Silver is in a structural bull market and will see significantly higher prices in the coming years. However, now is not the time to be buying. The market has spiked and a retracement is coming. Sentimentrader.com’s public opinion as of last week was over 90% bulls. The daily sentiment index as of last week was 96% bulls. A correction is coming. We have two charts to help decipher a potential bottom.
Here is our first chart:
On top we plot Silver’s distance from its 200-day MA. Note that following previous spikes, the market always tested its 200-day MA and it didn’t take long for it to happen. We also compare the current spike to the spikes in 2004 and 2006. Those spikes retraced a little bit more than 62%. The 62% retracement of this spike is nearly $30.
Here is the second chart:
We see two areas of strong support. The first is $34-$37 and the second is $30-$31. We also sketch the potential path of the 300-day MA. We think it hits $30 in July. The 200-day MA is likely to hit $32 before the end of July.
Last year we noted $32-$33 as a potential strong upside target based on the price action in 1980-1981 and various Fibonacci targets. The 38% retracement of the 2008 low to this top is roughly $34.
To conclude, our support points range from $30 to $37 with the strongest confluence at $33-$34.
Throughout 2010 we wrote about the key resistance in Silver at $20-$25. We noted that the breakout would be very big and eventually take Silver to $50. We didn’t expect it to happen immediately. Gold reached its now former all time high in 2008. Three years later, Gold is nearly 80% higher (than $850). The point is, a market that makes a new all time high for the first time in decades is a market that moves even faster in the future. If Silver follows the same path as Gold then we could be looking at $90 Silver in 2014. Yet, wouldn’t you rather increase your positions in the $30s rather than at $45 or $50? For more analysis and projections on Gold, Silver and the mining shares, consider a free 14-day trial to our service.
Read Some Related Articles on Pragmatic Capitalism -
There Isn't $10.8 Trillion "Stuffed Under Mattresses" Because of QE
I have to comment on this MarketWatch piece because I've now seen a number of people comment on it claiming that consumers are choosing to hold more low interest bearing ...read more
Is the Global Financial Asset Portfolio the Perfect Indexing Strategy?
If there was such a thing as an indexing purist that person would simply buy all of the outstanding available financial assets in the world and call it quits. In ...read more
AI, Robotics, and the Future of Jobs
This is a good piece sent courtesy of John Mauldin. It goes well with this video which is a pretty scary perspective of what the robots could do ...read more
Is a Big Equity Correction Imminent? Not Yet
Many investors think US stocks are due for a correction: They feel that the market has run too far, that the Fed has been slow to act, that complacency has ...read more