Quite a few charts have been focusing on the extreme price action from the markets in recent days. Today I have done two, with the first one being Gold's sharp decline below the 200 day moving average. So now I thought I would put forward none other than one of the worst performing asset class since the May 2011 top... Silver.
This precious metal, which seems to be more rare than Gold these days, is currently down over 13% for the week, over 18% for the month, almost 30% down for the quarter and almost 45% down since the peak in late April of this year. We now seem to be in another liquidation phase (chart above), which could be the third and final one. I would also like to add that Silver is now 3 standard deviations away from its 50 day moving average. This rare event only happened a handful of times in the last half a decade or even longer (second chart below). The dates circled in red include middle of 2006, middle of 2007, late 2008, early 2010, September 2011 and currently as of now.
Every single one of those events happened to be an intermediate bottom, apart from the famous Lehman Brothers crash in 2008. Three of the five signals were major bottoms, as huge gains followed afterwards. As already mentioned 2008 was a dud signal and would have cost you a high draw-down have you held the whole way down, but the bull market would have saved you in the end as the secular theme is still pointing here for precious metals. Finally, the recent signal in September would have made you a decent return for a trade or a break even as a worst case scenario. I assume that this current signal will be one of the more major ones, where one's investment will be followed by some serious gains in the future.
After all, this is now the second most oversold reading in over a decade! The question is how far lower will the price could go as investors overact in a panic? Judging by the last two phases (first chart above), which corrected by 30% to 40% from top to bottom, we could drop anywhere from another 10% to 20% from here... if we were to follow similar patterns. I am not so sure about that, so on the other hand, we could already be oversold and bottoming right around here. Having said that, I guess we will have to wait and see how things turn out in the up and coming trading sessions. The best thing is to wait for the panic and liquidation to end, before stepping in...
On a final note, it looks like majority who voted for Silver to reach $26 before year end might just get their prediction right if the price goes lower from here (Article: Poll: Up Or Down For Silver?). We are currently only $2 away from that outcome... Whenever the selling ends, I recommend to buy some Silver or add to your positions - I know I will!