The Curious Case of Silver, Gold and the S&P 500

One indicator that many follow for a macro gauge on the stock market is the ratio of Silver, $SI_F, to Gold, $GC_F. The ratio chart below shows how major moves in that ratio have been strongly correlated to moves or halts of moves in the S&P 500, $SPX. Whenever the ratio spikes the3 $SPX spikes and when it falls hard the Index follows. At the moment that ratio can be read in a couple of ways. The first, that it is in a second bear flag after falling from the top in April, ready for the next leg down to a Measured move to 0.014. The second interpretation is that it

double bottomed between 0.016 and 0.0165 and is reversing higher now holding in a bull flag with a Measured Move to 0.023 above the flag at 0.020. So which one will it be? The pieces may be giving a clue. The chart below of Silver, $SI_F, has the Elliott Wave interpretation updated from when it was first posted February 22nd, a month ago (link below). At that point it looked like Wave V of the impulsive wave had begun. Since then, Wave 1 has completed and the

retrenchment of Wave 2 may have just ended. This chart continuing higher will be a reinforcement for the bullish case for the ratio and thus for the S&P 500. A move below 26.33 for Silver will negate this bullish count. On the other side of the ratio Gold, $GC_F, has been in a meandering trend downward. The channel may be a bull flag in the long term upward trend but a

break below the 50 week Simple Moving Average (SMA) at 1655 and previous support will solidify the case for the Silver:Gold ratio to move higher with the SPX gaining as well. This too could continue higher with a a break of the channel and move over 1778 changing the bias to a move higher with the move in the ratio then unclear. Not the best indicator for catching a turn but one to watch to get a feel for the longer term direction.

Silver May be Ready for the Next Wave Higher

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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