Source: Clive Maund for Streetwise Reports 10/30/2017
Technical analyst Clive Maund explains why he sees silver’s prolonged underperformance as the sign of a bottom.
Like gold, silver now appears to be completing an intermediate
Head-and-Shoulders top that we can see on its latest chart below, within
a much larger and very bullish Head-and-Shoulders bottom pattern. Both
these Head-and-Shoulders tops are related to the Head-and-Shoulders
bottom that just completed in the dollar index, that we look at in the
parallel Gold Market update.
With the dollar index having just made a convincing breakout from its
Head-and-Shoulders bottom, and looking set to rally to the 97 area,
silver looks set to react back, probably to the $15.50-$16.00 area,
before reversing to the upside as the dollar turns lower again.
Unlike gold, silver’s COT structure showed further deterioration last
week, and readings are now at levels that are construed as bearish.
There is plenty of room for improvement, which will come about if the
silver reacts back as expected on a continuation of the dollar rally.
Click on chart to popup a larger, clearer version.
Like gold, silver is marking out a giant Head-and-Shoulders bottom
pattern, but in silver’s case it is downsloping as we can see on its
8-year chart below, which reflects the fact that silver tends to
underperform gold at the end of sector bear markets and during the early
stages of sector bull markets. Prolonged underperformance by silver is
therefore a sign of a bottom. This chart really does show how unloved
silver is right now, but although the price has drifted slightly lower
over the past several years, volume indicators have improved, especially
this year, a positive sign. A break above the neckline of the pattern,
the black line, will be a positive development, and more so a break
above the band of resistance approaching the 2016 highs. Once it gets
above this it will have to contend with a quite strong zone of
resistance roughly between $26 and $28. Over the short to medium term,
however, as discussed above, silver is likely to first react back to the
$15–$15.50 area on a dollar rally.
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.
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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 the content 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.
Charts provided by the author.