Cycle Trading

My thanks to Trondtveten.

He replied with the following to the “Boom goes the Dynamite” Special Edition that bears repeating.

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“Btw this silver breakout strikes a remarkable similarity with what happened at the same time in 2010.

I noticed the similar pattern and copied the 2010 chart already 5 days ago on the 29th, wondering will that last part also become similar, with a drop down into a U and then a huge handle rally out of it? ‘No that would be too much of a coincidence’. But then on Thursday and Friday it played out! (And remark the same on the RSI also). This 2010 initial August surge started the road from 18 to 49$”
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The Financial Tap also had an excellent report this weekend discussing, among other things, silver.

Here is an address to a similar discussion that can be found at the Bull & Bear Talk Forum:

http://www.bullbeartalk.com/forum/blogs/

So being inspired by the aforementioned references,
I decided to take a look at the Silver Run.

Silver has had 4 pretty good runs in the past 10 years.

So lets break them down.

The first run began in March of 2003 and ran 12 months.
Silver gained a healthy 52.88% during that run.
It was followed by a 15 month consolidation that retested the previous high mid way through.

August of 2005 was the yearly cycle low for Silver.
There it began a 9 month rally that gained 128.97%

May 06 peak, silver was followed by a 15 month consolidation that retested the previous high mid way through.

August of 2007 was the yearly cycle low for Silver.
There it began a 7 month rally that gained 92.99%
The silver proceeded to crash into an 8 year low which bottomed in October 2008.
A 19 month consolidation followed which retested the previous high mid way through.

Silver emerged from the 19 month consolidation in August 2010 and embarked on an 8 month rally that tacked on an additional 186.75% gain after consolidation.

Notice how August has played a key role in the previous three rallies.
This year August saw the important break out from the triangle consolidation.

Also notice that the three previous rallies retested the prior high before launching.

It seems to me that silver will need to retest the previous high before launching into the next rally.

Just to retest the previous high is around a 56% run.
That should be followed by about 8 months of sideways consolidation before launching into a truly spectacular rally.

Here is a bonus chart:
I compared silver’s previous 4 runs to the dollar cycle.

It is interesting to note that the first silver run (1) occurred simultaneously with the dollar rallying into a yearly cycle peak.

The subsequent silver peaks all corresponded with either a yearly low, three year low, or a 15 year dollar low.

Just speculating now:

Silver could see a retest of the previous high as the dollar sinks into its yearly cycle low.

After a (hopefully brief) dollar rally and (hopefully mild) silver correction when the dollar plunges into its three year low will see silver launch to the moon.