Headlines
|
|
A swift reversal in silver suggests further downside:
For only the 14th time in more than 50 years, silver futures reversed from a 4-month high to a 6-week low in ten or fewer sessions. After similar reversals, the commodity traded lower 69% of the time over the next two months.
|
Smart / Dumb Money Confidence
|
Smart Money Confidence: 44%
Dumb Money Confidence: 58%
|
|
Risk Levels
Stocks Short-Term
|
Stocks Medium-Term
|
|
Bonds
|
Crude Oil
|
|
Gold
|
Agriculture
|
|
Research
By Dean Christians
BOTTOM LINE
For only the 14th time in more than 50 years, silver futures reversed from a 4-month high to a 6-week low in ten or fewer sessions. After similar reversals, the commodity traded lower 69% of the time over the next two months.
FORECAST / TIMEFRAME
SLV -- Down, Short-Term
|
Key points:
- Silver futures reversed from a 4-month high to a 6-week low in eight sessions
- Similar reversals preceded negative returns for the commodity over the next two months
- Additional factors like seasonality are negative and about to get a lot worse in June
Negative momentum begets more negative momentum
Silver, like gold, has benefitted from the weak dollar, which bottomed last October with stocks. Could the recent downside momentum in the commodity signal that the debt ceiling negotiations are nothing more than Washington theater? Perhaps, a buy-the-rumor, sell-the-fact event. Let's avoid the narrative game and follow an objective approach to the latest price action.
For only the 14th time since 1972, silver futures cycled from a 4-month high to a 6-week low in ten or fewer sessions. The previous signal occurred in February 2020, when everything crashed during the Covid meltdown.
Similar reversals in the price of silver preceded additional downside follow-through
The negative momentum continues over the next few months when the silver futures contract cycles from a 4-month high to a 6-week low in ten or fewer sessions. Once the downside price action subsides, silver tends to bounce back in the three-month time frame.
If you think silver and other precious metals are in a secular bull market, I would be mindful that the commodity showed a loss in the two-month horizon in 4 out of 6 precedents during the last secular bull between 2002 and 2011.
The max loss was worse than the max gain in 10 out of 13 signals over the next two months.
What about gold?
The reversal in silver suggests the precious metals complex could be in the penalty box over the next few months. And seasonality for gold is entering a soft patch, which my colleague Jay Kaeppel recently highlighted in a research note.
Seasonality is about to become a significant headwind
Silver is a few weeks away from entering the worst month of the year for seasonality.
What the research tells us...
Silver futures cycled from a 4-month high to a 6-week low in less than ten trading sessions. After similar price reversals, the commodity tends to exhibit further downside momentum over the next few months. Gold could follow silver lower, albeit the outlook is not as adverse. With seasonality for precious metals turning unfavorable in June, the weight of the evidence does not bode well for silver or gold.
Indicators at Extremes
Phase Table
Ranks
Sentiment Around The World
Optimism Index Thumbnails
|
Sector ETF's - 10-Day Moving Average
|
|
|
Country ETF's - 10-Day Moving Average
|
|
|
Bond ETF's - 10-Day Moving Average
|
|
|
Currency ETF's - 5-Day Moving Average
|
|
|
Commodity ETF's - 5-Day Moving Average
|
|
