Did Silver’s Bear Market End In June?

November 13, 2014

In a recent article, I used two different methods of time measurement to arrive at mid-November as the approximate time when the present silver bear market would end, and the next leg higher in silver’s secular bull market to begin.

One method, using a horizontal Fibonacci scale across time, starting at silver’s bottom in November, 2001, to its top in April, 2011 (114 months), indicated that a 38.2% passage of time since silver’s top (43.5 months) would bring us to mid-November, 2014.  This chart is re-posted below:

silver spot price

And so here we are – approaching mid-month with a freshly printed lower-low of $15.04 in place – with the possibility of a rally higher.  Yet it's still early to confirm whether “the bottom” is in for silver and “the beginning” of silver’s next leg higher is already in process, as this can only be confirmed in the rear view mirror.

However, it does appear to me that the issue as to whether we can presently observe "the end" of silver’s bear market is rather a question of chart “interpretation”! 

For the balance of this article, I am assuming that most readers know that the two most common types of price scales for interpreting stock charts are “logarithmic” and “linear”, and the differences between the two.  If not, I highly recommend that you learn, understand and always utilize both of these price scales when analyzing any stock or market to improve your method and understanding of technical analysis.  There are many resources online to learn more, as this is not an introductory on the subject.

For whatever reason, most online commentary/analysis of silver’s price chart that I observe is typically presented using a logarithmic price scale, which shows silver locked solidly within a bear market downtrend, trading well below trendline resistance, as shown in the weekly chart below:

silver price chart

However, when viewed from a different perspective, it appears that silver has already broken out above its bear-market trendline resistance - in June of this year - and is currently back-testing the breakout!  This interpretation can only be observed on a “linear” price scale – as shown in the weekly chart below:

silver price

Although silver has broken below horizontal support to print a new “lower low” at $15.04, as of today price still remains above broken trendline resistance, and thus in “bull market” territory. 

As the next step towards an official return to full scale “bull mode” for silver – that being the business of printing higher-highs and higher-lows – technicians should be looking for the recent low of $15.04 to hold, followed by a weekly price reversal, or a weekly positive close (close higher than open) above $16.22 as a start.  And if Seńore Fibonacci has any say in the matter, look for this to occur sooner rather than later.

Ruben Varela, Jr. is an independent trader specializing in the precious metals sector. Email: rtvarela@yahoo.com. The foregoing is for entertainment and educational purposes only and not investment advice. Please do your own research before investing.

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