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Silver; 30-Year High and a Daily Upside Exhaustion Alert

Bob Hoye
Institutional Advisors
Posted Sep 24, 2010

Following last Friday’s breakout in silver to the highest weekly close since October 1980 the daily charts are producing upside Exhaustion Alerts in the bullion and a number of the related stocks (Coeur d’Alene, First Majestic, Fortuna and Silver Standard). While prices could spike higher in the next day or two, a pullback should be right around the corner.

The most recent Exhaustion signals occurred leading up to the highs in 2008 and 2006, but were also combined with weekly signals. The weekly and monthly charts are currently well below levels that could produce alerts.

There are half a dozen instances in the past three decades similar to the current conditions. In most cases the price topped out within the next week and saw a consolidation and/or correction, retracing to the 34-day exponential moving average and lower 15-day Bollinger Band within a month. A test of the $19 to $19.40 range would be healthy within the current uptrend.

(Click on images to enlarge)

The RSI(14) of the ratio of Silver to Gold moved into mildly overbought territory in the past week, suggesting that a mild correction in silver prices is very possible. If the RSI were into the mid 80’s we’d be looking for a severe correction as seen in 2008.

On a deflated basis (using the always questionable Bureau of Labour CPI numbers) silver is into resistance at the $20 to $21 level. The next important level of resistance is around $30.

Previous examples where a daily upside Exhaustion Alert occurred independent of Weekly or Monthly alerts


Sep 21, 2010
Institutional Advisors

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