Quick update on silver and the trend failure
In yesterday’s piece I was banging on about two trends in the S&P500: the longer-term downtrend and the shorter-term uptrend.
Well yesterday, that shorter-term uptrend line broke and is now invalid.
And here’s the after:
What can we then expect? One possibility is a full-on downtrend resumes, another is lots of choppy action one way or the other. Of course, another is it’s a fake-out.
I like to invest with a three-month to three-year timeframe in mind, sometimes longer. While some day-traders may love this kind of environment, for those who invest with longer time horizons (such as myself), it makes life a whole lot harder. You think something is cheap and offers value, you buy, only to watch it get cheaper.
So coming to yesterday’s idea that silver could enjoy a multi-month rally. Such a rally is going to be mighty hard if the S&P500, ie the broader markets, sell off and appetite for risk is low. Few, against such a macro backdrop, are going to want to hold silver. Panicking capital, as we know, goes to the US dollar.
It’s going to be even harder for silver if gold is selling off, which it did yesterday. Never mind what gold “should” be doing, a strong dollar is not ideal for gold.
As I have said many times, it is silver. If it can disappoint, it will.
I’m still of the mind that silver is going to be higher three to five months down the road, for reasons outlined yesterday. But the backdrop just got a lot harder, and silver is beholden to the psychologies of greed and fear prevalent in the broader markets. On the plus side, it might mean an opportunity to pick it up cheaper. On the downside, it may go lower. If you already have a position with no leverage, then one can just hold. But if you are using or plan to use leverage, be very careful with your position sizes and if in doubt reduce them
My guide to buying silver is here:
Disclaimer: I am not regulated by the FCA or any other body as a financial advisor, so anything you read above does not constitute regulated financial advice. It is an expression of opinion only. Mining is a famously risky sector so please do your own due diligence and if in any doubt consult with a financial advisor. Markets go down as well as up. Especially miners. I do not know your personal financial circumstances, only you do, but never speculate with money you can’t afford to lose.
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Good call Dominic - from somebody who is still short Silver, although who could have almost trebled his money by now if he'd capitalised on the volatility by just covering at the worst of each sell-off of the past 4-5 weeks; rather than holding the short; not such a great call on my part.
I have to say that #HedgeyeNation were positioned well for this further sell-off, although my implementation of it by shorting the NASDAQ has still proved tricky - shorting and holding is a bad strategy. Still, if the sell-off extends today and over the course of the next week, I'll come out of that one mildly ahead.
Long USD via short EUR, GBP and Silver is still working well for me as a portfolio hedge, although I panicked out of the Yen short at 133 back in August during the downside volatility incident. Was aware of people I consider to be smart money types taking the other side of the trade, including Ruffer, and decided it would be safer to cut and run. Was nervous about the 127 level - have watched Weston Nakumura's August Realvision presentations on the Yen, and am aware that's a critical VWAP level. Decided it was safer to not risk getting near it. Anyway, I missed the 140 level my original gameplan would have had me exiting at, this week. ;) In all honesty I cannot decide if my exit of the Yen trade was a result of being distracted by noise, or prudent risk management; but I lean in towards the latter.