Long-term stair-step pattern (with predictions!)

[swansontec]

Here is a weekly chart of silver going back to 2001. I've deleted the data from Aug 2008 - Aug 2009 (cyan line), and I've applied a logarithmic price scale to keep relative moves in perspective:



The most striking feature on this chart is the long-term stair-step pattern. The price of silver seems to surge upwards every two years, reaching a peak around April, correcting, and then consolidating back upwards to the peak. We have already had four of these step-up events, with peaks in 2004, 2006, 2008, and 2011.

Assuming that the future resembles the past, we can use this pattern to make some predictions. The last step-up event ended in the $50 peak of April 2011, putting us right in the middle of the two-year consolidation period. The price seems to bounce around between the previous peak and the new peak during these consolidation periods, so that would constrain the price between $21 and $50. The $26 lows back in September and December are right in line with this expectation, so those are probably the bottom for this cycle. We can expect plenty of volatility in the next 8 months as silver gradually ratchets back up to $50, reaching that level sometime around December. After that, silver should surge to new highs of $70-$100, reaching a peak in April 2013 and correcting back down to $50 for another two-year consolidation.

Of course, all technical analysis is mumbo-jumbo. Your guess is as good as mine when it comes to what the market is really going to do. For example, who would have predicted that the financial crisis of 2008 would create an exact one-year delay in the stair-step pattern, requiring me to delete that year from the chart? I wouldn't have expected that. Could we have another financial crisis which drives the price down to $15 and adds another year delay? Sure. Could we have a panic-driven surge to $1000? Perhaps. The bottom line is that nobody knows. Still, I think this stair-step pattern gives a nice mental framework for thinking about what could happen.

[Mojofabulous]

(04-17-2012 06:53 PM)swansontec Wrote:  Here is a weekly chart of silver going back to 2001. I've deleted the data from Aug 2008 - Aug 2009 (cyan line), and I've applied a logarithmic price scale to keep relative moves in perspective:



The most striking feature on this chart is the long-term stair-step pattern. The price of silver seems to surge upwards every two years, reaching a peak around April, correcting, and then consolidating back upwards to the peak. We have already had four of these step-up events, with peaks in 2004, 2006, 2008, and 2011.

Assuming that the future resembles the past, we can use this pattern to make some predictions. The last step-up event ended in the $50 peak of April 2011, putting us right in the middle of the two-year consolidation period. The price seems to bounce around between the previous peak and the new peak during these consolidation periods, so that would constrain the price between $21 and $50. The $26 lows back in September and December are right in line with this expectation, so those are probably the bottom for this cycle. We can expect plenty of volatility in the next 8 months as silver gradually ratchets back up to $50, reaching that level sometime around December. After that, silver should surge to new highs of $70-$100, reaching a peak in April 2013 and correcting back down to $50 for another two-year consolidation.

Of course, all technical analysis is mumbo-jumbo. Your guess is as good as mine when it comes to what the market is really going to do. For example, who would have predicted that the financial crisis of 2008 would create an exact one-year delay in the stair-step pattern, requiring me to delete that year from the chart? I wouldn't have expected that. Could we have another financial crisis which drives the price down to $15 and adds another year delay? Sure. Could we have a panic-driven surge to $1000? Perhaps. The bottom line is that nobody knows. Still, I think this stair-step pattern gives a nice mental framework for thinking about what could happen.

One of the most interesting charts I've seen in quite a while. Thanks.

[Mojofabulous]

Bump for a fascinating chart

[swansontec]

(04-18-2012 01:30 PM)Mojofabulous Wrote:  Bump for a fascinating chart

Thanks! I've updated the title a bit, so hopefully a few more people can have a look and share their thoughts.

[kramerprammer]

Just wait until QE3 is out. That stair-step pattern will turn into an elevator

[agsilverbear]

Thanks for the chart. Very interesting.

[Chronic]

looks like we should be heading up in just a few seconds, or hours, or weeks, or months, or years, or decades, centuries, millenniums, and so on an so on an so on..

[AgShaman]

(04-18-2012 07:35 PM)Chronic Wrote:  looks like we should be heading up in just a few seconds, or hours, or weeks, or months, or years, or decades, centuries, millenniums, and so on an so on an so on..

Yeah....or a drop back down to $22.

Pardon my inter-'up'-tion....but I'll be hoping for a 2008-esq smash down.

What's one more beat down at this stage? If you been "all in" for years....your resiliency is confirmed. The next...or last buying opportunity becomes the cherry on top or icing on the cake...er, stack

Become your own bank..."Stash n Stockpile Weapons of Stack Construction!"

[Cointreau]

Seems true that the smash downs are getting shorter in duration judging from the latest one in silver and gold.
If you blinked, you missed it.
Obviously, there is a lot of support at this level.

[Mojofabulous]

(04-19-2012 08:19 AM)Cointreau Wrote:  Seems true that the smash downs are getting shorter in duration judging from the latest one in silver and gold.
If you blinked, you missed it.
Obviously, there is a lot of support at this level.

A wild spike to 35-37 is starting to feel more and more likely in the next month. Don't ask me how I am arriving at this number.

I still think we're range bound 30-37 until the fall when things go nuts during the upcoming debt ceiling debate.

[swansontec]

(04-19-2012 10:57 AM)Mojofabulous Wrote:  A wild spike to 35-37 is starting to feel more and more likely in the next month. Don't ask me how I am arriving at this number.

(04-18-2012 06:21 PM)kramerprammer Wrote:  Just wait until QE3 is out. That stair-step pattern will turn into an elevator

My expectation is that QE3 will push us into the $40 range, which is the level suggested by the 7-month reverse-head-and-shoulders, and is still squarely in the $21-$50 range suggested by the stair-step pattern.

According to the stair-step theory, the real "elevator" would take off in December. It will probably be blamed on the elections, regardless of the outcome.

[swansontec]

(04-19-2012 12:39 AM)AgShaman Wrote:  Pardon my inter-'up'-tion....but I'll be hoping for a 2008-esq smash down.

The 2008 smash down caused a 1-year delay in the stair-step and brought the price down to the previous peak. If we get the same thing, that would bring the price down to $15 and delay the re-emergence of $50 silver until December 2013.

I wasn't around during the 2008 smash-down, but according to David Morgan, the price of physical decoupled from the paper price and remained much higher. Thus, even if AgShaman gets his wish and paper silver falls to $15, the price of physical metal might only fall to $21, which is the lowest level predicted by the stair-step theory. If anybody was around during the 2008 smash, I'd love to hear your memories of the decoupling event. So far, David Morgan is the only person I've seen talking about this.

[AgShaman]

(04-19-2012 11:18 AM)swansontec Wrote:  

(04-19-2012 12:39 AM)AgShaman Wrote:  Pardon my inter-'up'-tion....but I'll be hoping for a 2008-esq smash down.

The 2008 smash down caused a 1-year delay in the stair-step and brought the price down to the previous peak. If we get the same thing, that would bring the price down to $15 and delay the re-emergence of $50 silver until December 2013.

I wasn't around during the 2008 smash-down, but according to David Morgan, the price of physical decoupled from the paper price and remained much higher. Thus, even if AgShaman gets his wish and paper silver falls to $15, the price of physical metal might only fall to $21, which is the lowest level predicted by the stair-step theory. If anybody was around during the 2008 smash, I'd love to hear your memories of the decoupling event. So far, David Morgan is the only person I've seen talking about this.

I've been around for all the smash downs. (new millenium, that is)

What you describe is not entirely correct. I had no trouble locking in an order @ $9 for a bunch of 100 oz bricks when the 2008 smash took place. I got them all for the 'paper' pricing. Yes, I had to wait 4 months for delivery....but the Mint did in fact honor the contract and deliver the metal.

Should this scenerio come back around....the places that "flip" the 'We're Closed' sign on their business will be plentiful.

I'd say people should put a long list of contacts together....and be ready to run through them in short order...since they will most likely get 'stymied' plenty before they come across a "hedged" player that's not concerned with the gyrations, but exacting the service premium.

Become your own bank..."Stash n Stockpile Weapons of Stack Construction!"

[Mojofabulous]

(04-19-2012 11:18 AM)swansontec Wrote:  

(04-19-2012 12:39 AM)AgShaman Wrote:  Pardon my inter-'up'-tion....but I'll be hoping for a 2008-esq smash down.

The 2008 smash down caused a 1-year delay in the stair-step and brought the price down to the previous peak. If we get the same thing, that would bring the price down to $15 and delay the re-emergence of $50 silver until December 2013.

I wasn't around during the 2008 smash-down, but according to David Morgan, the price of physical decoupled from the paper price and remained much higher. Thus, even if AgShaman gets his wish and paper silver falls to $15, the price of physical metal might only fall to $21, which is the lowest level predicted by the stair-step theory. If anybody was around during the 2008 smash, I'd love to hear your memories of the decoupling event. So far, David Morgan is the only person I've seen talking about this.

I wasn't around but I've heard plenty of commentary on the extreme premiums paid. There's even some, somewhere on this forum. Brotherjohnf has talked about it too in his videos at least a couple times in the last year.