Silver has begun a new bull market this week. Now people throw around the words “bull” and “bear” market a lot without really thinking about what they are saying, much less explaining it so it is important for us to be real clear on what we are talking about. I’m getting emails now asking me for my next silver price target to sell into. We have to think of the big picture now – and not just the daily price gyration on an app.
Markets go through cycles of which a bear and bull market are a part of. I call these cycles stages.
During a bull market a market trades above its 150 and 200-day moving averages and they act as support. During a bull market these moving averages become great long-term buy points.
This is stage two. In stage four you have a bear market where these averages act as price resistance. This is actually happening with many sectors inside the US stock market now such as airline stocks.
After a bear market you typically get a stage one basing phase in which these moving averages go sideways and the bigger the base people like to say the bigger the next bull market will be.
So take a look at silver as this breakout this week as it cleared a giant base resistance that has been in formation now since early 2016.
This move this week remind me a lot of when silver broke out in late 2003 out of a base that also took several years to form. Silver then ran up to over $20 an ounce where it peaked in 2008. Yes it went above $45 back in 2011 and people talk a lot about that level now, but i twas that big breakout in 2003 that was really the time to buy silver and get involved in it instead of in 20011 or 2008.
Here is an interesting tweet Jordon Roy-Byrne put out – showing what silver would do if it repeated its move in past bull markets.
Part of flash update just sent. $SLV $SILJ $SI_F
— Jordan Roy-Byrne CMT, MFTA (@TheDailyGold) July 22, 2020
76-80 actually reached $130 on this scale. Had to cut it off to see the rest.
3 of other 4 runs averaged $58 on current scale. pic.twitter.com/QKG2WwgA4W
Now I have no way to predict how high silver will go from here and no one can and Jordon isn’t really doing that in this tweet. What I can tell you is something much more important and that is that silver has begun a new bull market that is likely to last for YEARS.
Most bull markets last 3-5 years. So we can expect silver to at least go up for that long from here, and 5 years is more likely than 3 as this is an extremely long base that it is coming out of and consider everything else going on in the financial markets and with the Federal Reserve, gold, and debt in the coming years.
This looks like the start of a move that will quickly take silver up in a matter of months to levels no one would have expected going into the start of this year. Take a look at my above chart and look at those moves in 2004, 2006, and 2010 to see the type of action I think begun this week. Sure it can dip today or tomorrow, but the overall weekly and monthly trends are up.
If you are new to concepts such as stage analysis I explain them in my book Strategic Stock Trading available here.
-Mike
