Loading ...Is Silver Leading?
After reviewing the Pendants across the PM complex this weekend, Silver jumps out at me but first, lets review Gold’s 5-6 month Intermediate Cycle (IC) Pattern during the long bear. Much depends on the USD here, especially if the bullish move on Friday continues.
Also see charts and comments on the Gold:Silver ratio at the end of my post.
Basically, every Gold IC has topped between weeks 8-11 with the current top during this Intermediate Cycle in week 10 (so far). While I think that the Bear is likely coming out of hibernation, this current parabolic move is not sustainable. A Cycle low is needed to recharge investor sentiment.
Now lets look at the Pendant pattern on Silver. Although Pendants are usually continuation patterns, it has clearly broken to the downside so lets look at what I think are Silver’s shorter Trading Cycle counts. It looks to me that Silver found a TC2 low on day 27, followed by a TC3 Top on day 2 and now we have a lower low in TC3 which should signal a move into the next Intermediate Cycle low, perhaps out near Martin Armstrong’s second Benchmark Low.
Now lets look at the Gold chart. Much depends on the USD and Stocks over the next few weeks as Gold has been getting a safety Bid (in addition to the negative rate bid). The USD had a very bullish move on Friday and should that continue, I would expect Gold and the Miners to break to the downside of their Pendants, similar to Silver starting next week.
Added: Or is the Gold:Silver ratio perhaps simply signaling a nearing Credit Contraction? The TLT:JNK ratio is also signaling that all is not well in global credit markets.
The Gold/Silver Ratio has been a reliable indicator of credit conditions. It declines during a boom and often rises to extremes signaling a Credit Contraction is looming in the not too distant future.
Note how the Ratio peaked near the low in stocks during the Financial Crisis and also near the low of the downturn from the 2000 Dot.COM bust. Looks like it is now breaking out from a bullish rising wedge just as Credit Spreads are also breaking out.
Martin Armstrong, as I understand it from various blog posts in the public domain, had two Benchmark Low dates for Gold and Silver. The First was in early December 2016 (check) and the second was in Late March to Early April 2016 where he expects a Lower Low.
The April timeframe lines up with my Cycles work. Gold typically makes a major Intermediate Cycle Low every 5-6 months. Over the last year Gold’s IC lows have been averaging closer to 5 months (In Bull Markets, Intermediate Cycles typically last longer and in Bear Markets, they often start getting shorter, Witness the SPX 7-9 months in the late stages of the Bull and now closer to 5 months low to low during the Bear)
Recent examples of Gold’s 5 Month IC Low pattern: June 2014 + 5 Mths = Nov 2014 + 4.5 Mths = March 2015 + 4.5 Mths = July 2015 + 5 Mths = Dec 2015 + 5 Mths = April 2016
FWIW, I do not expect Gold or the Miners (XAU/HUI) to make a lower low in April. Silver perhaps. Time will Tell 🙂