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A Deadly Sign for Silver

By Jeff Clark
Thursday, November 10, 2011

Precious metals bulls are getting all worked up over the price action in silver. Why shouldn't they? The price of the metal is up 18% in just the past three weeks. It's showing a 10% gain on the year. And analysts are predicting more gains to come.
 
All of a sudden, everyone loves silver.
 
I love silver, too. But I'm not buying it here. Not after what happened last week. Take a look at this chart...
 
 
Last week, silver's 50-day moving average (DMA) crossed below its 200-DMA. Technical analysts refer to this action as a "death cross," and it is considered a bearish development. This is textbook technical analysis 101. Everybody who pays attention to charts knows this is a bad sign.
 
But ever since the death cross occurred, I haven't heard anyone talk about it. Not a single soul.
 
To be completely honest, I'm not a big fan of following the 50- and 200-DMAs. They're just too popular. Everyone else pays attention to them, so their use as a technical tool is diluted. I prefer to look for signals no one else is following.
 
But the death cross on silver's chart is a clear bearish sign... And no one noticed it. That makes me want to pay attention.
 
It has been three years since the last silver death cross. In September 2008, the 50-DMA crossed below the 200-DMA... And the price of silver dropped 30% in the next two months.
 
If we get the same sort of action this time around, the price of silver could fall as low as $25 per ounce by the end of the year.
 
Please understand that I'm not predicting that severe of a decline. I just won't be surprised if it happens. But I am suggesting that if you're looking to buy silver, you may get a better opportunity to do so a few weeks from now.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Earlier this year, with everyone pouring into gold, Jeff turned short-term bearish. The metal then fell nearly 15% over the following month. Learn how he spotted caution flags in gold here: A Sign of Trouble Ahead for Gold.
 
And while silver may experience a correction soon, Brett Eversole says "shares of Silver Wheaton could double in the next couple years... even if the price of silver goes nowhere." If you like silver for the long term, this is a stock you need to own. Read more here: Silver Wheaton: Still a Double in Waiting.

In The Daily Crux
Market Notes
Copper is the worst-performing asset over the past three months... down 14%, while stocks and gold are in positive territory.
 
Gold miner fund GDX is up 15% since early October.
 
China "glamour stocks" Sina and Sohu are both down more than 40% from their May highs.
 
General Motors shares are down 38% this year... latest results show disappointing sales in Europe.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1261.12 +0.6% +2.9%
Oil (USO) 37.00 -1.2% -0.1%
Gold (GLD) 172.07 -0.8% +26.9%
Silver (SLV) 33.10 -2.7% +26.4%
U.S. Dollar 76.91 +0.3% +1.3%
Euro 1.38 -0.1% -1.9%
Volatility (^VIX) 36.16 +31.6% +89.5%
Gold Stocks (^HUI) 586.12 -3.1% +6.5%
10-Year Yield 1.96 -5.3% -26.3%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 123.16 -3.7% +3.3%
S. Korea (EWY) 53.50 -5.7% -5.0%
Canada (EWC) 27.29 -3.9% -7.0%
Japan (EWJ) 9.23 -1.8% -8.7%
Taiwan (EWT) 12.70 -4.1% -9.7%
S. Africa (EZA) 61.69 -6.6% -10.0%
Israel (ISL) 14.00 -4.8% -14.7%
Singapore (EWS) 11.73 -4.7% -15.4%
Lat.America (ILF) 44.14 -5.0% -15.4%
China (FXI) 36.84 -5.4% -19.8%
Russia (TRF) 15.53 -5.9% -25.3%
India (IFN) 23.43 -5.5% -33.2%

Sector ETFs
Symbol Price
Change
52-Wk
Retail (PMR) 20.87 -3.6% +14.4%
Utilities (XLU) 34.63 -2.2% +13.7%
Big Pharma (PPH) 67.63 -2.7% +8.7%
Internet (HHH) 76.80 -3.8% +7.4%
Big Tech (QQQQ) 56.81 -3.5% +7.1%
Consumer Svcs (IYC) 69.41 -3.4% +7.0%
Health Care (IYH) 67.73 -2.8% +6.7%
Real Estate (IYR) 54.88 -4.5% +3.3%
Industrials (IYJ) 61.61 -4.0% +1.9%
Software (PSJ) 24.65 -3.8% +1.2%
Oil Service (OIH) 125.26 -5.6% +0.1%
Transportation (IYT) 85.30 -3.9% -1.0%
Defense (PPA) 17.80 -3.8% -1.6%
Insurance (PIC) 15.31 +0.0% -2.4%
Media (PBS) 12.62 -4.5% -3.7%
Telecom (IYZ) 20.81 -2.9% -4.4%
Basic Mat (IYM) 66.39 -5.1% -5.1%
Biotech (PBE) 19.00 -3.1% -5.4%
Construction (PKB) 11.19 -4.5% -5.7%
Water (PHO) 16.61 -5.2% -6.3%
Semis (PSI) 14.07 -5.4% -6.7%
Financials (IYF) 48.23 -4.9% -10.8%
Nanotech (PXN) 6.22 -3.1% -36.4%
Alt. Energy (PBW) 5.72 -5.3% -44.3%

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