Are Silver Prices Stuck in the Uncertainty Zone?

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Mike Hammer | October 1, 2019 10:06am NYSE:SLV

NYSE:SLV | News, Ratings, and Charts

Silver has now dropped for 5 straight days.  Every silver bull will tell you it’s been an agonizing time; all the talk of historic gold-silver ratios, breaking up through 18 and such are now faint glimmers in the past.  Because in the end, what matters is your own personal account balance, not any pet theory or prognostication.  Not even what color your broker’s yacht is.

Here at The Gold Enthusiast, we care about our account balances in a very personal way – because they’re OUR account balances.  We need our money to make money.  It’s actually been a decent trading year here but not a great year. And there’s certainly enough year left to make more.  So let’s see if there are any immediate prospects in silver.

silver uncertainty zone


What we see in the current chart of SLV (our unleveraged silver trading proxy in US markets) is that silver has now dropped back into what an old trader called The Uncertainty Zone.

You see, when something runs up quickly there’s often an initial starting step to the move that forms a little area on the chart.  We definitely see this in silver’s recent run-up. This is the period during the run-up when the bulls and bears are really going at it – the early bulls are buying to get onboard the upward move, while the bears are busy selling and shorting thinking it’s going back down.

So there’s this see-saw action, often in a fairly narrow range, like half a usual trading-levels width.

Then one side or the other wins.  If no one else in the trading community believes in the move it will fail; new money doesn’t come into the sector, the price drops back, and the bears win.

If new money does come into the sector then the bulls win and we go up.  That’s what happened with silver this last round. Enough new money looked at all the articles and evidence, wieghed uncertainty, read annual reports, looked at production and consumption, and said Yes, this rally has legs!  They bought into the market and up we went.

But unfortunately, not enough new money came in. Just as the second round of money started to peter out, in came good news about trade wars and currency fixing. The next round of new money decided to go after equities and silver has now fallen back.

Typically silver will sit in this Uncertainty Zone for a few days while investors decide what to do.  Watch for US closing prices – don’t jump at the first tick above or below the zone. This is a market that may give a head-fake or two.  Your Gold Enthusiast thinks it might be a month or probably more before we see precious metals recover and head back up.


The Gold Enthusiast

DISCLAIMER: The author has no position in any mentioned security.  The author is long the silver sector via small positions in USLV, PAAS and SVBL. He may daytrade around these positions but has no intention of trading out of these core positions in the next 72 hours.

The iShares Silver Trust (SLV) was trading at $15.95 per share on Tuesday morning, up $0.03 (+0.19%). Year-to-date, SLV has declined -0.25%, versus a 12.17% rise in the benchmark S&P 500 index during the same period.

SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #9 of 33 ETFs in the Precious Metals ETFs category.

About the Author: Mike Hammer

Mike HammerFor 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.

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