So says GE Christenson (deviantinvestor.com) in edited excerpts from his original article* entitled Silver Up & S&P Down.
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (sample here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Christenson goes on to say in further edited excerpts:
Silver vs. the Silver-to-S&P 500 Ratio
The following graph of silver versus the Silver-to-S&P 500 Ratio tells me the ratio has returned to levels last seen in 2008 and that the ratio follows the price of silver…
The same ratio is plotted below against the 14 month Relative Strength Index of the ratio. The RSI is a timing indicator that ranges between 0 – 100 and indicates buy zones when the indicator is low and sell zones when the RSI is high. Currently the RSI of the index is about 23 – quite low and indicating that the silver-to-S&P 500 ratio should increase from here. Either the silver price should go up or the S&P 500 should come down, or more likely, both will occur.
Note that the RSI of the ratio was about 16 at the end of December 2013 when silver hit its double-bottom lows. That RSI reading was the lowest in 25 years. The December low in silver should have been an important bottom in the silver market and an important bottom in the silver-to-S&P 500 ratio.
SO WHAT DOES THIS PROVE?
…The ratio of silver to the S&P 500 is at a low, the actual S&P 500 Index is near an all-time high, and the RSI timing indicator for the ratio was at a 25 year low in December. The next major move is much more likely to be a rise in silver prices and a fall in the S&P 500. That major move might be many weeks away but it seems both inevitable and imminent.
Consider this 20 year chart of the S&P. Does the S&P look safe and healthy?
Consider this 20 year chart of silver. Does silver look like it has bounced off an intermediate bottom in a long term bull market?
- · The S&P 500 is near an all-time high and looks toppy.
- · Silver is near a 4-year low and looks like it has bottomed.
- · The silver-to-S&P 500 ratio is at a 5-year low and looks like it has bottomed.
- · The RSI of the ratio hit a 25-year low in December.
- · There appears to be far more downside risk in the S&P 500 than in silver.
- · In the short term, markets can be nudged up or down, but in the long term, the December 2013 low in silver looks like a turning point.
- · We will know in a few months if the December low was an intermediate bottom, or a prelude to another low. My bet is that the December low holds and silver prices will be far higher in 3 years.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://www.deviantinvestor.com/5775/5775/ (Copyright © 2014 – All Rights Reserved)
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