September 15, 2019
By Mish Schneider
Sometimes I wonder if I lived under a rock and never read or saw any news, and only had charts to look at, how would that change my trading.
After all, all the metal bulls quickly became bears.
Buyers fled the TLTs (20-Year long bonds) causing yields to rise.
Value, a long-term underperformer became all the rage.
The dollar weakened some.
Grains arose from the doldrums.
Meanwhile, the major news stories last week were about the Eurozone going to negative rates.
Economic data showed that consumer prices rose slightly.
The trade war relaxed a bit with words like “considering” and “good will.”
On tap, we have an upcoming Federal Reserve meeting.
In October, China and the US will allegedly sit down together.
Yet, the metals, in all the ongoing uncertainty, crashed.
So, if the charts tell me everything I need to know, when is safe to get back into metals?
Last time I showed you these charts was in July. Yes, right before the silver began to outperform gold. Right before SLV, the ETF, went from 14.50 to 18.35.
Right before the ratio between silver and gold flipped.
Currently, SLV has fallen to the 16.30 level. That is just over a 50% retracement.
Naturally, with a move like that, I thought it the appropriate time to bring back those same charts.
The top chart is the daily silver ETF. It sure looks like the old adage, stairs up, escalator down.
The dark blue line is the 50-daily moving average. A retracement down to there would be simple.
However, what I want to show you is the bottom chart, since the timing on the ratio flip was perfect.
The black and red lines are moving averages with the red one a shorter time frame than the black.
The dotted lines are bollinger bands.
In July, the price of silver relative to gold had a nadir or peak bottom. Then, once the price of the ratio cleared the red moving average, it was time to buy silver.
The gratification was instant.
Now, the ratio is still holding above the longer-term or black moving average but has failed the red line. That means that silver is back to under performing gold in the near-term.
That makes the decision relatively easy as to when to get back into silver.
Once the price either tests the black line (possible), or even more probable, returns over the red line, that will be a good indication it’s safe to get back into silver and gold too.
Depending on where the SLV price lines up on the daily chart with the daily moving averages, will help you determine risk.
So again, go under a rock. Forget what folks deem are the correct fundamentals. We are in the most unique environment where the “news” or “facts” are changeable on a tweet.
Under that rock, take this chart. Hopefully, you’ll emerge with an incredible trading strategy.
Russell 2000 (IWM) 154.50 now the closest pivotal support. 160 resistance
Dow (DIA) ATH 273.99 made in July. 270 support
Nasdaq (QQQ) 192.20 now pivotal support. 195.55 ATH
KRE (Regional Banks) 53-55 the range now to watch
SMH (Semiconductors) 120 support and ATH 123.56
IYT (Transportation) 190.00 pivotal support and 200 overhead resistance
IBB (Biotechnology) The 200 WMA at 102.65 now major support with resistance at 105 or the 50-DMA
XRT (Retail) 44.00-we will see if this spells the top of the move or not.