Silver 'n'
Gold
The
following is not prophecy. It is analysis. It is an attempt to make sense
of what I currently see happening to gold, silver, and the PM complex. I
could be proven completely wrong - for instance by a RWE (Rogue Wave
Event). This weekend stoking the fires of market turbulence we have the
constitution of the EU under threat from a 'no' vote in France, with all
that might mean for the Euro.
I
have looked at chart formations, disregarding the noise of news. This is
what I see.
Divergence
Much
speculation abounds regarding the relative performance of gold and
especially silver, and their respective mining stocks. The silver stocks
for example are trading at less than half their highs on average, while
silver is down less than 15% from the $8.50 top. So-called negative
divergence usually means a drop in the metal price is coming. However
'this time it is different' I hear. Hedge funds are close to blowing up,
the dollar is a confetti currency, investors will flock to the safety of
gold and the shares will spring back.
This
wishful thinking flies in the face of chart action - except that of
silver, which seems on the surface unmistakably bullish, with the LT
up-trend line remaining unbroken despite several touches.
My
guess is most chartists read the silver correction as a triangle affair.
After all silver and triangles have gone together rather well in the past.
And look at this smaller triangle - aching to break out...
In
fact there is another triangle within a triangle that looks less
over-ripe, and is also ready for a breakout. And the fact that it is a falling
wedge practically assures us of an upside move.
No
wonder the COT are less short than usual. But for how much longer?
While
silver's short-term destiny plays out, what will gold be doing? Here the picture
is distinctly less roseate.
Gold
has a clear and present Head & Shoulders pattern demanding a return to around $370. If
Gold started correcting around the same time as the PM complex the only
pattern that fits is 'irregular'. In fact it fits rather well...
The
same downside move can be seen logically on a larger scale
With
apparent downside to come, how on earth can silver be looking so bullish?
Here's
how.
If
silver is in a double three, one of the 6 EW corrective patterns, then
once we hit the top rail or there abouts...
...we
could indeed break out of the larger triangle - to the downside.
....and
that's only the Head and Shoulders MM I've shown.
Footnote.
End
of day 27th May 05
Since
writing the above silver broke out above the red wedge and hence
symmetrical triangle as expected, taking the PM complex with it. The HUI
and XAU and most US stocks are behaving as if Wave 4 up of this current
5-leg down move is well underway. In fact the HUI intraday looks like the
5-wave 'a' rise may be about over.
I
will be back 6th June to see how things are panning out. My current guess
is we start a downtrend (b of 4) before c of 4 tests EW resistance levels.
My
thanks to Prophet and Stockcharts for providing such excellent charts to
work on.
rodin
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