In the last year I became very drawn to some of the metals markets, as well as mining stocks (See here, here and here. What caught my eye was a narrowing, consolidating trend in gold, silver, gold stocks, silver stocks, etc. Of course, it also (finally) dawned on me that this kind of action can go on for quite a while (and it has).
In Figure 1 you can see this “narrowing” for yourself. As I wrote about here, extended “going nowhere” activity is often (though not always) followed by a significant breakout to the upside.
Figure 1 – Metals and Miners “coiling” (Courtesy AIQ TradingExpert)
Looking at Silver
For better or worse I can’t seem to get the idea out of my head that silver is going to break out in a big way to the upside at some point. However, at this moment I am trying to remain patient. To understand why consider Figure 2 below, which displays the results generated by holding long one silver futures contract every year starting in 1973 ONLY during the months of May and June.
Figure 2 – Long silver futures during May and June (1973-2017)
Figure 2 is clearly not a “pretty picture”. That being said it should be noted that silver in May and June combined:
*Actually made money 23 times
*Lost money 22 times
*But the average gain was +$3,878
*While the average loss was a whopping (-$9,061)
So one could accurately state that silver goes up more often than it goes down during May and June. That would be the Good News. The Bad News is clearly visible in Figure 2.
Summary
Bottom line: Silver could very well explode to the upside at some point soon. And it is not like silver can’t rally during May/June.
Just remember that when it’s good, it’s OK, and when it’s bad, it’s very bad.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
