Silver Price: This Industrial Metal Is All Set to Make a Monster Move

June 9, 2018

London (June 9)  The reason why I am focusing on the silver price is that I have reason to believe that a very large and violent move is on the horizon.

Many might be wondering what a commodity has to do with technology. The answer is that silver is not only a precious metal, but it is also an industrial metal.

Silver is consumed in the development and creation of many technologies. These range from automotive applications to smartphones to solar panels, to name a few.

As long as the economy continues to expand and the green movement continues to move forward, the industrial demand for silver will follow suit.

These fundamental facts are of importance, but they have little to do with the reason why I believe that a monster move in the price of silver is on the horizon.

The technical picture that has been painted on the silver price chart is exquisite, and it is nothing like I have ever seen before in my career. If there were ever a time when one could label price action as the calm before the storm, this is it.

The silver price action has literally come to a standstill. The month-over-month range between the highs and lows continues to contract. As a result, volatility has dropped off completely.

This lack of movement has caused a number of technical indicators to completely flatline at the neutral point.

The following monthly silver price chart captures this phenomenon.

The 50-month and 200-month moving averages highlighted on the above price chart are telling quite a compelling story.

These moving averages have become significant levels of price support and price resistance. Since January 2015, the range between these moving averages has contracted. This contraction of space causes energy to build.

The longer the price of silver is contained between these moving averages, the more violent the reaction that will follow.

The anticipated reaction that follows will begin when the silver price either breaks above resistance or falls below support. Once that occurs, it will be like a tightly packed powder keg going off.

Usually, the indicators in the upper and lower panels give clues to the direction of this anticipated move, but, at the moment, they not are giving any distinct signals.

The relative strength indicator (RSI) in the upper panel is used to measure whether a stock is overbought or oversold. This is achieved by using an oscillator that fluctuates between zero and 100.

A reading above 70 indicates that a stock is overbought while a reading below 30 indicates that it is oversold.

The RSI currently stands at 50, which is the midpoint; it is generating neither an overbought nor an oversold signal. An RSI signal at 50 is completely neutral, and the price can move in either direction before reaching an extreme.

The moving average convergence/divergence (MACD) indicator located in the lower panel is a simple yet effective momentum indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action.

Bullish momentum implies that the stock price is geared toward higher prices, while bearish momentum implies that the stock price is geared toward lower prices.

Momentum is a powerful force, and a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it.

The MACD indicator has been bound around the zero line, neither suggesting nor refuting whether the silver price is going to sustain a move toward higher or lower prices.

This just leaves the moving averages. The 50-month moving average currently resides at $16.85, and the 200-month moving average resides at $16.08. A monthly close outside this range will dictate which direction silver is heading in next.

I am leaning toward a bullish resolution because, from a technical perspective, the 50-month moving average has been above the 200-month moving average since December 2004, suggesting that a bull market is in development.

This means one could argue that the correction in the silver price that began in 2011 has been within the context of a much larger bullish trend that is still in development.

If this is indeed the case, the bull market that began in 2004 is still in development, and the last seven years have just been a prolonged correction, during which the price of silver has essentially been sitting in the eye of a hurricane.

Thus, a ferocious and powerful hurricane will soon follow, and the silver price won’t be standing still anymore.


Silver Phoenix Twitter                 Silver Phoenix on Facebook