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This
is the latest of of the weekly updates The Silver
Analyst sends out to subscribers. Some text is added to make it clearer to
non-subscribers.
Here
are the latest numbers on silver as of this weekend (acronyms explained at
bottom):
London
Silver Fix Price: $13.53 (-$0.75 on week)
NYMEX Spot Price: $12.82 (-$1.73)
RSI:
35.36 (-30.38 on week) (70 overbought/30 oversold - short term
top-bottom indicator)
RMAR: 1.05 (-0.01) (1.30 overbought - monthly to yearly top
indicator)
SLI: 1.48 (-0.03) (1.80 overbought - multi-year top indicator)
GSR: 48.18 (+0.35) (15.00 silver overbought - multi-decade top
indicator)
SLD:
2.444 (-0.187 on week)
GLD: 1.648 (-0.096)
RSI:
Relative Strength Index
RMAR: Relative 200 day Moving Average (Refined)
SLI: Silver Leverage Indicator
GSR: Gold to Silver Ratio
SLD: Silver Leverage to US Dollar on a four year rolling
basis
GLD: Gold Leverage to US Dollar on a four year rolling
basis
If I
repeat first of all what I said in last week's update:
"Silver
could approach the old high of $15 before dropping back to near $14 which
will be the last decent buy point before we soar."
That was half right and half wrong. Silver continued
on up to a spot intraday high of $14.68 (though the futures got as high as
$14.885 on Monday) and then dropped. It did not stop at $14 however. I also
suggested:
"I think that silver has only a week or so to
test $15 before being pulled back to perhaps its 50 day moving average. When
silver moves into a bullish phase, the 50 day moving average takes over from
the 200 day moving average as the baseline."
Indeed, it only had one day to test $15 as it peaked
the following day! The 50-day moving average (MA) of $13.47 was then quickly
visited before it stopped betwixt the 50 and 200 day MAs at $12.82 (see
attached chart). Now will it stop below the 50 day MA or go onto the 200 day
MA?
I check what had happened when silver dropped below
its 50 day MA over the last year or so and it was 3 to 1 in favour of the price
continuing onto the 200 day MA. During the last correction after the $8.47
peak, a break below the 50 day MA always continued onto the 200 day MA.
 
Of course, there is always something to muddy the
waters and there are two here. First, the only time the 50 day MA did not go
onto test the 200 day MA was the last time it happened on the 18th December! Also,
note the trendline I have added which forms an
ascending level of support to any drops in the silver price.
However, the RSI is now hovering above oversold
territory and we are as close as any price to a buy point. I plan to add some
silver this week and my gut feeling is that there is still room for silver to
drop and bring us into the 30 or less oversold region. Previous charts show
that silver only lingers here for a few days before it takes off again! If
you are really risk averse to these low buy points, I suggest you wait until
the old $15 high is taken out. An uncomfortable investor needs to enjoy their
investment.
One final point, I expect the 50 day MA to
"kiss" the 200 day MA just before silver takes off on the next
explosive bull phase. I'll keep you informed on that background story.
Our longer term indicators are pretty static just
now but we do not expect them to kick in until the next bull phase approaches
its end. In next week's newsletter, I'll give some time projections on when I
expect that bull run to end and usher in the next major correction.
Not surprisingly, silver and gold have dropped in
their inverse leverage over the US dollar. The US Dollar Index is actually
down with gold and silver from 84.07 to 83.74 - an unusual week indeed!
By : Roland Watson
The Silver Analyst
http://silveranalyst.blogspot.com
Further analysis and comment on the
silver market can be read in the subscriber-only Silver Analyst newsletter
described at http://silveranalyst.blogspot.com where readers can obtain
the first issue free. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk.
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