There are cool charts, there are incredible charts, and there is the silver chart. The long term silver chart is truly spectacular. The first chart below shows spot silver since the start of the bull market. The first peak in 2007 was quite incredible, but the second peak in 2011 spectacular.
The outstanding observation on the chart is really the support line, in red. As seen, this trend line connects the start of the bull market with the depth of the correction of 2008. Today’s price is sitting exactly on that trendline.
So the question really is whether we can find a leading indicator to get an understanding of the future direction of silver. By far, the most reliable indicator in the precious metals complex is the mining sector. So let’s revise some silver mining charts.
The first chart shows the group of silver miners: SIL. Chart-wise, we see a confirmation of the observation on the silver price chart, as SIL is testing support. One important difference, however, is that the SIL chart is a shorter term chart (2 years) while spot silver above is a long term chart. We should add to this that the charts of lesser degree provide clues for the longer term, so it really makes sense to zoom in on the short term mining charts.
The bad news on the SIL chart is that support has broken. That is not a constructive sign for silver bulls. Silver Wheaton, one of the biggest silver mining companies (specialized in royalties) shows a similar picture. Support broke only recently, so silver bulls would hope that this is a false breakdown.
Also First Majestic Silver, one of the largest pure silver plays, is quite similar to Silver Wheaton.
We conclude that the silver mining sector, being considered as a leading indicator for the grey metal, is currently testing support, and has not sent a strong sign of relief so far. Silver bulls would wish that this support holds, as that could trigger a strong bounce on silver’s chart.