Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Silver Bearish Technicality

Commodities / Gold and Silver 2010 Jan 13, 2010 - 12:36 AM GMT

By: J_Derek_Blain

Commodities

Best Financial Markets Analysis ArticleDon't get me wrong: I love silver - I have for as long as I can remember.  There is just something about the oft-mystically-mentioned white metal that attracts me.  Maybe I hate vampires (that new Twilight craze certainly hasn't added any vampire merit points), or maybe I just like high electrical conductivity and a pure looking luster.


There isn't really one single thing about silver that I like the most - but there is one thing about it that I don't like very much of late.

Silver is far too expensive.

Now, before you fly into a flurry of arguments about how "silver is real money" and debt denominated instruments are "worthless pieces of paper" (which is actually untrue because they are not only worthless, they are of negative worth, because they are debt), and how it is one of - if not the - most widely used metals in the world and demand for its application can only go up as the developing world's middle classes emerge and demand more electronics and such....

Before you say any of that, you have to understand what "expensive" is.

Expensive is a relative term.  A Mercedes SL500 is expensive relative to a basic Honda Civic.  Gold is expensive to silver.  A new computer relative to a ceramic mug.

Or relative strictly in dollar terms.  Sometimes something is simply expensive all on its own.  Now again this is in perspective - when I say it is expensive I could be saying "it takes too much of my labor or free resources to acquire an ounce of silver."  That is certainly part of it.

But the other part is that it is expensive when you measure it in terms of market psychology.  In terms of market psychology silver is very overpriced - not too say that people aren't buying, because they are (reading the latest C.O.T. report  should give you an idea.  You can view it HERE. - specifically, grab the number of weekly open contracts, chart them and do an overlay with the price of continuous contract.  Surprise surprise!)

One little study I did on silver recently was using RSI divergence from price.  I have used this before (our short recommendation on AIG using RSI and Money Flow), to some success.  This is of course not my primary piece of data used to determine silver is starting a multi-month downtrend that should make a lower low than October 2008, but its another piece of the puzzle that I have kept track of and is fairly compelling.


Here's an example of what I mean:



Silver has experienced a fairly large period of both RSI and MACD diverging from the price movements - as prices went higher and higher, both of these strength indicators steadily declined. Now that the uptrend has been broken with conviction, we should see a much faster and further fall in silver prices than we did in '08. 

Lucky for me, I have thought silver was too expensive for some time now (seeing as we are in a period of deflation, no matter how people clamor at the utterly temporary uselessness of the Fed's money-printing and say it is immediately grounds for silver to go to $50.00 / oz and gold to $3,000.00).

As such, the strategy is to accumulate a hefty batch of  "worthless" FRN's which I plan to exchange for said real money once silver has found a bottom.  One of the indicators I will be looking at to indicate a good buying opportunity for the precious metal is a solid price/divergence in RSI and MACD.

I'll keep you posted.

By: J. Derek Blain

http://www.investophoria.com

© 2010 Copyright J. Derek Blain - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules