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Was Silver Ever Bullish?

December 23, 2016

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Hat tip to Derek for bringing up today’s topic in the clubhouse. I think the query of whether or not silver prices were bullish in 2016 merits further investigation. Fascinating points were made all around, and I can’t help but throw my thoughts into the ring. The entire discussion boils down to two key points: time frames and personal preference matter a great deal when analyzing a chart. A third takeaway is that drawing trend lines can be subjective.

First, the chart that kicked off all this pre-Christmas chatter (drawn, no doubt, with loving care by Derek):

This beauty is a 5-year weekly chart showing silver locked in a downward sloping channel since 2012. And, indeed, SLV was unable to break above the upper trendline this year thereby supporting the viewpoint that it was never bullish. Which is true, if by bullish you mean “it never broke above this particular weekly trendline.” If that’s the line in the sand you want to draw, then sure, I’ll go with it. Silver, you dirty dog, despite a valiant attempt at recovery this year, you failed. Shame, shame, shame.

And yet, if the definition of bullish is breaking a weekly trendline, then SLV has been bullish for years. Consider this eye candy:

Since peaking in 2011, SLV has climbed above no less than four major weekly trend lines (white, green, yellow, blue).  And I’m sure I could have drawn more. The purple line (which is the one also used in Derek’s chart) is the one that stymied this year’s rebound attempt in SLV. But here’s the thing. Until we break above the 2011 peak, you will always be able to draw a weekly descending trend line for SLV. Even if it rallies to $25, $30, or even $35.

Now, let’s go to the daily chart of SLV to analyze how it looked up until August of this year. I see a series of higher pivot highs and higher pivot lows complete with rising 200-day, 50-day, and 20-day moving averages. How can that be anything but bullish? I could see if SLV popped enough to turn the 20-day higher, but not the 50-day. Then maybe you could say – hey, I need to wait for a stronger bounce to confirm the intermediate trend is rising (the 50-day moving average is often used as a proxy for the intermediate trend). I could even see if the SLV rally lifted the 20-day and the 50-day, but not the 200-day. And you reasoned the recovery was potentially a ruse because the 200-day moving average still hadn’t risen.

But, in this case, we can’t say that. SLV cobbled together a seven-month uptrend that turned all of its major moving averages on the daily chart. If you’re taking buy/sell signals off the daily chart, then you have to be bullish here.

Now, let’s take a renewed look at the weekly chart with moving averages included:

This year’s silver rally was sufficient in turning the 20-week and 50-week moving averages higher. Is that enough of a recovery to change your outlook on SLV from bear to bull? I don’t know. This is where personal preference and time frame enter the equation. If you’re waiting for the 200-week moving average (which is a measure of the long, long-term trend) to turn higher before changing your tune on SLV, then, I’m in agreement that SLV wasn’t bullish. But, let’s be honest. If you’re taking your cues from the 200-week moving average, then you’re the longest of long-term investors here. One waiting months, nay, years for ultra-confirmation before switching teams.

I could go on but holiday festivities are beckoning, and I think I’ve sufficiently articulated my thoughts on the matter.

Have a Merry Christmas!

8 Replies to “Was Silver Ever Bullish?”

  1. DEREKWILCOX says:

    Very well written Tyler as always! Good points made. Its always good to get multiple opinions/perspectives on a matter.

  2. Sundar says:

    Nice article and insights to chew on during the holidays. Thanks to both Derek and Tyler for this contribution.

  3. DarenKumar says:

    Very interesting points Tyler and Derek.

    Tyler, if you wrote a book with the same pizzazz and story telling you write your articles, i would definitely buy it and read it. I have fun reading them, so thank you for that.

    Have a Merry Christmas!!!

  4. ERICSIMMS says:

    Great analysis, Ty. Here’s wishing you and your family a very, merry Christmas!

  5. KEITHGIUNTA KEITHGIUNTA says:

    Merry Christmas Tyler. Great analysis.

  6. CHUCKHAUGER says:

    Thanks to Tyler and Derek. Interesting take on this. I also enjoy Tyler’s writings and hope everyone had a Merry Christmas and a profitable New year.

  7. ROBERTBREWER says:

    Thank you Tyler .. Merry Christmas

  8. PATRICIAROBSON says:

    Thanks Tyler

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