Technical analyst Clive Maund charts his expectations for how silver prices will respond to movement in the stock market.
Much of what is written in the parallel Gold Market update is equally applicable to silver and it will not be repeated here.
Although silver has picked up significantly since its March low it has greatly underperformed gold over the past two years. But this is normal during the earliest stages of a major sector bull market, when gold is favored over silver.
On its 20-year chart we can see that silver remains stuck within a giant base pattern that started to form as far back as 2013. This chart makes clear that once gold breaks out to new highs against the dollar, then silver should break out of this base to enter a dynamic advancing phase.
The 5-year chart reveals that silver is battling a lot of resistance in this zone, so if gold should back off soon for whatever reason, like the stock market dropping hard, then it will likely drop back for a while too.
Here we should note that if the stock market does go into another down wave soon, then the Fed can be expected to print up another couple of trillion [dollars] to drive it back up again, which will be hyperinflationary and very bullish for gold and silver. Keep in mind that if the Fed (or its proxies) wade in here, buying stocks, they can head off any decline and get it moving higher again.
The 2-year chart for silver, with the S&P500 index shown at the top, is useful as it makes clear that there is a crude but important correlation between silver and the stock market, which can be expressed bluntly as "when the stock market tanks, it takes silver with it." The message from this chart is thus clear—if the stock market continues to advance, courtesy of continued Fed pumping, then there is a good chance that silver will break out of its base pattern. But if the Fed "falls down on the job" and the stock market tanks again, so will silver. Big Money doesn't care about either the economy or the unemployed—all it cares about is the stock market and how much it can make off of deals, etc.
On this chart we see that although silver's overbought condition has neutralized in recent weeks, putting it theoretically in position to break out of its giant base, there is a lot of resistance above the current price that we can expect to turn it down if the stock market weakens.
Finally, on the 6-month chart we can see that silver is at a critical juncture here, with the 50-day moving average pulling up close to the price and the 200-day, and a small, potential head-and-shoulders top completing, so we can expect a bigger move soon.
Originally published on CliveMaund.com on June 28, 2020.
Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.
Disclosure:
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Charts provided by the author.
CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.