#$slv

I strongly disagree. The overall sentiment has become far too negative.

I see this as a sideways consolidation before the next major breakout to $60+.

$SLV $PSLV

Is Reddit Frenzy Over? GameStop, AMC and Silver Lose Significant Gains

The Reddit frenzy started by one particular group by the name of wallstreetbets that waged a war against Wall Street Hedge Funds seems to be dying down as most of the stocks including GameStop(GME), AMC cinemas(AMC), and Silver($SLV) lost a significant portion of their gains today. GME and AMC plunged by over 20% in the pre-market and Silver lost almost 10% after parking an 8-year high…

*The following Premium Post was issued to TLS members mid-day on December 22, 2020.*

This week’s bump in volatility is creating opportunities.

It’s no surprise that we’re seeing a bit more volatility this week. As noted in daily and weekly posts the past few days, some of the major averages in addition to several sectors are now testing key Fibonacci Extension levels. This, in combination with scorching bullish sentiment equates to elevated near-term risk. With that said, any near-term pullback should equate to a buying opportunity.

Presently, the pullback is providing an attractive buying opportunity in a space that we recently added to our radar: silver miners. The set-up is similar to gold miners, but the space may have a little more beta to it — plus, it may get more of a boost from an economic turnaround. Specifically, here’s what we’re doing:

Started buying a position in the Global X Silver Miners ETF (SIL) near ~44.98 and ~44.38; will add more ~43.75 should it get there.

Also eyeing SILJ, the Junior Silver Miners ETF (for even more juice) should it drop to ~15, ~14.87 and ~14.50.

The only other move we’ve made today is to take profits in our Mid-Cap Pure Growth position, RFG, ~205.

If you’re interested in a daily “all-access” view into our money management approach, please check out our site, The Lyons Share. You can follow our risk-managed investment process and posture every day — including insights into what we’re looking to buy and sell and when. Plus, our TLS Holiday Sale is going on now!! So it’s a perfect time to join! Thanks for reading!

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Silver started moving higher in November. And by the end of the year it had crossed above its 200 day SMA. It had not been above that marker since June, when it began a 3 month plunge from a double top. It came back to retest the 200 day SMA and held into January. The situation looked good for shiny metal #2.

A reversal to a higher high at the end of January and digestive pullback to a higher low reconfirmed the uptrend. It reversed higher again but stalled at the previous high, hmmm. It could not make a higher high this time and fell back. In fact the pullback made a lower low and undercut the 200 day SMA.

This was a change of character. And in the wider scope a top at a much lower high. The path through March started to look like a falling wedge. This often resolves with a reversal higher and as it moved back over the 200 day SMA at the end of the month got bulls excited. But instead it petered out and morphed into a falling channel.

Silver has a strong tendency to peak or continue lower in May, bottoming in mid to late June. Traders can look to sell silver in mid-May and maintain a short position until on or about June 23. In the past 46 years this trade has seen silver (July contract) decline 30 times for a success rate of 65.2%. Prior to 2014, this trade had been successful for eight years in a row. Since 2014 this trade has failed to materialize three times. However, it has been successful in 10 of the last 13 years.

In the chart below, the 47-year historical average seasonal price tendency of silver as well as the decline typically seen from mid-May until the low is posted in late June or early July is shown. This May silver short trade captures the tail end of silver’s weak seasonal period (shaded yellow) that typically begins in late February or early March.

Historically silver has a seasonal tendency to peak in February. Our seasonal analysis shows that going short on or about February 20 and holding until about April 25 has worked 35 times in the last 46 years for a win probability of 76.1%. As you can see in the short silver table, the usual February silver break was trumped by the overarching precious metal bull market of 2002–2011 just four times in ten years.

After suffering losses for two years in a row in 2010 and 2011, this trade returned to success with its second-best performance in 2012 as precious metals in general fell out of favor. This trade was then successful in 2013, 2014 and 2015. A shaky start for stock markets in early 2016 combined with multi-year lows for silver sparked fresh demand for the metal resulting in a loss that year, but this trade returned to success in 2017 and again in 2018. Last year, sizable gains could have been realized with a longer holding period as silver retreated in earnest after mid-June.

This post first appeared at TheFelderReport.com.

Warren Buffett is famous for many things one of which is his general dislike for precious metals as an investment. But maybe you’re old enough to remember when, just over 20 years ago, he backed up the truck and bought a ton of silver – over 3,000 tons, to be more precise. From the 1997 Berkshire Hathaway letter to shareholders:

Our second non-traditional commitment is in silver. Last year, we purchased 111.2 million ounces. Marked to market, that position produced a pre-tax gain of $97.4 million for us in 1997. In a way, this is a return to the past for me: Thirty years ago, I bought silver because I anticipated its demonetization by the U.S. Government. Ever since, I have followed the metal’s fundamentals but not owned it. In recent years, bullion inventories have fallen materially, and last summer Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand.

Maybe you’re even old enough to remember that earlier time, just about 50 years ago, when the Oracle of Omaha amassed a position in silver. Either way, it’s interesting to look back at why he did so. “Demonetization by the U.S. Government,” was his thesis back in 1967. Essentially, he made a bet on the devaluation of the dollar against the gold price and chose silver as his trade vehicle. And there are some interesting parallels between then and today.

The dollar is no longer convertible into gold as it was back then but the dynamics that forced the discontinuation of this convertibility are still at work. Wikipedia discusses the “Nixon shock” by explaining that, “from 1950 to 1969, as Germany and Japan recovered, the US share of the world’s economic output dropped significantly, from 35% to 27%.” The very same situation is happening again today, only it is China taking share of the world’s economic output even as the dollar remains the world’s reserve currency.

The story continues, “furthermore, a negative balance of payments, growing public debt incurred by the Vietnam War, and monetary inflation by the Federal Reserve caused the dollar to become increasingly overvalued in the 1960s.” The negative balance of payments is far greater today even when normalized for the relative size of the economy, again thanks to our relationship with China, as is the rapidly growing pile of public debt.

And if you haven’t noticed the monetary inflation created by the Fed over the past decade you must have been living under a rock. The currency component of M1 is currently growing at an annual rate of 7%, a growth rate it first hit in May of 1966. It’s no longer the president’s purview to demonetize the dollar; it’s the market’s. And I’ll leave you decide whether the market should do so today based upon the aforementioned dynamics.

But it’s also important to look at his later thesis for buying silver: “In recent years, bullion inventories have fallen materially, and last summer Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand.” Currently, we have a very similar situation in gold. As my friend, Luke Gromen, recently pointed out on twitter, registered gold stocks are currently testing their lowest levels on record. Thus it appears that a higher price is, “needed to establish equilibrium between supply and demand.”

The Gold Rush started in Idaho Springs Colorado, 13 miles down the road from where we have our home base for our mountain vacation in Georgetown.  Friday is our last day of vacation so instead of climbing St. Mary's Glacier, white water rafting through Glenwood Canyon or biking down from Vail Pass (we did all of these) we will stay local and explore the mining history.

Georgetown, along with the next town of Silver Plume were a big part of that mining craze.  Now designated the Georgetown-Silver Plume Historic District, the towns had a combined population of over 4000 people in 1880.  Now they are home too just 1200.  Back then the area was a silver mining camp and there was a railroad loop between them.  The Railroad Loop is now a tourist attraction and we will ride it too the mine and see if they left any silver behind as our last journey.  I may need it to pay off the trip, LOL.

But with that it seems like a good time to check in on Silver prices.  The chart below shows the price of the Silver ETF over the last 15 months.  From an April 2017 high it has made a series of lower highs, with the last one in June this year.  It has also found support roughly at the same spot with the exception of two periods where it overshot in July and December last year.  That created a rough descending triangle.