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Gold / Silver: What This “Large Non-Confirmation” May Mean

“Fractured trends are often unsustainable”

by Bob Stokes
Updated: February 09, 2021

When a trend is strong, related markets tend to move in unison.

However, when a trend is near exhaustion -- either bullish or bearish, "non-confirmations" often occur. This is when one market continues to rise (or fall), but a related market does not.

As a case in point, our Feb. 3 U.S. Short Term Update discussed the details of a non-confirmation between the price action of gold and silver. Here's a chart and commentary:

LargeNonConfirm

[Silver] plunged nearly 13% in a matter of ten hours from Monday night to Tuesday morning. The sketchy new stories of an impending "short squeeze" for silver prices were bogus. As we showed in Monday's Update, speculators are net-long a third of all open interest in silver, not net-short as some have erroneously reported.... The push to $30.09, Monday night's high, [was a] move not confirmed by gold, creating a large 5½-month non-confirmation. Fractured trends are often unsustainable.

Making portfolio decisions based on "sketchy news stories" can get speculators into hot water.

As Bloomberg reported on Feb. 2:

A single block of $30 June calls in iShares Silver Trust (SLV) sold for $3.4 million on January 28. Yesterday the same block was worth about $1.2 million.

Keeping your eye on a financial market's Elliott wave pattern can help you avoid such financial missteps.

That doesn't mean that the Elliott wave model can foretell the future to a "T," however, here's an insight worth knowing from the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path.

We've already learned that a non-confirmation suggests a trend turn is ahead.

Now look to Elliott wave analysis for the important details.

Your first step to learning what you need to know is to follow the link below.

Why You Should Avoid Aiming to "Beat the Market"

The reason is elementary: If the broad stock market falls 40% -- and your portfolio only falls 25% -- you did "beat the market," but your portfolio has still gotten smaller.

This is another way of saying that it's wise to carefully investigate any track-record claim of beating the market.

Here at EWI -- our approach is to keep subscribers on the right side of the market.

That means identifying the main trend and alerting subscribers as to when we anticipate the trend will turn.

Learn what our team of experienced analysts are telling subscribers about the stock market's price pattern now.

Follow the link below to get the Elliott wave insights you need at what appears to be a historic juncture.

EXCLUSIVE

Forget the Fed -- Watch the Waves

The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.

Why a U.S. Recession May Foil Economists’ Expectations

A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.

Gold Mining Stocks Lead Gold Lower: What’s “Fundamentals” Got to Do with It?

In mid-April, gold mining stocks led by VANECK GOLD MINERS ETF turned down from one-year highs to 3-month lows in May. Gold followed, reversing from all-time highs on May 4 to multi-month lows on May 25. We don't need another "fundamental" explanation for why.