ALERT: Silver Stackers Have a Small Window (Act NOW)

Silver Market Analysis & Outlook – January 2024

Key Concepts:

• Silver Breakout: A significant price increase breaking a 45-year resistance level, indicating a potential new price regime.
• Dollar-Cost Averaging (DCA): An investment strategy of buying a fixed dollar amount of an asset at regular intervals.
• Advanced Decline Line (ADL): A market breadth indicator showing the cumulative performance of stocks within an index (like GDX).
• Gold/Silver Ratio: The number of ounces of gold required to purchase one ounce of silver, used to assess relative value.
• Cup and Handle Pattern: A bullish continuation chart pattern suggesting further price increases.
• Rate of Change (ROC): A momentum indicator measuring the percentage change in price over a given period.
• Junior Silver Companies: Smaller, exploration-stage or early-production silver mining companies.

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I. Market Wrap-Up & Recent Performance

The week saw substantial gains in precious metals, particularly silver. Silver experienced a 10% increase on Friday and a 17% gain for the week, leading all metals. Gold followed, rising above $2045. The gold miners (GDX, GDXJ) and silver miners (SILJ) also saw positive movement, with GOEX outperforming GDXJ and GDX, increasing by 3%. The speaker emphasizes that while the silver move is significant, it may be nearing a short-term breather, potentially offering a final entry point before further gains.

II. The Significance of the Silver Breakout

Silver has broken out from a 45-year long consolidation base, a breakout described as the second greatest in capital market history. This breakout suggests upside targets of $87 and $96 per ounce. The speaker argues that, unlike typical breakouts, a retest of previous support levels ($50-$55) is unlikely given the strength and duration of this move. While a 10-12% correction is possible in the short term, a 40% correction is not anticipated in the near future. He notes that corrections of this magnitude are more likely to occur after silver reaches $130-$150.

III. Historical Comparisons & Copper’s Role

The analysis draws parallels to previous breakouts in other commodities, specifically copper (2005 & 2010) and silver (2010). The 2005 copper breakout, a 32-year resistance break, resulted in a 200% price increase within a year, with minimal corrections along the way. The 2010 silver breakout saw a move to $50 relatively quickly. These historical patterns suggest silver could reach $130-$140 (daily terms) with limited corrections until exceeding $100.

Crucially, the speaker highlights the concurrent breakout in copper as a bullish signal for silver. He states, “We’re not going to see silver make a major top when copper is making a major breakout here.” Copper’s breakout, potentially reaching $8-$10 in the next few years, reinforces the idea that silver is at the beginning of a significant bull market, not the end.

IV. Technical Analysis – Silver Price Action

Analyzing the daily chart, the speaker identifies $55-$54 as the most significant support level, making a retest of $50 unlikely. He illustrates that the current price action doesn’t resemble the typical “retest” pattern seen after breakouts. He also examines silver’s Rate of Change (ROC) indicator, noting that while extended, it hasn’t reached the levels seen during previous significant moves (like 1974). He dismisses comparisons to the 1980 silver spike as a unique, once-in-a-lifetime event.

V. Gold/Silver Ratio & Potential Risks

The speaker acknowledges a potential concern: plunges in the gold/silver ratio when silver significantly outperforms gold. A drop to 45-50 in the gold/silver ratio (currently at 57, having broken a 10-year base at 65) could trigger a 25-28% correction in silver, even with a $100 price target. However, the ongoing copper breakout and the strengthening gold/S&P 500 ratio mitigate this risk, suggesting a 40% correction is unlikely in the immediate future.

VI. Mining Sector Analysis & Indicators

The speaker analyzes the mining sector using the Advanced Decline Line (ADL) for GDX. A rising ADL indicates broad participation in the rally, suggesting a healthy market. He also examines new 52-week highs in GDXJ, noting that while previously a warning sign, the current market strength has absorbed corrections effectively. He identifies a cup and handle pattern in GDXJ, suggesting further upside potential to $35-$36 (GDXJ) and $103 (GDX).

VII. Investment Strategy & Recommendations

The speaker advocates for a dollar-cost averaging (DCA) approach to silver investment. For more aggressive investment, he recommends focusing on high-quality junior silver companies with the potential for 3x-5x returns over the next few years. He promotes his Dailyold Premium service, offering detailed analysis and company lists for subscribers.

Notable Quotes:

• “This is the second greatest breakout in the history of capital markets.” – Regarding the silver breakout.
• “We’re not going to see silver make a major top when copper is making a major breakout here.” – Emphasizing the importance of copper’s performance.
• “You break out from a 45 year long base. There's not a lot of history that you can use to model this breakout.” – Highlighting the uniqueness of the current situation.

Data & Statistics:

• Silver up 10% on Friday, 17% last week.
• GOEX up 3% on the day.
• Upside targets for silver: $87 and $96.
• Copper breakout in 2005: 200% increase in one year.
• Gold/Silver Ratio currently at 57, breaking a 10-year base at 65.
• GDXJ new 52-week highs at 20% (indicating room for further gains).

Conclusion:

The analysis presents a strongly bullish outlook for silver, driven by a historic breakout from a 45-year consolidation. The concurrent breakout in copper and strengthening gold/S&P 500 ratio provide further support. While short-term corrections are possible, a significant downturn is considered unlikely in the near future. The speaker recommends a strategic approach to investment, combining dollar-cost averaging with targeted investments in high-potential junior silver companies. The overall message is that silver is entering a new price regime with substantial upside potential.