SLVs Next MoveSilver analysts are divided on where the Wave count is. Some suggest that we are in a B wave correction to a longer term move down. Others suggest that we are in a wave 5 of a bullish move. I side with this interpretation. If correct, it appears that we may be completing a minor wave 2 of the expected 5 wave move up. As mentioned several times, wave 5 moves in commodities often are the strongest while in most other instruments, wave 3 tends to be the longest.
Usually, according to Elliott Wave theory, either wave 3 or wave 5 extends. In the major wave 3, we do not see any extensions so it's possible that this major wave 5 may be explosive.
Fundamentally, silver supply and demand numbers indicate annual shortages while production numbers continue to decline annually. When looking at the longer term performance of silver versus gold, gold has retraced close to 618% of its decline from the major peak in 2011 while silver struggles to even get to the .236% fib level. The gold/silver ratio reaches toward 90 even though some silver producers report that they are pulling out gold and silver at an 8:1 ratio.
There is no doubt that there are major price dislocations in all of the markets as interest rates remain historically low and the federal reserve continues to inject liquidity, pushing up risk assets ever higher. While silver has not participated in this general rise, a historical price review shows that silver has made major bottoms consistent with stock market bottoms. Silver's major low in 2008 coincides with the low point of the last Recession.
So the bottom line is this, if this is a B wave with a major C wave down to come, don't expect to find a safe haven in stocks. It may in fact be an indicator that the economy is heading in to a recession. WIth the economy currently firing on all cylinders with Trump keeping the pedal to the metal, I'm not seeing any sign of recession. So while the market timing may be distorted, I continue to buy physicals for the very long term and use LEAP options to juice my portfolio. While my long term target based on channels suggest 70s, others suggest that silver can move above $100/ounce. With such a small market, should funds decide to take even small positions in silver, demand will greatly overwhelm supply. Only time well tell if this scenario plays out but there is no denying that silver is undervalued especially when compared to other investment assets (including junk bonds).
