Silver Miners Pinpoint the Precious Metals' Outlook / Commodities / Gold & Silver 2019

Verylittle happened in the precious metals market both yesterday and in today’spre-market trading – at least so far. We will take this opportunity to discusssomething that we haven’t done in a while – silverstocks.To be clear, we’re not going to discuss the silver mining stock selection, asthat’s something our proprietaryalgorithms do on a daily basis. And yes, during the recent long trade, the gain on theindividual gold and silver miners was bigger than the one from the GDX ETF.

Instead,we’re going to take a look at this sector’s performance and compare it to onevery similar case from the past. Yes, just one, which may not looks like anappropriate base for drawing conclusions, but the level of similarity makes itdefinitely relevant to the current situation. So, without further ado, let’stake a closer look at the SIL ETF – the proxy for silver miners.

SilverMiners in the Spotlight

Eversince the SIL ETF started trading (in2010), we saw three significant rallies in gold and silver. The first rallytook place right at the beginning of this chart, leading to the 2011 tops. Thesecond rally started in early 2016 and it was significant in case of bothmetals. The third notable rally started in the second half of 2018 and it endedin August 2019. It was much bigger in the case of gold than it was in silverand mining stocks, but it’s clear that overall it was something major.

Thefirst takeaway from the above chart is based on the sizes of these three moves.The most recent upswing in the silver stocks was tiny. Even though gold andsilver moved higher in a visible manner, silver miners are barely up. To beclear, the rally is visible, but it’s orders of magnitude smaller than what wesaw in 2016. We copied the sizes of the previous rallies to the currentsituation (blue and green dashed lines). It’s clear how tiny the recent upswingwas compared to them.

The miningstocks are the part of the precious metals market that tends to show strengthat the beginning of a major move up. We saw exactly the opposite.Silver miners were weak compared to what the underlying metal did.Consequently, the odds are that what we saw last and this year was not the start of a long-term bull market in the precious metals market. We willmost likely get there eventually, but we are not there just yet.

Thething that we just discovered is that we see not only the similarity in termsof prices, but also in terms of volume movement. The recent move higher was notvery similar to the previous upswings in terms of price, but the way volumeincreased and then declined is very similar to what happened during previousbig rallies in gold and silver. In particular, it’s reminiscent of what we sawin 2010 and 2011. Because of both the shape of volume, and of the way silverstocks outperformed silver (barely). The latter is what differentiates therecent upswing and what we saw in 2016 – back then, silver miners stronglyoutperformed silver.

Thefinal parts of the rallies were accompanied by huge volume levels, but once thetop was in, the volume levels notably decreased. That’s what happened inmid-2011 and that’s what happened recently. We marked it with red rectangles.Within the 2011 red rectangle, we saw a few separate volume spikes, andsomething similar accompanied the recent action too. Back in 2011, the volumespiked during the topping process. It marked the final top in gold, the secondtop in silver, and also the second top in the silver miners.

Highergold prices were never seen since that time.

Highersilver prices were never seen since that time.

Neitherhigher silver stock prices were ever seen since that time.

Thesilver stock volume spiked last week in a way that was very similar to what wesaw in mid-2011. Moreover, last week’s session was a clear shootingstar reversal candlestick. These candlesticks are powerfulbearish signals if they are accompanied by big volume. And that’s exactly whatwe saw. When we exited our long positions and entered short ones close to lastweek’s high, the outlook was already bearish, but seeing this kind of powerfulconfirmation of the reversal in silver stocks makes this change even morejustified.

Allin all, the recent performance of silver stocks serves as a perfectconfirmation of what we previouslywrote about gold, silver, and gold miners. Namely, the short-, andmedium-term outlook for the precious metals sector remains bearish.

Ourprofitable long precious metals position has been closed last week, and we’veentered another trade immediately. This time, on the short side of the market,and it’s going profitable again. The full version of this analysis features allthe details and targets of the already-profitable short, digging into thefactors supporting this move and the bearish outlook. Joinus and profit along!

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Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE

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All essays, research and information found aboverepresent analyses and opinions of Przemyslaw Radomski, CFA and SunshineProfits' associates only. As such, it may prove wrong and be a subject tochange without notice. Opinions and analyses were based on data available toauthors of respective essays at the time of writing. Although the informationprovided above is based on careful research and sources that are believed to beaccurate, Przemyslaw Radomski, CFA and his associates do not guarantee theaccuracy or thoroughness of the data or information reported. The opinionspublished above are neither an offer nor a recommendation to purchase or sell anysecurities. Mr. Radomski is not a Registered Securities Advisor. By readingPrzemyslaw Radomski's, CFA reports you fully agree that he will not be heldresponsible or liable for any decisions you make regarding any informationprovided in these reports. Investing, trading and speculation in any financialmarkets may involve high risk of loss. Przemyslaw Radomski, CFA, SunshineProfits' employees and affiliates as well as members of their families may havea short or long position in any securities, including those mentioned in any ofthe reports or essays, and may make additional purchases and/or sales of thosesecurities without notice.

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