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Let us clarify that we do our
best to take the emotional element out of our trading decisions and we do not
"worry" about our investments. Instead we pay especially
close attention to the markets and our investment decisions at critical
junctures. But for expediency we will use the term "worry" in
this article.
So
when is it time to worry? It is our opinion that an investor should pay
close attention and possibly "worry" when truly unusual market behaviors, or "anomalies", take place.
For Example:
Imagine you are holding a
coin in your open palm, with a straight arm at shoulder height. Now
imagine turning your hand to the side to let the coin fall. Naturally
the coin would drop to the ground as the laws of physics pull it towards the
earth. Now on the other hand, how would you feel if you turned your
hand and the coin went up? Sounds ridiculous doesn't it? The
point of this analogy is that you would probably have very good reason to be
concerned. It is our opinion that most people would probably really "freak
out" and we think it would be fully justified.
So how does this apply to
the financial markets of today? Are we experiencing "unusual"
or "normal" market behavior when it comes
to precious metals such as silver. The
following chart shows us what has happened to the price of silver, in US
dollars, since the start of the bull market.
 
In the above chart you will
notice a few things.
- As with all
markets you should note that the price does not move in a straight
line. Although we are in a major bull market the price has times
of bursting forward along with investor enthusiasm and falling back due
to pessimisms. In our opinion this is normal market behavior and nothing to be alarmed about.
- Next you
should note that so far in this bull market the price has had two very
prominent advances. From June 2004 to nearly April 2005 silver
surged from under five dollars per ounce to over eight dollars.
From August 2005 the price moved from under nine dollars to over nearly
fifteen dollars in May of 2006. We
shaded these areas
in green.
- Notice how
the price of silver will pull back from a significant advance and then
consolidate for a number of months. We shaded these areas in
red. In a bull market this necessary price action is what causes
investors to lose enthusiasm, give up hope, and sell out of
positions. This is when negative commentary and analysis is
prevalent and doubts abound that the bull market is ending.
- Finally, in
the above chart, observe generally what has happened to the price of
silver in the month of June. Notice how June has seasonally been a
very weak month for the price of silver. However, investors
sometimes forget that in a bull market weak prices usually mean a great
buying opportunity. Notice what has happened to the price of
silver following the seasonally weak late spring and summer months.
At this point we must remind you that just because the price has
behaved one way in the past it does not necessarily mean it will do so in the
future. The markets seem to have a funny way of changing right when an
investor gets comfortable with a certain pattern. However, at this
point we do not see reason for concern.
In 2006 silver and gold had a major advance followed by significant
correction. In our opinion this healthy correction appears to be
following a normal pattern. We are currently in late spring heading
into summer, the months where the metals price seems to regularly soften.
We are predictably hearing bearish commentary and news about how poorly
silver and gold have been performing and why it may drastically fall.
In our opinion all of these market observations are normal, healthy and
bullish for the price of silver and gold.
So when should an investor worry? We can say that right now, we
are not worried about our investment decisions. Please watch for part
two of this commentary on this website. You may also visit our website www.investmentscore.com to subscribe to
our free investment newsletter for notification of articles such as this
one. At www.investmentscore.com you can also learn about
our unique investing system and custom built timing charts. We hope to
see you there.
Michael Kilbach
Editor
Investmentscore.com
Michel Kilbach is the President and Editor or www.investmentscore.com,
an online publication designed to show investors how to make profitable entry
and exit trading decisions in high growth potential investments. Investmentscore uses a unique scoring system as a visual
guide to assist investors in making lower risk / higher reward trades.
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Copyright © 2006-2007 Michael Kilbach
Information contained herein is obtained from sources believed to be
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