Silver

**PCMNewsdesk** · 06-30-2016, 10:05 AM

[Silver] spiked to a new recovery high today at $18.49, but today's push was not confirmed by gold, which so far remains below its high last Friday. Silver is just shy of a resistance band at $18.65-$19.00, which, if reached, will likely be a solid barrier to the near-term advance. As noted, there is no resistance after this band until near $21.50, so if prices somehow are able to punch through, there could be a sharp spike thereafter. As it now stands though, the non-confirmation to today's push from gold is a bearish sign.

**PCMNewsdesk** · 07-02-2016, 11:46 PM

The market is closed on Monday, July 4, in celebration of the Independence Day holiday. The next STU will be published on Wednesday, July 6.

[Silver] managed to punch through the top of the resistance band, which surrounded the $19.00 level. The Daily Sentiment Index (trade-futures.com) has risen to 85% silver bulls, nearing the 90% reading that attended the $18.05 high on May 2. But it's not there yet and there is little chart resistance until near the $21.50 level, as we noted in Wednesday's STU. Precious metals tend to spike into a high more often than not, so the potential exists for silver to continue its spike as the DSI numbers jump to 90% or higher. It would be frenetic end to this wave of silver's bear-market rally. A decline below $18.00 would break silver's upward momentum and indicate that the rally had exhausted itself.

**PCMNewsdesk** · 07-07-2016, 12:35 AM

[Silver] did spike to its most recent high, carrying to $21.17 on July 4 in trading on world markets. This high was 1.5% from the $21.50 chart resistance that we cited in the prior STU. Prices could still get there, with the resistance range expanded to $21.50-$22.22. But silver bulls have a serious headwind to a major expansion to the current rally. The top chart shows that Managed Money accounts (speculators) hold a record number of futures and options silver contracts in anticipation that the current rally has far to run. This cohort is slightly different than the Large Specs and Commercials that we discussed in the recent issue of EWFF, but their behavior is similar to the Large Specs in that they are trend-followers. They buy into a rising trend and sell into a declining one. When their positions reach an extreme, it’s worth paying close attention, as trend reversals are most likely to occur. With a record net-long position, there are few traders left with the position size to keep the current trend intact for a long period of time. The second chart shows that short term silver traders are lopsidedly bullish. The 5-day Daily Sentiment Index (trade-futures.com) has jumped to 94.4% bulls, the highest 5-day average in 5½ years, since the April 2011 silver peak at $49.91. Both measures are a bearish indicant for silver prices in and of themselves. When combined, they present a flat-out bearish message. Silver may complete a small fourth wave and then rally in a fifth-wave to finish the wave structure, as shown by the wave labels on the chart. But a sold close below $19.00 may turn the Money Managers from buyers to sellers, which would exacerbate a near-term selloff. In other words, it entails a high-degree of risk to be purchasing silver at this moment.

**PCMNewsdesk** · 07-09-2016, 12:44 PM

This is an exciting juncture for [Silver]. We’ve discussed the record net-long position in silver futures and options contracts held by the Managed Money cohort who are trend-followers that get caught in major wrong-way bets at trend reversals. The bottom graph on our chart shows the Daily Sentiment Index (trade-futures.com), another reliable sentiment indicator that is constructed by taking the measure of short term silver traders. In late 2015 and early 2016, after silver had already declined more than 70% over the prior 4½ years, traders were lopsidedly bearish toward silver’s future prospects. Just 10% thought silver had the wherewithal to rally in any appreciable manner. As the chart shows, that was exactly the time to be acquiring silver, which was building a base from which the current rally resulted. When the DSI hit 90% bulls on April 29 in conjunction with silver finishing wave A, prices dropped 12½% over the following four weeks, leading to the wave B low. Since then, silver has spiked up to $21.17 on July 4 on world markets. This week, the DSI registered back-to-back readings of 97% bulls for the first time since August 19-22, 2011 (98%-98%), which was the exact day of the closing high for a second wave countertrend rally (Aug. 22). Silver declined 41% over the following four weeks. So two different measures of market sentiment are flashing the same bearish signal. The labels on our chart indicate that today’s $19.21 low is wave iv (circle), implying that silver will rally to complete wave v (circle) and Minor wave C. But the lopsidedly bearish message conveyed by silver sentiment indicators makes this a dicey proposition. Silver’s near term rally potential will remain intact as long as prices do not close below $18.92. A close below this level would make the current decline larger in size than wave B from $18.05 to $15.80, which should not happen if it is Minute wave iv (circle). Instead, it would signal that silver’s spike to $21.17 is a top of more importance.

**PCMNewsdesk** · 07-12-2016, 05:12 AM

In Friday’s STU we discussed the sentiment extreme that exists in [Silver]. Short term, if prices are rallying in Minute wave v (circle) of Minor wave C they must continue higher from current levels. If there is any price weakness now, over-committed silver longs would likely start cutting back on their positions, which would exacerbate a decline. Minute wave v (circle) could carry to the $22-$23 range before it terminates, but it’s not a requirement. Any decline below the wave iv (circle) low at $19.21 would negate any remaining near term bullish potential and leave silver prices exposed to a very steep drop.

**PCMNewsdesk** · 07-14-2016, 08:25 AM

As our chart of [Silver] shows, prices have so far held above the wave iv (circle) low at $19.21, which allows silver to rally to a new recovery high (above $21.17) to complete wave v (circle) and Minor wave C. As we noted, Minute wave v (circle) could carry to the $22-$23 range before it terminates, but it’s not a requirement. As it stands at the end of today’s session, silver still has not confirmed gold’s high on July 6, instead making a high on July 4, and sentiment remains lopsidedly optimistic. The latter fact is why we’ve cited the wave iv (circle) low as important near term. A decline below $19.21 could cause over-committed silver longs to start selling, which would exacerbate a selloff. As shown by the Alt. line on the chart, it’s possible to label the July 4 high as the top of Minor wave C, which would place silver at the forefront of a steep decline.

**PCMNewsdesk** · 07-16-2016, 11:16 AM

Short term, while gold declined on Tuesday below its July 8 low ($1335.26), [Silver] has been resistant to a similar decline so far, still holding above the $19.21 intraday low on July 8. As a result, it’s still possible that silver is in the latter stages of Minute wave iv (circle), which will lead to another upward push in Minute wave v (circle) to complete Minor wave C. Sentiment remains lopsidedly optimistic, which means that if prices rally to a new recovery high, it should be the final wave of the advance. As before, wave v (circle) could carry to the $22-$23 range before it terminates, but that’s not a requirement. The Alt. line on the bottom of the chart shows that it’s possible label the $21.17 high on July 4 as the top of Minor wave C. We are watching this potential closely because of the record net-long futures and options positions held by silver speculators. This cohort makes large wrong-way bets at significant trend reversals and it’s making its biggest one right now. A decline below $19.21 would be the initial signal that silver has topped, particularly if gold confirms the decline by remaining relatively weak. Silver’s selloff could become very steep.

**PCMNewsdesk** · 07-19-2016, 06:06 AM

The implication currently conveyed by the Commitment of Traders data with respect to [Silver] remains as equally as bearish as it is for gold. Large Speculators are record net long silver futures and options contracts, while Commercials are record net short. The above chart is updated from Friday’s STU and shows that it’s still possible to label the $19.21 low on July 8 as a fourth wave. So while the $21.17 high on July 4 may be the top of Minor wave C, we cannot conclusively say so just yet. If prices push above the July 4 high though, it will be a fifth wave, which is the final wave of silver’s advance. As we said Friday, a decline below $19.21 would be the initial signal that silver has topped, particularly if gold confirms the decline by remaining relatively weak.