Silver Charts and a Look at the SP 500 Long Term Cash Chart
by Chart School - June 7th, 2010 12:10 am
Silver Charts and a Look at the SP 500 Long Term Cash Chart
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Several readers have asked for thoughts on the silver charts.
Silver normally functions as both a monetary and an industrial metal. This provides it with a higher beta (risk variation both on the upside and downside) than gold, and a stronger correlation to the SP 500.
So if one is looking at silver, one first has to ask, what do we think the SP 500 will do next, and then, what will gold do next?
SP 500 Long Term Cash Chart
The SP 500 is at a point where it will either find a footing and break back high according to its longer term bull trend, undoubtedly with serious assistance from the monetary authorities and their banking cohorts, or it will break down further and activate a more serious decline and a H&S topping pattern.
My bias now is for further weakness to the downside, possibly even a false breakdown, and then we will look for the turnaround to gain traction IF volumes remain light and there is no panic selling.
If there is a further decline, let’s see if it can hold the 1000 area where there is a long term bottom of the bull trend channel.
Silver Daily Chart
In the short term silver appears to have further downside. How much is a very open question.
If and only if the SP 500 falls out of bed and there is a general liquidation of assets, silver may trigger a short term H&S top and fall down to the target area in green. There it is likely to be a singularly attractive trading buy, but we would have to look at the overall market landscape and the Fed’s monetary actions.
Silver Weekly Chart
The weekly chart appears much stronger than the daily chart, suggesting that if there is a breakdown it might be short term, and look much worse on the daily chart, an intra-week spike down on the longer term chart. Again it is hard to say because the SP 500 is such an important variable in this.
I doubt very much that silver and the SP 500 will diverge. Gold however is more likely to diverge from stocks if it comes to that.
I have some confidence in Ben’s and Timmy’s willingness to sacrifice…