As a newsletter writer who keeps an eye on the long term prospects for silver, there are a few indicators I follow which have proven reliable over the years past. When each indicator issues a buy signal in succession, the probability of a long term silver bull market increases and so does my confidence as a precious metals investor.
You will read various commentators who start pumping silver as soon as it makes a big move. That is not good enough if a reason is not given. We have seen big moves rise and fall these past five years, but none of them issued the buy signal that occurred yesterday in the silver market.
I am referring to the 20 month moving average for silver which is shown in the monthly chart below as a blue line threading through the silver candlesticks. The thesis is simple, when a given month's trading range for silver moves above and fully clears its current 20 month moving average, a long term bull market in silver has begun. There are only three times this has occurred for silver in the last 18 years - May 2002, September 2009 and now in May 2016.
When the two previous buy signals occurred, silver started bull markets which lasted 6.3 and 1.6 years respectively. The bulls ended when the silver prices did the opposite and fully traded for a month below the 20 month moving average; indicating a bear market was in force. These happened in September 2008 and May 2012.
Note that silver may yet flirt with this moving average and may track it for months (as it did through 2002 and 2003). However, the expectation from here is that silver will not fully trade below this moving average for a long time. There is still at least one long term buy indicator I am waiting on for further confirmation, but from here, it is increasingly looking good for silver in the long term.
After that, I move over to the long term sell signals, but that is another story.
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