I am not showing you anything new here but I tend to continually review indicators like this both for myself and for others who maybe have not caught all details to date. The Silver/Gold ratio (SGR) came to our warning point yesterday and of course today comes the pullback/reaction.
The weekly chart adds a downtrend channel that the SGR busted down from during the COVID-19 crash. This view advises that the red line target area does not necessarily need to halt the advance. It always was likely to be at least a pause area. Other options besides a downward reversal are a rise to the top channel line or, given the extreme distortion to the downside made by this ratio, an equal upside slingshot that breaks the ratio to a new bull phase above the 2019 highs.
The monthly chart shows that not only is the ratio dealing with the 2019 low as resistance but also the lows of the early 90s.
We should watch the current warning area with the yellow box on the 1st chart. If it takes out that and the daily SMA 200 as the CDNX/TSX ratio has done (that indicator is getting a negative hit today too) we can watch the trend channel on the 2nd (weekly) chart. The top of the channel can be challenged with the indicator still remaining in a downtrend. But crossing the red line and taking out the SMA 200 would be notable and constructive as the first thing needed to send it bullish.
By definition however, risk is high and has been rising the closer the ratio got to the yellow box. Now it’s there and for a day at least, turning down from it. So that is a caution.