Gold started the month with an upswing, silver soared and… Silver stocks declined. Yes, you read that right. Big upswings can be bullish developments, but it’s definitely not true in all cases. For instance, in this case, one could say that while it’s true that gold moved higher, it failed to move to the late-March high, let alone break above it. Why is gold not moving decisively in any direction? What’s it waiting for? Was gold’s early-April rally just a late April fool’s joke?
Let’s start with the shocker – silver stocks (chart courtesy of StockCharts).
The Tiny Decline
The decline in the SIL ETF that we’re using as a proxy for the silver miners wasn’t something huge. SIL declined by only 2 cents. But the discrepancy between the fact that they declined at all and silver’s big daily gain, is a big warning sign for anyone who decided to trust yesterday’s strength. Naturally, silver miners should confirm the move of the underlying metal – but they didn’t. The general stock market can be responsible for a part of the underperformance, but not for its entirety.
SIL moved briefly above the 50-day moving average and declined shortly thereafter That’s the third time this year that we’re seeing this kind of action. Both previous cases were followed by declines, so the implications here are also bearish. It’s also worth noting that the volume that accompanied the intraday reversal was relatively big – it was biggest in a week.
Silver’s Daily “Strength”
The white metal moved sharply higher during yesterday’s session. In fact, it moved to the late-March high erasing two previous daily declines during just one day. But, unless you are new to our analyses, you know that silver’s big daily rallies are often fake moves and they are good entry moments for short, not long positions. This is especially the case, when silver outperforms the rest of the precious metals sector. Was this the case?
Gold’s Extra Pop-up
Gold moved higher, but it didn’t close at its late-March highs. It ended yesterday’s session about $10 lower. Consequently, silver has indeed showed strength, which makes yesterday’s session a bearish sign. That’s yet another daily sign of silver’s strength that we saw in the past several weeks. The bearish outlook is therefore more and more confirmed.
In the previous alerts, we discussed the triple tops in gold and we wrote that they were followed by one final extra pop-up before the decline. Yesterday’s upswing would perfectly fit that pattern, which is another reason to continue predicting lower gold prices. The pattern simply continued, and the implications didn’t change – they remain bearish.