The GoldSilver head and shoulders and bearish wedgeThis is tagged as short due to the bearish patterns on the chart but it is kinda confusing because I am writing this to long silver
A zoom out has help me get a more detailed look at the goldsilver ratio. What appeared to be random chop and a blow off top now appears to be a left shoulder and head. The C19 dump created a new all time high for the goldsilver ratio and ever since then it has been bearishness. The ratio dropped almost in half from 120 to 64 and then created a classic bearish rising wedge pattern. Given the quick downside we have a flagpole and a bearish continuation structure that combined with the previous chop looks like a head and shoulders. The chart also shows a Fibonacci channel with the carats showing the anchor points. With the bearish chart pattern I see a high probability that the monthly MACD sees a bearish cross of the signal line as we see performance on the flag pole/head and shoulders.
Here is a draw on the channel drawn to monthly candle bodies as opposed to wicks. One reason I think the fib channel is valid for trading is there are lots of strong reversals at key levels.
Now this is a important point: I don't foresee this move happening in the next year or so. Price has spent a lot of time bounding around between the 62-66 range and since it has bounced there so many time as both support and resistance there is a fair chance that the ratio will be testing the range as resistance in the next couple of years if it fails as support here. A initial sell off then a return to the neckline of the head and shoulders pattern would be very typical price action. The chart below shows a fib draw and just the bottom of the fib channel. There is a confluence between the 1.618 target and the trend line support so some stall or bounce there is concurrent with the flag pole portion of the head and shoulders.
Below is my favorite example of a chart pattern hitting target off all time. It is a head and shoulders draw on Ford with quite the cant to the neckline, but it predicted a massive sell off and the technical traders stepped in right where we would expect them at that key ratio. Sure, price went down another 10% but if you were the mad man buying long term out of the money calls down there you would look like a genius. The targeting shows that we can't expect much below that 1.618 level with a high level of confidence. I have heard some technical analysts with a lot more experience than me say a flat neckline gets you better performance but I think I will be happy rotating out of silver into something else between 39 and 41.
Some Silver Nasdaq Stuff
Below is a comparison between the NDX, Silver, and Silver/NDX. It is still a bit to early to tell if Silver/NDX is in a ascending triangle with the purple as resistance or a symmetrical triangle shown by the black. But the case for NDX and Silver moving in opposite directions seems clear.
This could be its own post, and maybe I will make it one. The high beta index is NDX, and silver is high beta compared to gold. Just by simply looking at the SilverNDX pair it looks like equities broadly isn't a good decision. But if it looks like SilverNDX and GoldSilver are reversing at the same time it will be time to broadly be looking at equities and tech stocks and not precious metals and mines.
