Can Silver Rally With Stocks?
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Mike Maroney: Good afternoon! It's Wednesday, November 7th. My name is Mike Maroney and I am coming to you today from the Monex Precious Metals Studio. Today, we're going to do our Silver Centric video.
We had a very interesting day yesterday as the mid-term elections actually broke down where the Senate is controlled by the Republicans still. The Executive Branch, obviously, is still being held by the Republicans, but now the Democrats have actually taken control of the House. So, we have a split. Now, interestingly enough, if you look at the stock market today, we saw the Dow, the S&P, and the NASDAQ all rally big. Now, people might wonder why would that happen where suddenly now you have a split in the two major houses. Well, Wall Street actually prefers when government doesn't get heavily involved and one of the ways to assure that government won't get heavily involved is have the Republicans control one half and the Democrats control the other, so there isn't an easy way for them to push through bills that could potentially affect the price of stocks and bonds. So, a big rally today in the stock market as both the Dow and the S&P have popped to the upside.
Now, how does that affect silver? First of all, we have to look at how it affects gold, because gold has been the engine that has been pulling silver along with it as far as the recent safe haven activity. What we saw in October was a major sell-off in stocks. The S&P and the Dow dropped to almost 10%. Now, what we saw is a lot of safe haven money buying in the gold market. This in turn propped up silver as silver also moved higher, but silver wasn't able to break through any of the key resistance levels, like gold, and trade at the upper level as far as the range is concerned. A matter of fact, silver has been stuck below key resistance, right between that $14.95 neckline of an inverse head and shoulder bottom and $15.00, which just so happens to be the 100-day moving average. The question is right now... can silver break above these key resistance levels and regain some of its bullish posture? Now, if you look at what's happening in gold today, gold pulling back, because stock market moving higher. You might think, well, probably not if gold's going to go down, but remember, silver is a dual persona metal. What do I mean by that? Not only is it an industrial commodity, it's also a precious metal. So, when gold is doing well based on safe haven, a lot of times it will drag silver along to the party, but when the economy is doing well, strong demand exists in the industrial market and the potential for inflation, that's when silver really thrives. So, if we see the stock market to continue to move higher, investors moving more on a risk on situation, that may actually be a better environment for silver and we could see that $14.95 resistance level potentially taken out. But, remember, we talked about this last week. There are trading opportunities that exist in silver and when you have an absolute key resistance level it's not unusual for traders to sell right in front of that and wait to see if the market has the strength to break above on a close. What they'll do at that point is buy back what they sold, which inevitably helps push the market higher, but there are lots of ways to make money in the precious metals market and silver has been sitting in a little bit of a lull lately, but it looks like it really might start to pick up some life. So, this is the type of opportunity that you might want to discuss with somebody that knows a bit about precious metals.
Right now, we have the FED tomorrow, will they talk about continuing to raise rates? We have massive debt here in the United States, well over $20 Trillion. It looks like we're going to have gridlock, as far as Congress is concerned, and we'll have to see what sits out on the horizon, but now may be one of the better times to look at putting precious metals into your portfolio and the best way to find out is... give us a call. So, we can explain the opportunities that exist in the precious metals market. Thank you.