Jordan Roy-Byrne, CMT | Sep 19, 2012 11:10AM ET
While we have written about Silver here and there, we've not covered it publicly in over a year. The market made an obvious cyclical top last spring and the tremendous gains from late 2008 into 2011 would need to be corrected and digested. From May to July the market tested its lows successfully and formed support. The recent advance confirmed the lows and confirms that we are likely in a new cyclical bull market. Based on the technicals, Silver and silver stocks continue to show tremendous long-term potential.
Below is a chart of our growth producer index, which features 10 growth-oriented producers and is weighted somewhat by market capitalization. The market had a rip-roaring advance, which lasted a total of 27 months. The correction lasted about 14 months (a 50% time retracement) and retraced about 50% in price. As you can see from the circles, the low occurred in May and was retested multiple times over the summer.
The $50 Target
The super bullish outcome would be driven by Silver making a run at and eventually surpassing $50/oz. The equities are closer to their all-time highs and will likely break to new highs before Silver clears $50/oz. Certainly, the “super bullish outcome” is predicated on Silver breaking through $50/oz.
In the meantime, Silver and the silver stocks have rebounded strongly. Similar to the gold stocks, we see an upcoming pause or pullback in silver stocks over the next month. October is typically a weak month. Many stocks have rebounded substantially and with strong momentum. A pause or correction in October stands between gold and silver miners and a retest of old highs in the winter. A correction would also mark a great buying opportunity ahead of much higher prices.
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