| Ross Clark talkdigitalnetwork.com
Message 29014174
Monthly Capitulations in Silver & Gold
A very rare monthly Capitulation Buy Alert is in the process of developing in silver this month. It is coupled with a 75% retracement of the rally from the 2008 bottom and a stretch of twenty-two weeks of downside pressure. Watch for signs of stabilization and an upside price flip that could trigger a multiweek rally with a target around $30.
When reviewing multi-year rallies and subsequent corrections we have pointed out the key retracement levels in silver of 38%, 55%, 65%, 75% and 85%. Today’s action retraces 75% of the rally from the 2008 low of $8.40 to the 2011 high of $49.82. In all but one (1980) of the eight 75% breaks (2008, 1998, ’97, ’93, ’88, ’84, ’80 and ’69) the price then generally recovered 38% of the total decline. If prices bottom here then we can look forward to a rally that approaches $30.
Gold Capitulation
Gold is generating its fourth monthly Capitulation Buy Alert in the last forty years. The August 1976 alert was generated in the bottom month and within one dollar of the 100-month exponential moving average. The November 1969 and June 1999 occurrences bottomed only two percent lower in the next two months. This equates to $1155 based upon the recent $1179 low and within five dollars of the moving average.
The monthly signal is coupled with equally rare daily capitulation alerts (July 3 & 7 1997, Sept 21-27 1988, Dec 20 1984 and Sept 23 1975). Three occurrences saw prices bottom within three days and rally back to the 20-week exponential moving average within eight weeks. The 1984 alert at $309.60 was after a 40% decline encompassing twenty-two months and followed by a rally back over $500 during the next three years. The current decline of 39% over twenty-two months is a close match.
While a bullish divergence in the mining shares versus gold would be a great indication of a bottom, it has not been necessary after a capitulation reading in gold. The XAU/Gold or GDX/Gold ratios only need to show a steady improvement to foreshadow an upside price reversal. Thursday’s action has the initial signs of such a turn. | |
