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Renowned Cycles expert and developer of Cycle Analyzer™, a proprietary analytical system & intelligence tool. Founder and author of "The Financial Tap", a membership site dedicated to helping people navigate the markets and grow as investors.
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  • The Coming 5th Silver Wave 0 comments
    Mar 22, 2012 6:08 AM

    I have been studying the Silver cycles in a little more detail and I remain encouraged by Silver, as I believe it's far more advanced in its development towards making a more sustained move higher. In the recent Silver Stacker report, I introduced the concept of these major waves that silver follows. A repetitive process of base-building, blow-off moves, collapse/consolidation, and back to base building.

    The distinct Silver waves
    These waves are so consistent and almost predictable that we need to focus our energy on identifying and profiting from future waves. Let's for a minute make two very logical assumptions, that a) this bull market is far from over b) that these Silver waves actually occur as outlined and that a 5th wave is to follow at some point. I believe these assumptions hold a very high probability and therefore I want to formulate a strategy to profit from these.

     

    Wave 1 (2004 Top)

    Wave 2 (2006 Top)

    Wave 3 (2008 Top)

    Wave 4 (2011 Top)

    Wave 5 (2013/14 Top?)

    Gain to Top

    79%

    129%

    94%

    180%

    120%?

    Loss to Low

    36%

    38%

    61%

    48%

     

    Retracement

    67%

    78%

    110%

    71%

     

    Week to Low

    6

    5

    32

    35

     

    I spent some time studying the Silver charts, marking the start/end of each blow-off move, the move to a low post collapse, and the time taken from the top to the eventual low. I considered this exercise a requirement in my attempt to understand these waves and to predict the coming wave #5 advance. In the table below, here are my findings:

    Observations:

    • Each wave was exactly a 2 year move, except for the most recent Wave #4 top which occurred over 3 years. I believe this is directly associated with the 2008 financial crises, as this caused a massive 110% retracement of the previous wave that extended the cycle by one year.
    • The blow-off move (not measure from past low to top) was at least a 79% move, but averaged 120%.
    • The current wave #4 spent 35 weeks from top to low, more than the 2008 financial crisis.

    Looking at the results and considering the observations, I made the following conclusions as to the possible composition of Wave #5:

    • That the coming Wave #5 top is no more than 2 years away, but more likely just 14 months away.
    • The coming blow-off move will be at least an 80% move from its base, but could be well into the triple digits (average 120%) as this bull market is mature.
    • As these blow-off moves occur at around the top of the previous wave peak ($50 area), we're still some $12-$18 below the point where a blow-off move should begin.
    • We're already 47 weeks past the Wave #4 top; to expect a deeper low to come would be an extreme outlying event when compared to the previous waves. This gives me confidence in suggesting that the move higher off a wave low (base-building) and towards the next blow-off point has well and truly begun.

    So I see a period of 12 months, over 2-3 Investor Cycles, where Silver builds a solid base. A backing, filling and grinding move higher towards the $44-$50 level, in preparation for the Wave #5 blow-off.

    Building up to the Wave #5 blow-off
    It's at this point, as early as 9 months away that Silver should rocket out of its base (near previous highs) and launch into an 80-150% multi month blow-off move. From today's position, such a move (over 12-24 months), could be anywhere from a 120% to 275% move.

    Although an Investor Cycle low is due in Mid to late April, we could begin building positions in the coming weeks. For more information regarding this artilce and all other "The Financial Tap" articles, including free tiral information, please visit www.thefinancialtap.com

    Disclosure: I am long SLV.

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