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Silver Continues to Confirm Bullish Trend

Stock MarketsNov 09, 2021 03:30PM ET
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© Reuters. Silver Continues to Confirm Bullish Trend

It’s been a great year thus far for investors in the S&P-500 (SPY) and Nasdaq-100 (QQQ), but unfortunately, investors in the precious metals space (SLV) have been left in the dust. This is evidenced by a 20% plus return for the S&P-500 and Nasdaq and a pathetic (-) 9% return for silver. However, while the returns have been disappointing this year, they’ve created the conditions for a new bull market to emerge, with some of the lowest bullish sentiment readings we’ve seen in several years in the precious metals space.It’s been a great year thus far for investors in the S&P-500 (SPY) and Nasdaq-100 (QQQ), but unfortunately, investors in the precious metals space (SLV) have been left in the dust. This is evidenced by a 20% plus return for the S&P-500 and Nasdaq and a pathetic (-) 9% return for silver. However, while the returns have been disappointing this year, they’ve created the conditions for a new bull market to emerge, with some of the lowest bullish sentiment readings we’ve seen in several years in the precious metals space. Meanwhile, even though the S&P-500 continues to make new highs, silver is not making new lows relative to the S&P-500 and looks to be trying to bottom out currently. This is a reason to remain optimistic, as is the fact that silver continues to make higher lows vs. the gold price (GLD (NYSE:GLD)). Let’s take a closer look below:

(Source: TC2000.com)

Just over two months ago, we had concerning readings for the silver/gold ratio and the silver/S&P-500 ratio, with the latter in free fall and the former looking like it would make a new 1-year low and break below its key moving average. However, the bulls stepped up exactly where they needed to for silver, holding the critical $21.50/oz - $22.00/oz support zone and recently breaking out of a short-term downtrend. As the chart above shows, this allowed the silver/gold ratio to make a higher low relative to Q4 2020 levels, and it has also contributed to the silver/S&P-500 ratio not making a new low and continuing to hold above its 2018 lows, in the depths of that violent bear market. Generally, outperformance in silver vs. the gold price suggests that both metals remain healthy and that violent pullbacks should be treated as bull market corrections, not the start of new bear markets.

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Silver Continues to Confirm Bullish Trend
 

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