Check out the SILVER to Silver Wheaton ratio, and the SILVER to the XAU Gold and Silver Index ratio, with 10% exponential moving average envelopes .
These ratios have to correct.
Assuming silver stocks won't rise if silver falls, there are only 2 possibilities if the ratio is to correct:
(1) silver falls AND silver falls faster than the mining stocks. How often does that happen?
(2) silver rises AND the mining stocks rise faster than silver. This, in theory, should happen all the time, but hasn't been lately.
My guess is that (2) is more likely. (And my if my guess were worthless, Louis wouldn't pay me the big bucks to post here.) However, you can go to stockcharts.com and create these charts yourself; you'll see that the last time these ratios popped out of their 10% moving average envelopes so saliently, it was during the late 2008 chaos...
3 comments:
Hope you are right. I'm getting a little fed up looking at these mining stocks lagging the bull market in physical. Logic would dictate that at some point they will but if the fed is really the buyer in the market you know they have no interest in mining shares.
Maybe they will capitulate and instead of the govt nationalizing the miners the fed will just buy them with their funny money :)
At least they would have some real assets on their books instead of piles of underwater mortgage notes.
OK that's my ranting done for the day.
Check is in the mail.
You know what's interesting ....
We have had a $5 sell off in silver in the last few days and no one seems that concerned. The HUI has gotten a few kicks today but more so yesterday but no one seems that concerned. It's not so much blindly bullish but more of a relaxed yeah, yeah we have seen this movie already cut to the chase.
Well, the silver : ^XAU ratio did indeed "correct" today, at least to the point where it closed between the 20 day exponential moving average's 10% envelope. Option (1) happened today -- silver fell, miners fell less. The silver:SLW ratio, however, got a little bigger. I predict it will correct tomorrow.
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