While Nobody Was Watching …

Probably the most ignored sector in the markets right now is gold and silver commodities/miners … I have started a position in my portfolio today in both silver and the silver/gold producer WPM.  Here are the charts …

Silver Futures (SI) – Monthly Chart

The monthly chart shows how little silver has done during the whole economic recovery phase … no pricing pressure/inflation and therefore, no interest in silver or gold which act as inflation hedges for investors.

Don’t get me wrong … there is no sign that gold/silver are going to spike here.  I am looking at this as the start to a multi-month or even multi-year position in my retirement portfolios.

Silver Futures (SI) – Weekly Chart

One of the things that I am looking at in terms of starting a swing position in silver via SLV January 2019 calls and common stock in silver producer WPM is the above weekly chart for silver futures … we are in the midst of a super huge contraction warning signal.  What follows contractions?  Expansions do.

When you add the wedging seen on the weekly chart, I think it is worth while for me to start a position so I am motivated to monitor this set-up more closely going forward.  The $17.00 on Silver Futures is a key level going forward for me.

Silver Futures (SI) – Daily Chart

The daily chart shows the bigger weekly wedge consolidation pattern even better …

How does gold look?

Gold Futures (GC) – Daily Chart #1

The bounce in gold during 2016 was probably Wave 1 or A of a bigger pattern that is yet to fully play out.  The pullback into the beginning of 2017 held the SLOT support zone levels and we have been making what looks like a corrective push higher since then – I say that because of the overlapping nature of the price action since that support low held.

Gold Futures (GC) – Daily Chart #2

So while the “corrective” nature of the price action during the current wave argues against playing precious metals to the upside, I think the strength of that possible first wave/move gives me enough confidence that something bigger is at work here with gold and silver.

Speaking of gold and silver, for silver to be worthwhile when compared to gold as an alternative, the gold/silver ratio should be working in our favor …

Silver / Gold Ratio – Daily Chart

Ideally, silver investments are preferred over gold ones when they are “cheap” relative to gold … to me the silver/gold ratio has finished what looks like to be a 3-wave move lower, so silver should do better, relatively going forward for the next little while.

One other ratio I like to monitor is silver/emerging markets …

Silver / Emerging Market Ratio – Monthly Chart

Looks like silver is finished a big period of underperformance on the monthly chart …

Silver / Emerging Market Ratio – Weekly Chart #1

A closer look at that big pattern …

Silver / Emerging Market Ratio – Weekly Chart #2

The bigger 3rd wave looks like it has completed a 3-wave pattern as well … what does that all mean?  It means that going forward here, silver is likely to outperform the EEM emerging market ETF.

Ok now let’s look at the publicly traded silver producers/miners …

I typically defer to the largest cap stocks when looking at playing a swing trade price reversal … my thought is that when institutional money comes looking for silver stocks is that they will migrate mainly to the largest most liquid names.  That is obviously WPM in silver’s case.

WPM has added a fair amount of gold to their production profile the past couple of years, and while it still has a tax issue outstanding with the Cdn government, I think that is how I should play silver miners in my Canadian retirement accounts.  WPM also pays a 1.64% dividend yield here as well.  The next earnings report is in August.

Here are WPM’s current charts …

WPM – Weekly Chart

You can see the big downward expanding price pattern that I have been tracking for WPM on the above chart … we are getting close to breaking out of that pattern here at current levels.

WPM – Daily Chart #1

The daily chart shows how WPM is making a second attempt to break higher …

WPM – Daily Chart #2

A closer look at the daily chart shows a possible 3-wave move into that resistance trendline … Today I bought a small position in WPM and placed several orders at lower prices that will remain in place until the end of the month.

Bottom-Line … Long-term trades often fail because they take so long to get going and traders often get too big too quickly and get shaken out of the trade by the drifting of time.  I realize that issue, but I think I want to get a starter position in place before we get to the FOMC meetings and the North Korea summit occurring next week.

Cheers … Leaf_West

 

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