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Silver — on its way to $20

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Price pattern today almost a perfect image of 1980

The chart below overlays the Silver today with the Silver price in 1980. The time framing and price scales are not identifical. It is the price pattern itself that is important.

Based on the price pattern, Silver today is following the script of 1980 with uncanny accuracy. And, based on the similarily of the patterns, Silver is headed to $20 to $25, probably by the end of the year.

Yet, a survey released Monday by Bloomberg indicated that the median expectation of 100 commodity analysts is for Silver to rally back to $49.79 by December 31.

I will trust history rather than the commodity analysts.

Markets: $SIL, $SI_F, $SLV

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Wheat vs. Corn spread coming off of historic lows

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Spread will eventually return to $1.75 premium Wheat

On June 9, the Wheat vs. Corn spread made a new all-time historic low of 40 cents premium Corn. This broke the previous low of  11 cents premium Corn from November 1983.  Over the years the lower band in the spread has been around 10 cents premium Wheat, as shown below.

The spread has rallied sharply from the June 9 low and is now about 23 cents premium Wheat. I think it is a fair assumption to say the spread will NOT retest the June low. Unfortunately the forward spreads accept this reality. The December 2011 spread is at about 70 cents premium Wheat. Just four months ago this spread closed at $3.68 premium Wheat.

Tightness in Corn could continue throughout the growing season and this could drive the December 2011 spread toward 40 cents premium Wheat. The new crop spread should be bought in this area. Historically the Wheat vs. Corn spread will return to about $1.75 premium Wheat within a year or two after trading near parity.

Markets: $ZW_F $ZC_F

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Short Commodity ETFs — Part 4: Time will tell

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Soybean Meal completes major chart top

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Bull trend in the US$ continues to unfold

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Short Commodity ETFs — Part 3: The boat is starting to sink

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A long-term look at the Japanese Yen charts

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Gold — a current chart analysis

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Oh, what a difference a chart makes!

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Using slightly different charts of the same market produces different results.

Those of you who look at my charts on the blog or on Chart.ly might have noticed that I make wide use of nearby continuation charts in the futures markets. These are charts that plot only the nearest delivery contract. When one contract expires, the next contract month is then plotted on the same graph.

Even with the category of “nearby contract” charts there are differences. One approach is to plot the nearby contract until its expiration. Another approach is to follow the contract until first notice date. Yet a third approach is to drop the nearby contract when its volume shrinks below the next closest contract month. I use the third type most often.

Frequently the nearby continuation graph will give a different picture of a market than will the chart of a specific contract month. Take the current situation in Chicago Wheat.

Shown below is the graph of the July Wheat contract. This chart shows that the 10+ month H&S top was completed on June 16.

Yet, the H&S top on the nearby continuation chart has not yet been completed, as seen below.

I follow both types of charts — charts of the specific contract months and nearby continuation charts. It is by far my preference for the nearby chart to breakout first. I am always suspect of a market when a breakout by a specific contract month is not confirmed by the nearby chart. Many of my most profitable trades over the years have come from markets in which the nearby chart led the way.

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The Boston Bruins inverted hockey stick jinx

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