Setting Up For The Next Major Silver Bull Market

While the precious metals are totally off the radar by the majority of investors, silver is setting up for one major bull market.  Yes, it’s hard to believe as the gold and silver prices have been trending lower while the broader markets grind up higher, but if we look at the fundamental and technical indicators, the stock market and precious metals are now at extreme opposites.

The situation in the silver market is so much more favorable today than when it was trading at $20 at the peak in 2007.  I will go one step further and say that the current silver indicators are even better than when the silver price fell to $9 towards the end of 2008.

If we look at the Dow Jones-Silver Ratio, it is at a much higher level today than what it was in 2007 or 2008:

When the Dow Jones Index reached a high of 14,000 in July 2007, silver was trading at $12.75 an ounce.  Thus, we had a 1,100-1 Dow Jones-Silver Ratio.  An investor could purchase 1,100 oz of silver for the Dow Jones that month.  However, as the price of silver shot up over $20 in 2008, the Dow Jones-Silver Ratio fell to a low of 600-1.  Once the markets started to sell off and as the silver price dropped to $9 in October 2008, the Dow Jones-Silver Ratio went back up to 1,100-1.

Now, if you look at the where the Dow Jones-Silver Ratio is today, it’s at a high of 1,823-1.  Thus, the Dow Jones-Silver Ratio is 65% higher than it was when silver was trading at $9 in October 2008.  I don’t believe precious metals investors realize just how extreme this indicator has become.

I also wanted to update the long-term Dow Jones and Silver charts.  I have spent more time understanding technical analysis, and I can tell you that it does impact the markets when retail and professional investors trade based on technical indicators.  Of course, it doesn’t change the fundamental reason to own precious metals due to the ongoing disintegration of the financial system via massive money printing and debt.

However, technical analysis does provide SOME CLUES on how the market is changing.  And when investors rotate out of one sector or industry and into another, then we will see volume and price react in a profound way.  Currently, the retail and professional traders (for the most part) are not interested in gold or silver.  But, that will change.

In looking at the Dow Jones and Silver chart and their 200 Month Moving Averages, we can see they continue to move in opposite directions:

The Dow Jones Index is now 90% above its 200 Month Moving Average (MMA).  Yes, there is a 200 MMA when we use a “monthly chart.”  If I use a daily chart, then we have a 200 Day moving average, and if I use a weekly chart, then we have a 200 Week moving average.  Using a monthly chart and a 200 MMA provides us Birds-Eye view of the markets.  For the Dow Jones Index to fall back to its 200 MMA, it would need to drop 12,250 points.

On the other hand, the silver price is currently 13% BELOW its 200 MMA:

As I have stated many times, the silver price of $14.18 today is set up much differently than when it was trading at $20 in 2008 before the markets crashed.  And if we look at the Commercial hedgers, they are now NET LONG silver for the first time in over 25 years:

The Commercials are now net long silver by 14,613 contracts while the Speculators are net short by 25,000 contacts, another record.  What this chart is telling me is that silver is so FAR off the RADAR that Commercials are now becoming bullish while the Speculators are becoming bearish.  This is quite a change as the Speculators were net long silver by 50,000 contracts just three months ago.

And if we look at Silver Sentiment, it is also at a record low:

When the silver price fell from $34 down to $19 during the end of 2012 and into the summer of 2013, silver sentiment reached a record low of “17”, below the 30 level which indicates “extreme pessimism.”  Today, the silver sentiment is back down to the 17 level once again, but the difference is that the silver price is $5 lower than it was in 2013.

In looking at these charts, the indicators suggest that silver is both excessively oversold and disliked.  When a stock or commodity is in favor, then it moves up towards the “excessive optimism” level.  So, not only is the silver price well below its 200 MMA, its also at a record low sentiment reading.

However, this doesn’t mean that the silver price can’t trend lower.   Even though the silver price could continue to weaken, it is setting up for a significant reversal higher whereas the markets will turn down severely.  I have to say; this current precious metals-stock market structure is one I have never seen before.  Normally, when the stock markets sell off, so do commodities and the precious metals.

Now, the only time when the precious metals disconnected from the markets was during the 1970’s inflationary period, and commodities such as oil and copper increased along with gold and silver from 1971 to 1980.

Today, investors are focused on the stock indexes, FANG stocks, Real Estate, Bonds, and what’s left of the Crypto market.  But, when the markets finally correct lower, there aren’t too many alternative investments to protect the mighty gains made in the stock market.  I believe investors will begin to rotate back into the precious metals sector during the next bear market in stocks and real estate.

However, when the retail and professional investors rotate back into the precious metals sector, the amount of interest and volume will likely be nothing we have witnessed before.  Why?  Well, it has to do with the over-leveraged and highly indebted financial system that we have today than in any other time in history.

As I mentioned in my previous article, the U.S. public debt continues to surge higher, which is impacting the interest the Treasury has to pay on that debt.  The U.S. Government debt service will easily surpass $500 billion this and will likely be over $520 billion.  But, what happens when the U.S. Government loses control over the low 2.3% average interest rate that it’s paying to service its debt.  If it just doubles to 5%, then the annual interest expense jumps to $1 trillion.

While it has been frustrating to watch the precious metals prices trend lower over the past seven years while seemingly everything else (minus the cryptos) continues to grind higher, patience will finally pay off to investors who understood the reason to purchase and hold gold and silver.

Lastly, to those individuals who believe the precious metals won’t experience another bull market for another decade or two, similar to the 1983-2003 period, we had the energy to drive global economic.  However, this time around, we won’t have the energy to pull us out of the next recession-depression.  Thus, another excellent reason to protect wealth with gold and silver.

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34 Comments on "Setting Up For The Next Major Silver Bull Market"

  1. Wow..great analysis.

  2. DisappearingCulture | September 11, 2018 at 8:11 am |

    The fact that the author works for a G & S sales company does not take away from the quality/accuracy of the article:
    https://goldsilver.com/blog/its-official-gold-silver-prices-now-at-inflation-adjusted-50-year-lows/

    • I was reading the same article today. Silver was over 600 bucks in today dollars in 1980. at the peak…no wonder people lined up to sell their grandma’s silverware.

  3. Michael Kohlhaas | September 11, 2018 at 8:44 am |

    Silver is dead!

    • Michael,

      LOL…. a perfect indicator that the SILVER MARKET IS BOTTOMING.

      Thank you,

      steve

      • Michael Kohlhaas | September 11, 2018 at 9:05 am |

        You’re welcome! 🙂

      • Steve, at the beginning of 2020 stock indices will resume growth. What level will silver achieve in this period? I am asking because it will be the best time to sell silver and take profit from the last leg of stock bull market.

        • Ed,

          So, you say at the beginning of 2020, stocks will resume growth. However, I don’t have a CRYSTAL BALL, but I would be surprised to see the broader markets continued growth when its been 9 years in the tooth already.

          If the markets begin to crack this fall, it will likely take several years to bottom, but then I don’t see a typical reversal and rally. This is due to the tremendous amount of debt and lack of good quality energy to drive growth.

          steve

        • Ed, stocks are derivatives of currencies, and currencies are derivatives of money. Both currencies and their multi trillion dollars of derivatives depend on growth. And growth is over. So lets talk about value, watch your back with everything that depends on growth. Those who understand consolidate.

  4. BLOW OFF TOP DEAD AHEAD

    The NFIB small business optimism index for August just hit an all time high!
    Everything is going just gangbusters!

    The BLS job openings report has hit an all time high! There are 660,000 more job openings than there are unemployed Americans! The labor market is HOT!

    The BLS also reports that the job “quit rate” just hit the highest level since the 2001 recession. These stats prove that the population has swallowed the ‘rosey’ picture.

    Meanwhile outside the borders of the US the global economy is quickly collapsing.

    Can you say, BLOW OFF TOP? I knew you could.

  5. I add a little to my stack whenever I get a little “spare change”.
    I’ve noticed the premiums are creeping up.

  6. I have two of the monster boxes(500 1 ounce silver eagles each). My problem is that they weigh a ton. No way can you put them in a bank saftey box. Home safes are too small unless you pay 10 grand for a large good one. Yet I think silver is the future especially for the average person. What to do? Any Advise?

    • Chris in Arkansas | September 11, 2018 at 7:55 pm |

      Those boxes aren’t that big. My little closet safe is shaped like a cube and will fit three. A $1k Liberty Safe offers more protection.

    • There are lots of ways to hide PM if you gotta have it around the house. Remember fire is as much a possibility as theft. Build a fake wall somewhere, maybe in a closet. Place additional unconnected 3 to 4″ sewer pipes in the garage, under the house, in the yard, etc, filled with PM, not poop. Get creative.

  7. The next few months are going to be very extreme for gold and silver. Remember Gold between 1974-77 ??!

  8. I’d say watch for $8/oz, but good luck finding any.

    • Billy Lone Bear | September 11, 2018 at 10:43 pm |

      If you already have a lot I’d wait for $12-13.00, but if not buy as soon as possible. You will not regret buying $14.00 silver.

      In 08 it crashed to $9 and inflation adjust that to $11 in todays dollars. But with cost of production we’re already in the red.

  9. Awesome article! Thanks again!

  10. Would like to have a bigger say on this Steve BUT having a hospital stay at the moment so I will just say this.

    I have said it before in here, I do not expect to agree with you on everything; I come in because like many if us we can have our moments of GENIUS!

    IMO the above article is one of your GENIUS moments.

    Spot on, keep it coming and enjoy the moment!🙂👍

    Graham

  11. You can take those COT positions and toss them in the garbage can. It is should be obvious to anyone that the silver game has changed. The $ peaked at 96.90 and has dropped 2.20 points. Did silver rally? No. Its down $1.25 almost 10%. And gold? Down $8 or not even 1%. Hmmmmm. And this whole time JPMorgan is going long?

    “If JPMorgan does nothing….silver will go up!” What do you have to say now Ted?

  12. Dear Steve,

    Jim Sinclair and Bill Holter said that there’ll be two stages of Global Currency Reset.
    Can you comment on this and advise when is time to sell silver.

    Should it be advisable not to sell silver until final GCR is set.

    regards!

    • Edmond,

      I don’t know if we will get the Global Currency Reset that Jim and Bill are suggesting. If we do, then it will be good news for the gold and silver prices. However, the most important factor that Jim, Bill and 99% of the precious metals analysts overlook is the DIRE ENERGY PREDICAMENT we are facing. For some odd reason, most people still believe we are heading towards a JETSON’s type High-tech future world.

      This is pure Bollocks. Thus, the main reason I believe in owning precious metals in the future is due to the negative impact falling Energy Supplies will have on most ASSETS, minus gold and silver.

      So, to answer your question, it is impossible for me to provide you a DOLLAR FIGURE on when it’s time to sell gold or silver. I believe they will be even better assets to own as Global Oil Production continues to decline.

      Which means I don’t see a BLOW-OFF TOP in the metals. Rather, an ongoing enlightenment by the public as time goes by, that gold and silver are the BEST STORES OF VALUE in the market.

      steve

    • EY, currencies will blow up. Don’t sell, accumulate every now and then. Don’t go all in, buy some ounces of silver, some grams of gold, what you can afford without giving up things you enjoy.

      This is not the time for profits or enrichment. Consolidate. And keep breathing.

  13. I trade gold and oil on the futures market. I have noticed lately that gold and silver and oil are starting to diverge. A couple of times I have shorted gold and went long oil which used to be a rare event.
    Are gold and silver and oil losing their link?

  14. PS
    Silver is forming a flag on the daily so it could go lower.

    • Major flag is between monetary and physical plane. First goes Jupiter. I just wonder if the pain is in the comment or in the investment.

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