Editor’s Introductory Note:
Today’s short feature post is from our friend Hub Moolman, in South Africa. Hub’s analysis includes two very useful charts.
While I don’t rely on technical analysis, I do find that it often provides useful confirmation for the study of market fundamentals.
For the big market traders, the current silver market seems to be transitioning from the “disbelief” stage to the “mania” stage. It is always difficult to time a market top, and missing a top can be perilous. I did quite well in calling the silver market bottom, on February 8, 2001 in a Usenet post titled: Rawles Calls Major Bottom in Silver Price, but I won’t dare try to call the top. It is better to gradually unwind an investment during a bull market mania. I described one way to do this in my recent article: Planning Your Silver Bull Market Exit Strategy. (Your mileage may vary. But that is the way that I see it.) – JWR
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Even with the successful breakout of the $50 level, silver is still cheap, as pointed out in the chart below.
(The chart above is click-expandable.)
Silver has recently come out of the bottoming pattern that started around 2014 when silver broke down below the channel. That bottoming pattern is very similar to the early 2000s bottoming pattern that started in October 2000 when silver broke down below the channel.
If this comparison is valid, then it is reasonable to consider silver prices as cheap while the price is still outside (below) the channel. There will come a time when silver could be considered expensive, but that will probably only be another $1,000 or more higher. You can continue to track this chart on my premium blog.
In a previous article, I have shown how significant silver peaks occurred within 8.5 years after the Dow/gold ratio peak, with the Great Depression silver peak occurring the soonest (6 to 7 years after). Here is an updated chart from that post:
(The chart above is click-expandable.)
It is now 7 years and 2 months since the Dow/gold ratio peak of October 2018. In other words, there are still about 1 year and 3 months (15 months) left before we get to the 8.5 years since the Dow/gold peak.
Given that silver actually rallied on a sustained basis for at least two years before each of the previous post-Dow/gold peaks, silver is likely to rally for most of the coming 15 months.
Editor’s Closing Note: This article first appeared at Hub Moolman’s website. It is re-posted with permission. By subscription, he also has a premium service. I recommended both of them. – JWR
Read the full article here