• 4 hours Toyota Tests Solar-Powered Prius
  • 22 hours Why The Gold Rally Flatlined
  • 1 day The Uranium Sector Can’t Catch A Break
  • 2 days Upcoming Fed Meeting Has Investors On Edge
  • 2 days Global Gold Sector Outlines Responsible Mining Principles
  • 3 days China’s Giant Vampire Fund Loses $120B
  • 3 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 3 days Savvy Investors Are Betting Big On This Little Data Company
  • 4 days How The Government Is Wasting Tax Money This Year
  • 4 days Supply Concerns Halt Expansion On Tianqi Lithium Plant
  • 4 days The World’s Biggest IPO Is Almost Here
  • 5 days The Relatively Of Money And Happiness
  • 5 days Wall Street Unfazed By Recession Fears
  • 5 days SoftBank Urges WeWork To Pause IPO Plans
  • 6 days Anti-Aging Market To Hit $55 Billion
  • 6 days JPM, Morgan Stanley Take Advisory Roles In Aramco IPO
  • 6 days Are Bonds In A Bubble?
  • 7 days The Unknown Media Giant Taking The World By Storm
  • 7 days From Millennial To Millionaire With One Simple Trick
  • 8 days The 5 Most Expensive Art Pieces Ever Sold
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

  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