Friday Wrap: Um, so if you’re not on silver’s side, you might want to raise that white flag right about now. Silver is about to make things really messy…
This morning I asked if silver might test a 16-handle based on a new possible contrarian indicator?
So far my theory is wrong, but either way, we’re down, and it hasn’t been an easy day to sit through.
But we need to look at the bright side – we’re above $17, and believe it or not, the momentum is ours.
Now sure, there’s no way to give a post-game pep talk game after losing game, but things are looking up.
Don’t just take my word for it, but let the charts do the talking for you.
First, however, a little background for those who may be new to the precious metals.
Generally speaking, in theory and in practice:
Silver is gold’s volatile little sibling. Gold gets moving in a direction, then silver plays catch-up and starts moving even faster in that direction. Silver then reverses first (because of the volatility), and starts moving faster than gold in the other direction.
I’m sure I’ve jumbled, and mumbled, and couldn’t talk my way out of a wet paper bag with that explanation, so let’s just look at the point I’m making as it related to the 2011 run up in price:
You can see in that in mid-2010, price really started moving in gold, but silver lagged.
Silver was in a sideways channel for most of the year actually in 2010. But in late 2010, silver finally woke up from it’s slumber, and being the little ball of energy it is, silver started to seriously outperform gold in terms of price action.
Notice, however, that silver peaked out in late April of 2011, but gold continued its rally for five more months.
Now, nearly everybody agrees that gold & silver bottomed in December of 2015. After three painful years, here we sit in the spring of 2018 wondering when we’re ever gonna get our day in the sun.
Well, gold solidly performed last year, and this year gold has slowly but surely been gaining ground in terms of price, and gold has also been outperforming silver. But all of that started to change this week.
This looks like the week that silver finally takes over the reigns and starts to outperform gold in a big way.
Here’s how that out-performance looked this week:
Is this the start of silver’s catching-up to gold in terms of performance?
I think it is, not only because it’s the natural course for silver (since silver is such a smaller market than gold, it takes less currency to move the price), but because of that spec net short position on the COMEX.
Time will tell if I’m right, but so far, so good.
Even the gold to silver ratio was started really moving this week:
From Monday through yesterday, the number of ounces of silver it takes to buy one ounce of gold dropped by three ounces.
That’s a pretty impressive move as can be seen on the chart above.
There is more good news:
Silver is now back into positive territory on the year:
Silver opened the year at $17.03, and I get it, after Wednesday’s uber-bullish candle the rally fizzled out, but hey, we’re positive on the year!
Bitcoin can’t say that. The stock market (Dow Jones) can’t say that. Bond prices can’t say that.
But silver can.
Sure, the cartel was trying its hardest to end the week as a downer, but no fellow stackers and sound money advocates – the victory is ours. Yet again! For the third week in a row! But who’s counting? OK. I am.
But I digress.
It would have been nice to see more trading volume, especially with follow through momentum to end the week, but I’ll take a close above $17. Better than a 16 handle (unless you’re a buyer right now).
Here’s what those three weekly gains look like on the chart:
The weekly chart above helps out our cause bigly, and I would like to point out three things about the technicals.
While the volume waned off yesterday and today from the spike on Wednesday, volume, on a weekly basis, has been picking up. That’s a good sign. Also, the Relative Strength Index (RSI) shows silver has a ton of room to run before running the risk of being “overbought”. Another good sign. Finally, It’s hard to tell on the chart above. I was torn on showing it or not because I wanted to get the December 2015 bottom in as a reminder of just how far we have come, so I didn’t show it, but if you look closely on the Moving Averages Convergence – Divergence (MACD), that is a bullish crossover on the weekly.
Not to mention that big, fat, beautiful candle at the very end for this week.
We need to put things into perspective. Nothing has changed with the overall outlook. Gold and silver are in the early stages of long term bull markets, and while the day by day, week by week and even month by month can be frustrating at times, we’re on the winning side of this trade by holding physical gold & silver.
And yes, that goes for the people who bought silver at $25, or $35, or even $50, because sooner or later, and I think sooner myself with everything the fundamentals and technicals are signaling, those prices will be distant memories – the “good old days”, kind of like those people who talk about how it was when they were able to buy gold at $250 at the turn of the century.
Back on track.
Don’t beat me up for this, but gold had a nice healthy little pullback this week:
We’re still in the upper $1330s, ready to deal with that nasty wall of resistance at $1350.
The trend is up folks. And all we are doing is setting up to power through that wall of resistance with the authority and dominance appropriate for the big boy of safe havens (and hedges against inflation, and hedges against uncertainty, and hedges against political crisis, etc, etc, etc).
Besides, if the cartel is heck bent on smashing the sentiment out of this silver rally, which they are, but with silver starting to outperform gold and then silver getting knocked back the last two days of the week, then it’s understandable that gold has a pullback.
But what we are seeing is exactly what we want to see – silver outperforming gold.
On the daily, we can see gold’s fade:
If we end up below the 50-day moving average, we could spend a little time below it, but we’re still close enough from the last brutal beat-down that it won’t be much time below it at all. Besides, if the cartel does smash below the moving average (which they most certainly want to do), then all the cartel is doing is allowing for silver’s out-performance of gold to be that much greater.
I’m not worried here. Remember – buy the dip.
That’s what happens in bull markets. Traders buy the dip. If we were in a bear market, then they would have sold the rip on Wednesday, but that is not the case.
So all of this is just par for the course.
Let’s see if 2017 MVM put’s in a textbook bounce off of support:
If the precious metals are going higher, well, a rising tide lifts all boats, so palladium is going higher too. Luckily, that whole number support line of $1000 includes a nice little buffer before having to rely on the support of the 50-day moving average. We’ll see if palladium teaches us a lesson in Charting 101, and by the looks of things, all things considered, we’ll know soon enough – like it could be as soon as next week.
Platinum could also teach us a lesson in Charting 101 next week:
Platinum has been the under-performer of the precious metals for quite some time, and sitting below the 200-day moving average shows that. But in textbook fashion, platinum has come up to test the resistance of the 200-day twice just this week.
Is the third time a charm as the chartists say?
We’ll know soon enough.
Copper is yet again riding the support of the 50-day moving average:
See one of the themes here I mention a lot? I talk at times about “suspended animation”. Traders call it “consolidation” and copper has been one of the classic examples for months on end.
It’s gone nowhere in the last several months, and copper doesn’t have the solid look on it of what it really wants to do.
I’ll tell it what to do: Dr Copper – get that 50-day moving average turning up again, and do that by making an authoritative surge higher off of it.
Let’s spend a moment and talk crudely, shall we?
Sorry for the cheese. It’s been one of those weeks and I’m giddy. Too much Cheese Whiz I guess.
First – ya don’t say there’s manipulation out there do you?
Why yes, you do:
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
See, here’s the thing: Higher oil prices are going to put a damper on everything because oil is really the life-blood of the economy.
Those tax cuts – yeah, good luck with that growth story if it all gets absorbed and then some all because of the price of oil.
But the oil charts are super bullish right now, with a new multiyear high put in just this week:
Not only did we nearly breach $70 when less than a year ago we were at a measly $42, but crude has put in a “golden cross” on the weekly.
Recall that a golden cross happens when the 50-period moving average (in this case the 50-week instead of 50-day like we normally look at) crosses up and through the 200-period moving average.
And since it’s a long term chart, what does that say about the trend?
The trend is up folks, whether the President likes it or not, and the price of crude might very well be the black swan this year, swooping in right along with silver.
Because, contrary to what the mainstream financial pundits want you to believe, crude was rising before the shortest military conflict ever (Syrian missile strike last week), and crude has been rising since the shortest military conflict ever.
But don’t take my word for it, see the price chart for yourself:
Not if, but when crude gets above $70, and when it marches towards and takes out $80, the whole growth story narrative is going to burst in a ball of crude flames. Because, apparently, the economy is so delicate right now that even the slightest increase in the price of crude is going to throw things into a tailspin, and the advisers to our President know that.
They just won’t come out and say it, so they are using a trick from the Fed’s book, and they’re going with some good old-fashioned jaw-boning mixed in with a heavy dose of scapegoating.
And where gold and silver have been performing, the other, paper, imaginary markets are not doing so good right now, despite them being the Frankenbabies of the ESF and the Fed.
The Dow just dropped below it’s 50-day moving average and closed there:
Sure, a 200-point drop from these insanely high levels is nothing, but it’s the sentiment factor, and gosh do we know a thing or two about sentiment.
Volatility looks like its about to become a thing again:
But that’s not the scary part.
The scary part is the market is fading despite a pop in the dollar:
Look how the U.S. Dollar Index went up to and tapped the upper resistance of this sideways channel perfectly.
And you might be thinking – well people are looking for the safety of the dollar, that’s why.
Well, that’s the perception, but that’s no longer the reality. The dollar may be safer than the Bolivar or the Lira, but it’s still the Titanic.
And furthermore: If traders were seeking safety in U.S. denominated “risk free”, “Safe havens” like the dollar, that can’t be the case, because bonds are selling off:
Look at that move over the last three days.
The yield on the 10-Year punched through the upper resistance of the sideways channel with authority.
To multi-year highs.
We are getting closer and closer to that psychological level of 3.0%, and we’re about to find out if that yield is priced into the broader markets or not.
Because the stock market doesn’t look so hot right now.
Neither does the dollar in suspended animation.
And volatility might add a bit of an upset stomach to the mix.
With inflation not around the corner but already here.
Just at a time when the manipulators are cornered.
The ESF is cornered.
The Fed is cornered.
The cartel is cornered.
Gold & silver know that.
And we know that too.
– Half Dollar