A Silver Chart That Says "Break-Out" Vs. GDP, FOMC, Powell & The October Jobs Report
SD Outlook: Silver's chart technically looks all sorts of bullish, and silver's fundamentals may prove a little too much for the cartel...
Silver does have its work cut out for it.
With important data releases beginning today:
Wednesday will be a particularly important day in that we get third quarter GDP, but, more importantly, at 2:00 p.m. EST the Fed will release its October FOMC statement and subsequent interest rate decision.
As of this morning, CME Group is showing a greater than 94% probability of a rate cut:
The stock market may be at all-time record highs, and the job market may be booming, but gosh darn-it, the Fed's just gotta cut rates!
If there was ever a Powell press conference that was going to be hyped-up by the mainstream, the enablers and apologists, it would be the one this coming Wednesday.
Remember, during the last FOMC, Powell basically dismissed the Fed's "Not-QE", which in mid-September was only a couple of days old, but now we've had over one month of emergency liquidity injections to the tune of 10's of billions of dollars, and, at times, over $100 billion, per day!
In addition to the October Jobs Report on Friday, we get some manufacturing data as well:
So it is clear the cartel has absolutely tons of cover to smash.
The fundamental outlook, however, is bullish.
How so?
We'll let's look at some likely outcomes for this week's events, and examples of what those likely outcomes mean for silver:
GDP IS SLOWING
Obviously, economic expansion just can't go on forever, much in the same way that it is impossible to only breathe out, and this economy has been breathing out for over 10 years, which is the longest economic expansion in US history.
Fundamentally, this is "good for silver", and here are just a couple of reasons why:
Silver is a hedge against uncertainty.A slowing GDP or recession would bring additional, worsening corporate earnings declines, which, at least theoretically, would adversely impact US equities, if for nothing more than at a bare minimum in regards to reduced dividends, so this is "good for silver" because silver can act as "wealth preservation", an "anti-stock market play", and a "store of value" through an equities bear market.THE FED IS CUTTING INTEREST RATES AND ENGAGED IN QE
Even if interest rates are technically positive, which is called "nominally" positive, those interest rates do not keep up with inflation, and therefore, "real interest rates" are actually negative.
Let me show you one example of what I mean, and sure, I'm not talking about US Treasuries here, but a simple youth's savings account from a major credit union, but the concept is the same:
That's not one percent, but one-tenth of one percent.
I'm sure in lesser quality banks those yields are even lower, and, since they're usually always "variable" yields, and since the Fed is actively cutting interest rates again, in which direction does anybody really believe they will vary?
But back to the fundamental point about interest rates and QE:
This is "good for silver" because the Fed and the government are actively engaged in US dollar debasement at it's finest, and silver is money, which can't be debased by increasingly negative real rates or money printing, for believe it or not, but silver is actually a thing, and it is a thing that must be mined, crushed, sifted, smelted, cast, refined, cast and possibly even stamped with something pretty on it, such as the Walking Liberty design found on the obverse of the American Silver Eagle.OCTOBER JOBS REPORT WILL BE WEAK
This is "good for silver" because, well, see the first two points above.That is to say, less work equals less spending equals less earnings equals economic slowdown equals monetary and fiscal stimulus equals dollar debasement and money printing equals good for silver.
In other words, everything is inter-connected, and job gains (or losses) affect interest rates, GDP, consumer spending, and all of those things.
I just mentioned only a few of the fundamental factors affecting silver right now, but the outlook is clear - bullish.
Interestingly, if the technicals matter, then silver's daily chart is clearly bullish right now:
Recall that I was looking for a close above $18.05 to make that all-important higher-high as plain as day, and as of this morning, silver's been trading above that price level.
Additionally, I'm liking the increasing trading volume, we're opening the week above the 50-day moving average, we have a ton of room to run to the upside before screaming "overbought", and the moving average convergence divergence (MAC-D) had a bullish crossover two days ago.
Finally, recall that any thing, silver in this case, can "correct" over price, time, or both, and with regards to time, we've pretty much had two months of correction already.
The gold-to-silver ratio is showing the start of silver's break-out:
If silver outperforms gold this week, then we could be kissing the 80-handle goodbye at this stage of the cycle.
Gold has been looking strong with it's base-building at $1500:
I'd like to see gold push through its 50-day moving average with authority and get a close above $15,25, and if that happens going into Wednesday's FOMC, we could be talking about multi-year highs by the end of the week.
Palladium will be interesting to watch this week:
Pullbacks since early August have been minimal, and we're close to breaching $1800 to the upside.
The cartel might have to let platinum run this week:
I say that because I do think the cartel is giving platinum the same treatment they give gold & silver, however, with such an important week in the markets and economy, I'm sure the cartel will place the vast majority if not all of it's metal attention on gold & silver.
Crude oil is getting closer and closer to a break-out:
Not just above its 200-day moving average, but also a break-out of the sideways channel that crude's been stuck in.
Copper is telling us the current cycle of "deflation" or "dis-inflation" is likely over:
Which is another way of saying the Fed is going to have a heck of a time trying to explain how inflation is stubbornly low when the rising price of commodities becomes felt by all.
A 25 basis point Fed cut would dis-invert the Fed Funds Rate from the yield on the 10-Year Note:
Yield on the 10-Year Note is getting very, very interesting because we can be darn sure the cartel is in there, ultimately, with the plan of bringing rates even lower and possibly even negative, but yield on the 10-Year Note looks like the bond market would love to tell the Fed "no mas"!
The dead cat bounce in the dollar index could be over:
The dollar index has successfully bounced off of the support of its 200-day moving average for the better part of a year, but I don't think that will be the case this next time.
Bringing the world's number one terrorist leader to justice is surely good for a 10-handle:
Because it was the Nasdaq that hit all-time record highs on Friday, but wouldn't the cartel love to just seal the deal with the DOW and S&P 500 hitting all-time highs too?
The S&P 500 only needs a few points:
I mean, they could do that by noon, then take an extended lunch and call-it an early day.
The bottom line as we find ourselves here this beautiful Monday in late October?
When we look at the fundamentals, they're super bullish for silver right now.
We've been in this technical price correction for nearly two months.
And silver has seen a peak to trough price decline of 13.5%.
Fundamentally, silver is finally ready for a break-out.
Technically, silver is also set-up for a break-out.
I think the break-out is coming very soon.
If fact, I think it begins this very week.
There will be wild swings, though.
As they're so many events.
So grab your popcorn.
It'll get interesting.
That's for sure.
Big week?
Indeed.
So.
Stack accordingly...
- Half Dollar
 | About the Author U.S. Army Iraq War Combat Veteran Paul "Half Dollar" Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart. Paul's free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at PaulEberhart.com. Paul's Twitter is @Paul_Eberhart. |
***