On Monday, we described silver’s similarity to the post-September 2017 decline, so we won’t get into the details again here, but we want to emphasize that the pattern continues with remarkable accuracy.
The sudden jump in the price of silver that we saw yesterday is most likely the analogy to the November 17, 2017 daily rally. The rally that preceded the big daily downswing and that was shortly followed by a decline of over $1.50. The implications here are bearish, not only in light of this specific analogy, but because silver outperformed gold on a very short-term basis right before declining multiple times in the past.
We wrote that silver was likely to rally above its short-term declining resistance line and the 50-day moving average and to top close to its mid-February high, likely outperforming gold. This is exactly what we saw yesterday when silver moved to our target area and thus it seems that a bearish outlook is once again justified.
Miners’ Second Rally
Mining stocks (we’re using the GDX ETF as a proxy) are underperforming not only relative to the late-February decline. They underperform also relative to the previous cases that we marked on the above chart. During the previous volatile declines, mining stocks used to bounce twice before the decline resumed and the second bounce was not as small as what we saw this week. The implications of the underperformance are bearish.
Moreover, please note that yesterday’s session took form of a shooting star candlestick, which is a classic reversal sign if it is accompanied by sizable volume. The latter was not huge, but it was definitely sizable, and the bearish implications are already present.