA

Tweet
Rate :Average note :5 (1 vote)View Top rated
Previous article by
Przemyslaw Radomski CFA
All articles by
Przemyslaw Radomski CFA
Next article by
Przemyslaw Radomski CFA
Receive by mail the latest articles by this author  
Latest comment posted for this article
Be the first to comment
Add your comment
TOP ARTICLES
Editor's picks
RSS feed24hGold Mobile
Gold Data CenterGold & Silver Converter
Gold coins on eBaySilver coins on eBay
Technical AnalysisFundamental Analysis

Przemyslaw Radomski CFA

Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
Przemyslaw Radomski CFA ArchiveWebsiteSubscribe to his services
Most recent articles by Przemyslaw Radomski CFA
10/23/2014
10/22/2014
10/22/2014
10/21/2014
10/21/2014
All Articles
Comment this article
You must be logged in to comment an article8000 characters max.
 
Sign in
User : Password : Login
Sign In Forgot password?
 
Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.
Disclaimer