The Silver Lining
10/03/2005
Gold prices continue to flirt with new highs above $475/ounce, but silver looks excellent, too, and could play catch-up in a hurry. Currently, it takes 62 ounces of silver at $7.58/ounce to equal the price of one ounce of gold at $473.00.
My analysis of the gold-silver ratio chart argues for 45-1 at some point in the weeks or months ahead, which means either that within a bullish setting silver accelerates in relation to gold as they both advance, or in a pullback setting gold plummets while silver acts relatively buoyant. For the time being, the bullish setting rules.
As the chart below shows, Thursday's upmove in silver thrust the price above its 11-month resistance line at 7.35, and followed through into Friday morning's recovery high at 7.59 amidst an impressive upleg pattern off of the August low at 6.63. That was coupled with underlying oscillator readings that support still higher prices projecting beyond the June high at 7.67 to the vicinity of 8.
Daily Spot Silver Price : April 2004 - Present
Those of you have who seen silver "in action" on the upside know that a move to 8 can occur (and end) in a flash. Only a break below 7.20 will neutralize the very constructive pattern.
Incidentally, equity charts that could mimic an upmove in silver are PAAS, CDE, and HL... in that order.
On the equity side, the daily chart on the QQQQ -- the Nasdaq 100 Tracking Stock -- shows some unfinished business on the upside, which points to a run at the August-September resistance in the vicinity of 39.75-.80. The Q's closed the day -- and the quarter -- at 39.46, right at their 2-day highs, and appear poised to continue higher.
QQQQ Daily : Feb 14th - Present
Only a failure to move higher followed by a reversal that presses the Qs below 39 will argue that the current upleg is complete, and that the Qs already in the midst of a deep pullback.
On the S&P side, the December E-mini S&P 500 contract popped to marginal new recovery highs at 1236.00 right at the close of futures trading, which I suspect was totally predictable with end of quarter buy programs hitting the tape.
In any case, based on the Thursday-Friday upmove, the index should be poised to continue higher -- into the 1240-42 next target zone -- unless support at 1230 is breached, which will indicate that the upleg from 1216.25 is complete, and that a correction is in progress.
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