Silver: Technicals Suggest Very Bullish Long-Term Outlook
It's clear from the charts that silver and silver stocks are in position for a potentially spectacular move over the next three to five years.
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 long-term technical outlook for silver producers is potentially nothing short of super bullish. We say potentially because nothing is certain in this business. The market has formed a textbook cup and handle pattern. Note that the beginning of the handle is higher than the start of the cup. In other words, this shows more strength than a typical pattern in which those two points are equal or in which the start of the handle is lower than the start of the cup.
Moreover, we can visually see that the correction in a long-term sense was relatively mild. Mathematically speaking it was dramatic (about 50% in percentage terms) but much less dramatic than 2007-2008 (90%) and less dramatic than 2004 (60%). A smaller correction can be a sign of a market building internal strength for the next impulsive advance.
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