Silver: Time For Bulls To Start Playing Offense | The Mesh Report

Silver: Time For Bulls To Start Playing Offense

The Gold Enthusiast September 10, 2021 Comments Off on Silver: Time For Bulls To Start Playing Offense
It’s been a disappointing year thus far for silver (SLV) and the Silver Miners Index (SIL), with the metal sliding by more than 8% year-to-date and the Silver Miners Index plunging more than 13%. While the underperformance and consolidation are not surprising after a 47% return for silver, the volatility has likely unnerved many investors and forced some to go looking for greener pastures.

Fortunately, when it comes to the bigger picture, we haven’t seen any real technical damage, and the Silver/Gold ratio continues to remain in a long-term uptrend, though, this is contingent on silver holding the $21.50/oz level. So, while it’s easy to throw in the towel and I would not rule out a re-test of the recent low at $22.50/oz, I remain bullish on the price of silver long-term, especially given the recent capitulation in bullish sentiment.

(Source: Daily Sentiment Index Data, Author’s Chart)

As shown in the chart above, bullish sentiment for silver has fallen off a cliff in the past six months, descending from single day readings of more than 90% bulls in late February to a reading of barely 10% bulls on Wednesday. This exodus from the bull camp is a great contrarian indicator, with silver typically finding strong buying support on further weakness when readings dip to these depressed levels. As the chart above shows, this plunge in short-term sentiment has pushed the long-term sentiment moving average for silver to its lowest levels in years, with a current reading of 24%.

This is the worst reading since September 2018, which ended up marking a bottom for silver. While silver did fall another 4% after hitting a reading of sub 25% bulls on its long-term moving average, the metal was 9% higher over the next six months and 24% higher just 12 months later. This represented an attractive forward 12-month return drawdown to forward 12-month return of 6 to 1.

(Source: TC2000.com)

Moving over to the technical picture, we can see that silver has remained in a steep downtrend since June, making lower highs and lower lows, with a massive shake-out in early August. This would be concerning from a technical standpoint if the long-term chart confirmed it.

However, a look at the…

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