Silver’s Monthly MACD (Moving Average Convergence Divergence) crosses over to diverge for only the 5th time this decade, potentially leading to the next bull run in silver. This very brief video from Silver Bullet Silver Shield explains the possible significance of this technical indicator right now. (See below for an full explanation on the MACD indicator.) We’ve also recreated their chart below the video as it isn’t on the screen for that long.
[There’s also a really short video on Investopedia that explains the MACD nicely if you prefer to watch than read.]
Definition of ‘Moving Average Convergence Divergence – MACD’
A trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the “signal line”, is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.
Investopedia explains ‘Moving Average Convergence Divergence – MACD’
There are three common methods used to interpret the MACD:
1. Crossovers – As shown in the chart above, when the MACD falls below the signal line, it is a bearish signal, which indicates that it may be time to sell. Conversely, when the MACD rises above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentum. Many traders wait for a confirmed cross above the signal line before entering into a position to avoid getting getting “faked out” or entering into a position too early, as shown by the first arrow.
2. Divergence – When the security price diverges from the MACD. It signals the end of the current trend.
3. Dramatic rise – When the MACD rises dramatically – that is, the shorter moving average pulls away from the longer-term moving average – it is a signal that the security is overbought and will soon return to normal levels.
Traders also watch for a move above or below the zero line because this signals the position of the short-term average relative to the long-term average. When the MACD is above zero, the short-term average is above the long-term average, which signals upward momentum. The opposite is true when the MACD is below zero. As you can see from the chart above, the zero line often acts as an area of support and resistance for the indicator.
Then this slightly longer video also looks at the MACD in terms of gold and what it is saying now and looks back a few decades.
Steve Sjuggerud on his Daily Wealth site this week also agreed that now is a great time to buy silver. In fact he believes:
“It is the best opportunity to buy silver in over a decade – and possibly one of the best times you will ever see in your life.”
“Silver is down by 60% from its peak in April 2011… Compare that to gold… and you can see just how extreme the bust in silver has been.”
I like to look at “real money” bets on commodities and currencies to gauge investor sentiment. One way I do this is by looking at the government’s Commitment of Traders report. It shows what real futures traders are doing with their money.
When I wrote to my subscribers last month about silver, I said: “based on the real money, silver is more hated today than any time in the last decade.”
Looking back over history, silver had been this hated three times: 1997, 2001, and 2003. In two of those three cases (1997 and 2003), the price of silver roughly doubled in about a year.
I told my paid subscribers: “I’m optimistic that silver bottomed in late May, and the next move up has started… I’m perfectly happy to buy silver today – at the most hated point in over a decade.”
So there looks to be at least a couple of reasons why now might be a good time to buy silver. Of course we will only know for certain after the fact. But if you’d like to add to your hoard or begin it, get in touch with us today. Request a quote here or give us a call on 0800 888 465.