We have been on a macro theme that is very different than what transpired into April. This goes for stocks, commodities and the sentiment backdrop in general.
It was at first anticipated with the idea that when silver tanked in relation to gold the potential for a hard snap-back was in play. We began managing the Silver/Gold ratio (SGR) in May for this very prospect. Silver eventually turned up hard relational to gold.
More recently, the expectations has been for another leg up in the SGR. This morning in pre-market the ratio is moving above its 200 day moving average after dwelling below/at that marker for the last month. RSI and MACD look coiled for more upside.
So it appears that the expected 2nd leg is in progress, barring some kind of pre-market whipsaw. Assuming we are on the 2nd leg, the analysis is now down to two options:
- SGR will signal a new and sustainable macro in play, which would feature significant upside in commodities, by breaking its down trend (simply moving above the SMA 200 does not break the downtrend), or…
- …it will find resistance at some point and fail back into the downtrend.
Thing 1 would be the new macro phase that commodity super-cyclers have been waiting for as if it were Godot.
Thing 2 could signal an interim market liquidity problem that would trigger a market correction, including in many commodities.
Personally, I am marrying neither option. But I am respecting both of them. However, the way silver rolls, I expect at least more short-term upside. If the SGR continues grinding its way upward that could signal better odds for longer “SGR trades”. If the SGR spikes and causes jaws to drop, I think that might signal an ending event.
It’s best for silver to be bullish, but stay under control. Its ending moves tend to be events. Let’s talk more about this in NFTRH 871.
