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:
[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.
U.S. Treasury yields aren't the only ones that have been rising. Just like here in the U.S., you can find a lot of "fundamental" explanations for the moves in German bonds. But watch how an Elliott wave pattern warned of these developments as they were just starting.
If you've ever applied technical indicators to a price chart, you know the challenge -- namely, where do you even begin? Watch our Trader's Classroom editor walk you through a "blank chart" of GRPN to show you how to spot simple levels of support and resistance, for starters -- and get an idea as to what's next.
This time-tested indicator provided a warning before the historic 2007 stock market top, and here in 2021, investors should focus on this indicator again. Find out why.