Our technical model is showing the completion of a downside capitulation signal for silver prices, indicating that a significant long term bottom is either already in place or will be finalized over the next several weeks across the silver market. Whether or not we see additional short-term weakness to the extent of a few dollars per ounce, the emergence from this pattern will represent a long term silver buy signal of similar magnitude to the one that occurred in November 2008, which saw silver rise over 400% within 2.5 years. Over the same timespan, certain silver miners saw gains well in excess of 1,000%.
We remain optimistic on silver due to fundamental supply/demand metrics, which include significant uptrends in investor demand since 2005 amidst mostly inelastic and stable industrial and jewelry demand. Such will be the topic for another article; in this feature, we focus on the technical side of the market and begin with an examination of our most important indicator: the relative strength ratio of the company Silver Wheaton (SLW) to silver bullion.