Erik Swarts makes really nice charts and in this article he draws a parallel between silver’s QE2 blow off and what the S&P 500 is doing now at the behest of QE3. I have noted this staggered correlation before but Mr. Swarts’ charts are just excellent. I noticed his article at Safehaven. Here it is at his blog:
Recall that I thought something was fishy at the time of QE2. Specifically the beautiful inverted H&S that wasn’t in the gold-silver ratio. The GSR was supposed to go up I tell you! Well back then silver got the QE bid, culminating in 2011′s blow off. The GSR got hammered as silver outperformed. Today the US stock market gets the bid and conspicuously, the GSR has risen and broken out of the post-2008 downtrend.
Gold-Silver Ratio weekly
In fact, is that a more massive inverted H&S than the little one that failed in 2010? Is Erik Swarts correct in comparing the SPX with the silver blow off? Yes, but the stock market’s PE is historically moderate and all that cash is on the sidelines! That cash is being beckoned to come join the party; the water’s fine.
This is not likely to prove to have been a healthy time to jump in, in my opinion. Just give it some time and this should prove to be true.
That something was a big smash in gold and especially silver over night and then a head spinning reversal. Exactly the kind of thing we look for to be buyers.
Silver actually got near my target zone, which is 17-20. But there is a bump of long-term support elsewhere (noted this morning in an NFTRH update) that could hold for a rally or better. When items like gold and silver have been this badly decimated and people have come to hate a concept like honest money this vehemently (while being compelled to worship inflationary policy making), you need to give merit to the idea that the next rally could be the rally.
Silver’s CoT data still shows some open interest by whatever gamers or evil interests there may be in the paper and digital markets, but its structure is very bullish. Yet until this morning, everybody hated silver.
Now, lack of follow-through and another flop would reset and extend the agony that honest money advocates have endured, but there seemed to be enough going on today in gold, silver and the associated stock indexes to stand up and take notice.
May/June is after all, the time frame we have been expecting for some pretty important changes in the macro markets. Did something happen today? We’ll find out very shortly.
This target has been on radar for months upon months and most intently since support was lost at 26.10 a few weeks ago. Today silver is doing this…
If the breakdown holds, there is nothing but hot air between current levels and sub-20. Here is the disgusting chart produced 8 weeks ago in NFTRH
238 [edit: 230]
Some improvement again this week.
Gold Commitments of Traders
Silver Commitments of Traders
Here are some possible bear flags in the making, compliments of the precious metals sector. These are weekly charts and the flags may not yet be mature. Indeed, we have been managing a would-be rally by the miners off of the capitulation low of a couple weeks ago, and that is still in progress.
HUI, GLD & SLV daily
But the weekly view is not a good one technically for the precious metals complex. Maybe what we need is for the “community” leaders to get emboldened just a little more.
People who understand the value of their physical metal are sleeping soundly. Unfortunately, the majority of players are just casino patrons dressed up as value players and they are micromanaging every tick in gold. Do you think it is just going to breeze through 1524 with all that hope and angst built in?
The gold generals (with egos as big as their reputations) may be debunked by the time this is all over. All along they have used dogma to keep the troops in line and other smart guys have used charts to call bottoms that really weren’t… ‘see, I have a chart to back up my biased viewpoint!’; but the problem is real people with real lives, loves, problems and joys read this stuff and think ‘expert’.
Nobody knows what the fuck is happening out there for certain. If the bear flags above turn out to be wrong, I’ll admit as much. That is because a chart cannot predict. It can only hint and prompt risk management or speculation. It is all about hard work and discipline.
Sorry for the negative attitude, but this whole process has disgusted me more and more the longer it has gone on. I read things every day by dangerous people that make me want to puke. Gold is monetary value, not an idol of worship. Keep religion out of it. Keep fear out of it. Keep greed out of it, and you’ll be fine.
This week we pared it down to 17 pages because that is all I felt it needed to make its points, some of which were strong. That is in part owing to the more frequent ‘in-week’ updates that were posted here at the site of late. This will probably be the mode going forward; an easier flowing weekend letter and interim updates as frequently or infrequently as called for during the week. It’s sort of a more dynamic way of going about things.
Not that it means much these days, but here it is anyway. Commitments of Traders lurch in a positive direction for both gold and silver.