Silver – The Daily Gold https://thedailygold.com Your Source for Everything Gold Mon, 07 Jul 2014 05:05:59 +0000 en-US hourly 1 https://wordpress.org/?v=6.7.2 Silver Stocks Valuations (c/o BMO) https://thedailygold.com/silver-stocks-valuations-co-bmo/ Mon, 07 Jul 2014 05:05:59 +0000 http://thedailygold.com/?p=20354 Courtesy of BMO, here are a few charts which plot valuations for silver stocks. The charts cover the last 4 years and categorize the silver stocks as seniors, intermediate and junior. The first chart is enterprise value / EBITDA. The second is price / cash flow.      ]]> Courtesy of BMO, here are a few charts which plot valuations for silver stocks. The charts cover the last 4 years and categorize the silver stocks as seniors, intermediate and junior. The first chart is enterprise value / EBITDA. The second is price / cash flow.

 

SilverstocksEPVtoEBID

 

SilverstocksPtoCF

 

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Following Up on Silver https://thedailygold.com/following-silver/ Wed, 25 Jun 2014 07:04:20 +0000 http://thedailygold.com/?p=20337 A consolidation of recent gains, as the price works of overbought levels, would obviously be positive for the bulls....]]> If you have been following the blog posts and newsletters over the last several weeks, you would have noticed an increased trading activity and focus towards various asset classes that seem to be “breaking out” from their consolidations or downtrends. One of these assets is Silver, which I first focused on over a month ago in a post titled “Decision Time For Silver“.

Chart 1: Silver has broken out as hedge funds start covering their shorts

Silver COT 

Source: Short Side of Long

As we can clearly see in Chart 1, Silver has now broken out from the so called downtrend line, just as hedge funds and other speculators became increasingly negative on the metal. The chart above shows the highest net short position on the Silver since at least 2006, just before a powerful rally took off. As we can see time and time again, it is usually better to be a contrarian at times when the so called “dumb money” turns extreme in one way or another.

The question now is what’s next for Silver?

One of the things that concerns me right now is that Silver is overbought from the short term perspective. The metal is up 13 out of the last 14 days, which is usually a signal that price will consolidate at best (or more likely correct properly). Sentiment is recovering rather too quickly and short positions are being covered rapidly.

Chart 2: From the near term perspective, Silver has become overbought!

Silver Bollinger Bands 

Source: Bar Chart (edited by Short Side of Long)

Furthermore, daily technical indicators such as RSI reading are at extremely overbought levels once again. Previous two instances where we saw similar readings marked intermediate degree peaks for Silver. We can also observe in Chart 2 that yesterdays price was trading more than 3 standard deviations away from the mean (even though Bollinger Bands are much more compressed now).

In general, these overbought readings are much more important during downtrend then uptrends, so it will be interesting to watch how Silver deals with these conditions. A consolidation of recent gains, as the price works of overbought levels, would obviously be positive for the bulls. From there, the price could move higher as the trend feeds on itself. On the other hand, a sharp reversal of the current rally will be an indication that bears still control the trend and all we went through was nothing more then a short covering move.

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Metals Could Surprise Investors https://thedailygold.com/metals-surprise-investors/ Mon, 26 May 2014 22:07:21 +0000 http://thedailygold.com/?p=20251 Tiho Brkan takes a look at individual metals and concludes that Zinc & Silver especially could follow Nickel to the upside... ]]> Chart 1: The initial commodity rally has now paused with consolidation

Commodity COT 

Source: Short Side of Long

As a commodity downtrend was broken at the beginning of the year, a relief rally started. After three years in a downtrend and quite a disappointing performance (both nominally and relatively), commodities are now surprising investors on the upside. However, it is almost impossible to correctly predict whether this is a start of a new bull market or just a dead cat rebound. After all, every bull market starts with a relief rally, which manifests into more and more participation.

Chart 2: Metals are not participating in the current commodity rally… 

Commodity Sector Performance 

Source: Short Side of Long

Only two out of the three sectors have participated in the current commodity rally. The chart above (3 year rolling performance) shows that energy has moved up slowly, while agriculture has been one of the main catalysts for this year commodity index strength. For the current rally to turn into a more sustainable bull market, we would need stronger participation from the metals sector (both industrial and precious metals). Both of these sub-sectors continue to base since middle of 2013, without any progress.

If commodities were to continue higher, what should one focus on?

That is a very interesting question and I believe answer lies in the value. Assets with strong long term fundamentals that are currently trading at a major discount. Chart 2 clearly shows that metals tick all the right boxes.

Chart 3: Nickel exploded higher Aluminium & Silver eventually to follow?

Metals Performance 

Source: Short Side of Long

The commodity index itself peaked in late April and early May of 2011. Over the last three years, metals sector had performed awfully. However, breaking down the sector into various components, we can see that that certain metals have had a better performance then others. For example, Palladium is actually up over the last three years, which is very rare for any other commodity. Interestingly, that is why so many traders are raving about the recent breakout in the metal, as they chase performance as trend traders.

Personally, I like to chase bears instead of bulls and look for value / discount / oversold conditions. After the beating and selling pressure of the last three years, coming into 2014, there hasn’t been a lot of better assets to purchase other than Nickel, Aluminium and Silver. These three metals have been the worst performers, down at least 50% since May 2011.

If we refer to Chart 3 again, we can see that after a prolonged basing period, nickel recently exploded higher and almost doubled in a space of just a few months (highlighted green line). I hold a view that if nickel can double from oversold levels in a few months, despite constant bearish news out of China; and if Greek stock market more then doubled in 2012, despite constant bearish news out of EU PIIGS; other extremely cheap and oversold assets like Silver can do it too.

Chart 4: Sentiment is once again extremely negative on metals like Silver

Silver Sentiment 

Source: Short Side of Long

Sentiment is extremely negative on Silver right now, as it finds itself at a major decision point. That does not mean that Silver cannot drop further in the short term. As a matter of fact, market loves to scare investors by doing a false breakdown on extreme sentiment. The last of the weak hands usually panic, sell their holdings and right after we see a powerful reverse. This case scenario is quite possible if Silver breaks lower, below the current $18 per ounce support.

Regardless of what happens over the short term, I would not be surprised to see Silver (and other very cheap metals) eventually follow in the footsteps of nickel and surprise on the upside by a multiple of 50%, 75% or even 100% rallies in a very short space of time. For me, another sell off is a buying opportunity, the same way a breakout on the upside is also a buying opportunity.

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Decision Time for Silver https://thedailygold.com/decision-time-silver/ Tue, 20 May 2014 18:05:55 +0000 http://thedailygold.com/?p=20222 Chart 1: Silver finds itself between a downtrend and a strong support…    Source: Bar Chart (edited by Short Side of Long) Precious metals sector outperformed majority of other asset classes in Q1 of 2014, however that strength has recently dissipated. Whats even more interesting is the fact that while Gold and various miners rebounded powerfully in … Continue reading]]> Chart 1: Silver finds itself between a downtrend and a strong support… 

Silver Technicals 

Source: Bar Chart (edited by Short Side of Long)

Precious metals sector outperformed majority of other asset classes in Q1 of 2014, however that strength has recently dissipated. Whats even more interesting is the fact that while Gold and various miners rebounded powerfully in quarter one, Silver has continued to disappoint. As we can see in Chart 1, the metal now finds itself at a technical pressure point.

To break on the upside, Silver will have to overcome a downtrend line, which has been in place since the bear market began in May 2011. On the other hand, if Silver was to move towards new bear market lows, it will first have to break a strong support area around $18.50 to $19.00 per ounce. A break in either direction could occur very soon, and would be a leading indicator for the rest of the PM space.

So which way will Silver move?

While I wish I could answer that question with precision, unfortunately I do not know as my crystal ball is currently getting fixed. What I will do is place forward a handful of clues, so that we can work on probabilities and case scenarios.

Chart 2: Silver has declined 15% over last 3 months, but not yet oversold

Silver Performance 

Source: Short Side of Long

Over the last three months, Silver has sold off by about 15%. As we can see from Chart 2 above, Silver is slightly oversold, but not yet past the 1.5 standard deviations on the downside (or about 19% decline) that I like to use. Therefore, more selling could come in the short term, before we consider the long side. Keep in mind that Silver usually follows Gold closely and Gold itself is even less oversold over the last 3 months. Finally, most of other classic technical indicators (RSI, MACD, STO, etc) are not at oversold daily or weekly levels either.

Chart 3: Change in hedge fund positioning is now close to bearish levels

Silver COT Long Term 

Source: Short Side of Long

Recent COT report, released last Friday, continues to show that hedge funds and other speculators continue to dislike Silver. However, future positioning hasn’t reached extreme bearish levels just yet. Last time we saw those type of conditions, signalling a contrarian buy signal, was around the back part of the panic sell off in middle of 2013. Since there is numerous ways to track the COT report, I thought I’d include a few other interesting charts:

Chart 4: Premium during topping phase, discount during basing phase?

CEF Premium & Discount 

Source: Short Side of Long

As precious metals sector was building a complicated top from 2011 into 2012, majority of the closed ETFs (such as Central Fund of Canada) displayed a premium to its net asset value. In other words, retail investors were bullish on Gold and Silver, just prior to a correction. Today, we have a totally opposite picture.

The sector has corrected rather sharply in 2013 and ever since the sell off, retail investor have pushed the CEF ETF into discount territory (refer to Chart 4). While lower prices are still possible, it is almost always wiser to be a buyer when majority are sellers. Therefore, if the ETF traded at a premium near its peak, most likely the current discount is a signal that we are closer to the final bottom.

Chart 5: Sentiment on Silver has been very negative throughout ’13/’14

Silver Public Opinion 

Source: SentimenTrader (edited by Short Side of Long)

Next up, we look at SentimenTrader’s public opinion levels. As we can see, Silver continues to hold support around $19, while sentiment on the metal is rather negative (only 31% bulls today compared to 91% bulls in May 2011). Public opinion readings this low are a decent indicator of a possible reversal in price, however at times negative sentiment readings can also occur just prior to a final collapse.

Finally, there are many other indicators traders should research prior to making up their minds on the up and coming Silver move. These include Gold sentiment indicators, Gold Miners breadth readings, ETF fund flow data, volatility and put / call ratios, ratio between Silver & Gold, Silver & Silver Miners and Gold & Gold Miners, and so forth. It is very important to do your own research before anticipating the next move.

However, when it comes to speculating on price directions, maybe the most prudent advice I could give is to follow Jesse Livermore, who famously said:

In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be. The thing to do is to watch the market, read the tape to determine the limits of the get nowhere prices, and make up your mind that you will not take an interest until the prices breaks through the limit in either direction.

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Silver vs. S&P 500 (Since 1900) https://thedailygold.com/silver-vs-sp-500-since-1900/ Mon, 05 May 2014 17:41:21 +0000 http://thedailygold.com/?p=20191 Chart of Silver/S&P 500 dating back to 1900....]]> Click the image below to enlarge to full size.

The chart was composed with data from Nick Laird @ ShareLynx.com.

may5silvervspx

A few observations. The ratio peaked below 6 at the major commodity top in 1920 then remained around 15 during the Great Depression. It made its lowest peak at 2.7 during the precious metals bubble in 1980.

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Silver Breaking Down but Silver Stocks Holding Up https://thedailygold.com/silver-breaking-silver-stocks-holding/ Wed, 30 Apr 2014 22:34:15 +0000 http://thedailygold.com/?p=20160 Silver could be starting the final breakdown we discussed in an editorial about a month ago.  Silver broke lower today, hitting the lowest level since February. It is only 6 cents above its December closing low of $19.11. Interestingly, the silver stocks as judged by SIL and SILJ are showing more strength. The bottom two … Continue reading]]> Silver could be starting the final breakdown we discussed in an editorial about a month ago.  Silver broke lower today, hitting the lowest level since February. It is only 6 cents above its December closing low of $19.11.

Interestingly, the silver stocks as judged by SIL and SILJ are showing more strength. The bottom two rows of this chart plot SIL against Silver and SILJ against Silver. Those ratios have increased over the past two weeks while Silver has trended lower. Furthermore, SIL and SILJ are nowhere close to their December lows.

apr30silvervstocks

This is something we’ll cover in more detail in our next premium update. Click here to learn more about our premium service. 

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Silver COT Charts https://thedailygold.com/silver-cot-charts/ Tue, 15 Apr 2014 18:19:37 +0000 http://thedailygold.com/?p=20102 Here are four charts that breakdown the Silver COT. Data is a week old so keep that in mind. First, here is the general COT. The black is the net speculative position (long) as a percentage of open interest. It has declined materially over the past few weeks. Next is open interest. Interestingly, unlike Gold … Continue reading]]> Here are four charts that breakdown the Silver COT. Data is a week old so keep that in mind.

First, here is the general COT. The black is the net speculative position (long) as a percentage of open interest. It has declined materially over the past few weeks.

apr14silvercot

Next is open interest. Interestingly, unlike Gold whose open interest is at 5-year lows, Silver’s open interest is robust.

apr14silverOI

Here is the speculative gross long position as a percentage of open interest. (There is an error in the legend). Note how speculative longs have steadily declined throughout this bull market.

apr14silvergl

Here is the gross short position. Note how it was extremely elevated at the end of 2013.

apr14silvergs

This is a sample of some of the things we look at in our premium service. 

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Silver’s 3-Year Performance https://thedailygold.com/silvers-3-year-performance/ Thu, 03 Apr 2014 06:31:31 +0000 http://thedailygold.com/?p=20068 A look at Silver and its 3-year rolling performance through history...]]> Chart 2: Silver’s 3 year performance worst since 1982 bear market low

Silver Performance

 Source: Short Side of Long

Since every man and his dog are discussing (and celebrating) the five year anniversary of the S&P 500 bull market (which started in early March 2009), I thought it was just as important to discuss the approaching anniversary of the three year bear market in Silver (which started in late April 2011).

Ok, so I’m joking about the importance of these anniversaries. Majority of the time, they do not mean anything, but I just thought it was a catchy title.

Nevertheless, make sure you click on the chart above for optimum zoom. And analyse the chart yourself. As always, I’ve left a few personal comments, including the fact that the current 3 year rolling performance is the worst since the 1982 bear market lows (and second worst on record).

 

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A Golden Opportunity Coming in Silver https://thedailygold.com/golden-opportunity-coming-silver/ Fri, 28 Mar 2014 07:48:58 +0000 http://thedailygold.com/?p=20051 Silver has been in a bear market for almost three years and the recent lack of strength suggests the metal could be headed for new lows. New lows are always bearish until the last one. Our technical work suggests that we should watch for a final low and end to the bear market in the … Continue reading]]> Silver has been in a bear market for almost three years and the recent lack of strength suggests the metal could be headed for new lows. New lows are always bearish until the last one. Our technical work suggests that we should watch for a final low and end to the bear market in the coming months.

This chart plots every major bear market in Silver dating back 45 years (excluding the 1980-1982 bubble bust). It plots them on the same time scale as the current bear market. Excluding the 1980-1982 bear market, we find that the current bear market is inline for being the worst bear market. It is already the fourth longest in time and close to the second worst in price. The current bear is very close to the 1983-1986 bear. This chart and the 1983-1986 bear suggest that if the current bear breaks to a new low then its final bottom could occur about one month later.

mar26silverbears.png 

Silver has very strong trendline support on the daily chart around $17. If Silver breaks to a new low then it will run into this trendline support which dates back 11 years.

mar27edsilver.png 

In the lower column we plot a 12-month rate of change for Silver. Note how it often reaches or comes close to 100%. After lows in 2003, 2005, 2008 and 2010 Silver gained 100% in a 12 month period. Moreover, following the 1983-1986 bear market which closely resembles the current bear, Silver rebounded 89% in 10 months. Following the 2008 low, Silver rebounded 84% in 11 months. Let’s say Silver bottoms at $17.50 and rebounds 70% in 12 months. That would take it to $30. That would create huge upside in most silver stocks.

Below is a chart of our proprietary silver producers index which contains 14 stocks and is partially weighted by market cap. It contains all of the large, important silver companies as well as junior producers. We didn’t just pick the 14 best. This index recently peaked at neckline resistance and just below the 80-week moving average. Note how the 80-week moving average marked resistance in early 2012 and late 2012. A new bull market will only be confirmed when this index is able to surpass that confluence of resistance.

mar26silverstockslt.png 

From a bird’s eye view, the bear market in Silver is just about over while the bear market in silver stocks probably is over as we don’t expect them to make a new low. However, the silver stocks won’t break resistance and confirm a new bull market until Silver has bottomed. Our analysis shows that Silver’s bear has a bit more to go in terms of price and time. We’ve laid out what we are looking for in Silver which is a new low and a bounce from 11-year trendline support. If that occurs at a time of extreme bearish sentiment then it is a buy signal. This prognosis, if correct means we have some time to research and patiently accumulate the best silver stocks which are positioned to benefit from a resumption of the secular bull market. If you’d be interested in learning about the companies poised to outperform, then we invite you to learn more about our service. 

 

Good Luck!

 

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

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Silver Bear Market Analogs https://thedailygold.com/silver-bear-market-analogs/ Mon, 24 Mar 2014 20:22:23 +0000 http://thedailygold.com/?p=20039 Throughout 2013 we posted the gold stocks bear market analogs. Now its time for the silver bear market analogs. Silver has had a very weak bounce in recent months and is threatening new lows. This suggests the bear is not quite over yet. However, this chart argues (because of the extended nature of this bear … Continue reading]]> Throughout 2013 we posted the gold stocks bear market analogs. Now its time for the silver bear market analogs. Silver has had a very weak bounce in recent months and is threatening new lows. This suggests the bear is not quite over yet.

However, this chart argues (because of the extended nature of this bear in terms of price and time, in comparison to all other bears ex 1980-1982) that a new low in Silver would be a BUY signal. We think a new low would mark a final bottom and a tremendous buying opportunity for Silver and silver stocks.

mar22silverbears

This chart was featured in our free newsletter (opt-in at the top of the right column) and covered in premium update #351. Click Here to learn more about our premium service. 

 

 

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