• 539 days Will The ECB Continue To Hike Rates?
  • 539 days Forbes: Aramco Remains Largest Company In The Middle East
  • 541 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 941 days Could Crypto Overtake Traditional Investment?
  • 946 days Americans Still Quitting Jobs At Record Pace
  • 948 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 951 days Is The Dollar Too Strong?
  • 951 days Big Tech Disappoints Investors on Earnings Calls
  • 952 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 953 days China Is Quietly Trying To Distance Itself From Russia
  • 954 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 958 days Crypto Investors Won Big In 2021
  • 958 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 959 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 961 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 962 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 965 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 966 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 966 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 968 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Silver Market Update

Originally published October 18th, 2015.

Silverbugs have been getting worked up this month about the possibility of a new bullmarket in their favorite white metal, due to its sharp rally in the early days of the month, but as we will see in this update, the long-term charts and latest COTs reveal that there is little real cause for celebration - on the contrary, we should beware of an imminent downturn in silver and more than that, position ourselves to capitalize on it.

If we start with the 6-month chart, we can quickly see what got silverbugs and their cheerleaders stoked, the sharp rally in the early days of the month, which took silver to a 3-month closing high. The problem now is that not only has silver not made any further significant progress since, as it has battled the resistance near to its 200-day moving average, but the Commercials have been aggressively piling on the shorts as we will soon see, and when you see people who are almost always on the right side of the trade, it's not a bad idea to align yourself with them. Before leaving the 6-month chart we should note that the 50-day moving average is still quite a way below the 200-day, which is not a favorable configuration.

Silver 6-Month Chart

The Commercials certainly don't look like they are guilty of reckless behavior when we consider silver's 5-year chart. As we can see it remains stubbornly locked within a major downtrend, and with recent new lows and its moving averages in bearish alignment, this chart provides little real reason for excitement. What would it take to change the still dismal outlook? - that's easy to answer, a clear breakout from the long-term downtrend. This is not likely to occur of course unless the dollar index breaks down below the critical 92.50 - 93 support level on the index and drops away, so we will continue to keep a keen eye on that.

Silver 5-Year Chart

The fact that the Commercials are piling on the shorts here, as we can see on the latest COT chart below, of course implies that both gold and silver will drop, which further implies that the dollar will rally away from the danger zone (shown on the dollar index chart in the parallel Gold Market update). "How could the dollar rally recover?" you may well ask, given the Fed's enormous money printing of recent years which must be inflationary, and which is still coming through the pipe, but don't forget that this has to be set against a far greater $500 trillion mountain of atrophying trash overhanging the world financial system in the form of a plethora of bonds and derivatives, which is what is really strangling the world economy.

Silver COT

Finally, do not forget that even though the dollar looks like it will recover here to a certain extent, and gold and silver drop, that doesn't mean it's "out of the woods" - it could still turn and drop later and crash its key support.

 

Back to homepage

Leave a comment

Leave a comment