Inside Silver’s Latest Meltdown (SLV)

From Silver Doctors: Last night we were asking why just days ago, CME Group was showing a “stimulative, rate-cutting paradigm shift on interest rate policy”, only to have just yesterday magically turned into a “bullish, rate-hiking everything is awesome continuance of current interest rate trajectory”?

We will soon find out as we get a slew of data today on the economy, including potentially market moving Housing Starts data and the release of the July FOMC Minutes.

Recall that if interest rates go up, housing prices must come down as a higher mortgage payment means a buyer must settler for a house with a lower price point. Said differently, if interest rates go down, a buyer is able to afford a more expensive house because the monthly mortgage payment will be lower as the house costs less to finance.

This is why these two independent data points could have effects on the markets today. Just yesterday, we also reported the NY Fed Tweet showing off their fancy, Doppleresque interactive national housing prices map, and we do know that after the stock market, the housing market is certainly one of the Fed’s Frankenbabies. Therefore, we can be assured that extreme care has gone into the minutes that will hit the tape at 2:00 P.M. EST.

And focus on the housing market the minutes will. As forecast, the VIX is moving back towards a state of peace and tranquility in the markets that will afford the Fed a chance to do just that:

After the better than 44% surge in “fear” last Thursday, we are now back to unchanged. Amazing how the threat of nuclear Armageddon can come and go in the evening news like it was a report of a salmonella outbreak at McDonald’s. Recall that there as a multi-decade Cold War that centered around this very threat and culminated with one of the ultimate prepper pipe dream movies Red Dawn. Now, mutually assured destruction is right up there with the threat of getting some bacterial infection from the petting zoo.

We also stated the Dow’s next move was higher, not lower, and sure enough, we are right back in spitting distance of all-time-highs:

When are we not just a data release away from all-time-highs? The stock market will rise until it doesn’t, and time will tell. The hyperinflationists, however, will see the Dow go up to 25,000, then 50,000 and perhaps 100,000. Looks like CNBC is going to need more hats.

Whether we have a runaway stock market also depends on what is going on with the US dollar. If the dollar is strengthening relative to other fiat, debt based currencies, our stock market may just keep up the momentum.

However, we have called into question the strength of the dollar for some time. The run in the dollar since min-2014 looks more and more like it is coming to an end. On there daily, the dollar looks like it could rise for another couple of days, but that it is a nasty looking downward channel and it is right up on the upper end of it. Look out below:

Through the spike and turmoil of nuclear destruction, to the everything is awesome recovery in just three days, the gold price is holding it’s own:

The yellow metal patiently riding a nice trend line and the pullback over the last couple days is very bullish looking. If we can keep on a few days up and a couple days down, we will be rewarded over time. And that is under conditions of no-fear in the markets and central banks around the world trying their hardest so as not to raise any red flags and trigger a flight to safety.

Volatility, dollar weakness, fear and uncertainty, extreme overvaluation of the stock market, and continued parabolic moves in cryptocurrencies all keep raising the floor on the metals. It may not feel like it, but the floor is raising for silver prices too:

Between $16.05 and $16.10, there is support. That support goes back into 2016. We have also put in that oh-so important higher-high on the daily chart. We can be certain silver prices will be pushed around to the extent the cartel can push it. They cannot, however, push it too hard, because at some point, there is a flood of buyers. Is that at $16? How about $15.90? The cartel doesn’t really want to play that game, because if there is upside silver price action, those buyers, realizing they missed their price targets, would end up chasing price.

And while we would have liked to see continued strength in the rally, just within the last few days, silver  has been down by as much as $0.75, so anytime is a great time to buy this dip. In the crudest sense of the math, that’s a free ounce every 23 ounces. We must ask ourselves, is it worth waiting to see if silver prices gets smacked down to $16.50 to time a purchase? It seems a lot more likely that it will become $0.75 more expensive than $0.25 cheaper.

We have been following the price action of crude and copper lately to gain a sense of where commodity prices are headed. If CPI inflation data is a joke, and the guy on the streets has to pay for gasoline to be that guy on the streets, actual prices of things we purchase everyday matter. We have been wondering if crude would catch up to copper, but the chart price action looks to be shaping up that copper will fall down to crude. Black gold has been range bound all year, and it looks like it is moving to the bottom of that range again. This is coming off tapping $50 last week:

However, it is worth noting that the last candle on copper’s price action is one big bullish-engulfing candle. Yes copper has been fading, but that sucker on the end looks like the next move is higher before catching down to crude. Is crude going to start hurling the gains over the last two months, and is copper’s fade a healthy pullback in confirmation of the commodities bull market? We will keep you posted either way.

The iShares Silver Trust ETF (NYSE:SLV) was trading at $15.93 per share on Wednesday morning, up $0.19 (+1.21%). Year-to-date, SLV has gained 5.43%, versus a 11.63% rise in the benchmark S&P 500 index during the same period.

SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #16 of 35 ETFs in the Precious Metals ETFs category.


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