We are in my view, which may prove myopic, set up for a powerful run-up in silver, or at the very worst - decline less than gold. We are just now crossing the ".00" threshold on the MACD Histogram. As stated earlier, I do not rely on the MACD so much as a "sell" indicator, but as an "entry" indicator, and to the right you'll see that the bars have been turning down since the Ratio touched 64.98. The swap back to gold will give us an "entry" when the bars turn back up positive. Most times this heralds a pause in the gold & silver bull, and that gold will now favor silver. The target is now 56.61 and given a 2% overshoot to 55.48 will give us a shot at 51.81. That will give us a channel breakout thru support which we've been trading in since April of 2004.
But, you ask, where are we in respect to silver's individual standalone strength? We're advanced, I must admit. Here's the chart. We've got a dichotomy here in that the Ratio is giving off a strong signal that we have a way to go yet (silver advancing), yet the strength in silver is at the upper boundaries of the selected indicators. Gold is even further advanced in its pullback than silver.
We can't derive any clues from the HUI either, as it too. is pretty near to completing its correction.
We get a little more insight by looking at the strength of silver when compared to the HUI. On this weekly chart we see the HUI/SILVER ratio is sitting right on the 50/200-wma transect. Since the third week in September silver has outperformed the HUI. From this relationship we can conclude that the ratio has a way to go to the downside (favoring silver).
So, after this tedious and often conflicting analysis, what can we conclude?
Do not commit any new money to any of them, gold, silver or stocks. All are comfortably north of their 200-dma "buy" boundaries as defined by Adam Hamilton. We have traveled a good depth into the "neutral" zone. The present risk is greater than the potential for reward.
Physical silver will outperform the HUI and Gold for a while longer.
The HUI will resume its superior performance over both gold and silver. Probably in one to two weeks.
Confused yet? No, then throw the S&P Index into the mix. This we see rallying again in its multi-year bear market. We see this coinciding in a week or so with upside leadership being led by the HUI and its resumption of the bull market in gold stocks.
If you've made it this far in my explanation, good luck!
- - CV
-- Posted 17 October, 2005 | |
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I DON'T KNOW WHERE WE'RE GOING
