This is a continuation of the Comparing Silver Versus Bitcoin Equals Gains post but rather than comparing the current silver formation against bitcoin we are going to compare it to the formation created between the 70s through 90s.
First will be the double ichi clouds. I mentions in the Silver and Bitcoin post that we are looking for the clouds to be thin and flat for a major break to the upside and you will see that in the green box in the chart below. We are clearly no where near that condition. The clouds are thick and the crypto cloud is still expanding. we will need to see both clouds contract over an expended period of time before the parabolic move we all seem to want occurs. The crypto cloud seems quite useful on silver, especially for me, because it clearly rules out an explosive or sustained move with the current robust size. Also we see at the red hammer a lot of wicking and a retest of a failed break out. Cloud was still to thick. If you were just using the standard equity cloud you could be a lot more excited. Second, another thing we can see is that the average true range (ATR) is no where near all time lows, and in order to get a real big move you need to see some measure of price constriction. The thin ichimoku cloud shows that constriction, a Bollinger band pinch also helps and you can use Bollinger band width but they will give you a lot more false signals than the ATR if you are really looking for that legendary move. Putting the ATR on the log scale really makes it clear we are not anywhere near the price constriction we would want to to see.
Third will be the falling wedges, in particular the support which is of particular interest to me now. The wedges are starting from outside where one would normally draw them at the rightward facing blue arrows. It is always nice to see when previous resistance turns to support and so when I see a lot of action at the downward arrow and then a break out to a parabolic move it shows to me that that line has a lot of validity. The big upward arrows shows the first retest that starts the formation of the descending triangle. This leads me to think that the price action is going to need one more tough on the wedge support, somewhere in the vicinity of the blue question mark.
This is a pretty common formation combination as the bitcoin chart below will show. Bitcoin is a little further in the cycle than silver. Finally for silver is some simple moving averages, the monthly 100, 200 and the 550 (which we are using because the 600 isn't available just yet). The possibility of the price action failing at the 100 month SMA/triangle resistance is subjectively very high to me, as is the 200 failing as support. I mentioned above that I am more concerned with wedge support as opposed to resistance but conveniently the 50 lends some credence to my wedge as currently drawn. The arithmetic chart with wedge redrawn looks a lot more believable, with the 595 month SMA. I am hoping to get an actual touch of the 50 month SMA for a very technical signal to sell/go short. The chart also shows that silver has lost about 50% of its price per ounce a couple of times before.
I would absolutely love silver and everything else to just go up, but I don't see that in the charts right now. I did a few months ago and my silver posts were quite bullish. But take a look at the 50 month SMA, it is screaming down and it looks like a bearish cross of the 200 month has a very high probability of occurring. The linked post will show why the volume situation doesn't look that great for silver as well.
Of course, the regular disclaimers. I am not a certified market technician nor am I a financial adviser.
1A)eurodollar futures are pumping and should go to near 100 if not over due to negative interest rates
1b) Every other time that happened the SPX went into recession
2A) in the 08-09 silver bear market silver lost about half its value
2B) When silver first went over 30 in 1980 it went all the way back down to around $3.5
2C) Gold futures (CG1!) has lost over 70% of its value twice
Given the hisory and volatility of precious metals why do you rule out another dip in the price of silver?
BobbyBanksX
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@This_Guhy, my bad with my comment being rash; a late-night comment that was too short to be read as productive...
I do not think that any of the metals will go below the cost of extraction, and for silver, it's in the ~15s
The ideas show a very powerful relationship between the eurodollar future and the SPX. We are primed for a recession and while the SPX might still have some upside, it should be limited.
And one reason we have future contracts is so mines can lock in the future price of the silver they mine. Hopefully the major mines have a technical analysis that is letting them know what is going on. Also, I have detailed this in an elliot wave post, when silver dips down to 9.5 or 8.4 it will complete wave A, wave B should get us a high around $35 (that price target didn't get explicitly stated in the post, but is implicit in the elliot wave theory).
awh2830
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This is amazing analysis, the length of time covered, WOW. I think Silver heads to $21+ in 2020, will that negate the bearish outlook? The bottom is in, that took place in 2015.
This_Guhy
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@awh2830, I would need to see resistance change to support and a better volume situation. If the triangle resistance is tested as support, or if the 100 month SMA is tested as support we have a bullish set of circumstance.s
If we get the On Balance Volume EMAs to get a bullish ordering then that would be fantastic. The black box on the price action shows the 100M SMA test and confirmation and the black box on the OBV signals the volume situation I would need to see.
Just currious, as this is often a probability based game... what chance to you think there is that the price action tests my falling wedge support one more time?
awh2830
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@This_Guhy, So then we are a long way off from those situations turning bullish, ie the OBV and 100M SMA test. Probability ? well what is the falling wedge price level? $9.50?
This_Guhy
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@awh2830, Around 9.5 , yes. When it hits the wedge I expect a lot of strong wicking so I don't want to be overly precise with a dollar prediction. I spent quite a bit of time fiddling with the wedge support to get that right.
Good news for the swing traders among us (mainly me!) that the 12h OBV volume has just taken a fully bullish ordering. I do expect, unfortunately to see some bearish divergence when the price action begins to top.
The 4h OBV volume is also somewhat interesting with a horizontal resistance that has been tested twice. A third rejection would be pretty bearish. If the OVB mounts that level as support that would also be causes to get bullish.