The last time (about a week ago) that we saw this kind of price divergence it was explained as the general stock market went up so this stock went up. Well today not only did Silver get it's clock cleaned but the general market did also. I remember the inverse relationship to Silver awhile back, but I thought it was done. This stock is clearly about 20% over bought and will free fall when Silver makes a big move up. Have a great weekend everyone.
There are a lot of people trying to trade silver and SLW based on the day to day movements in the price of silver and the options activity which IMHO is a losing proposition. Sit back and enjoy the ride higher whild receiving an ever increasing dividend. SLW is a long term investment, don't get caught up in the day to day moves.
I remember the same phenomenon back in the middle of August this year when Silver was $27 or $28. For a few trading sessions, as Silver would take the usual shellacking right about 10 to 10:30am (like clockwork) the miners would hold strong, if not edge up a little, then rally into the close. Soon thereafter we had the run up to $34-$35 POS.
To me this is indicative of the strength of the physical silver market, since the miners actually have what the market really wants (not paper futures contracts), they get bid up because of their fundamental value based on their literal possession of physical silver.
The market gets exhausted of paper silver.
Sentiment: Strong Buy
I think there are a few reasons:
1) from august to the highs there was a belief that miners would outperform the metals so a trade was put on that was predominantly long miners to a short on the metal. This trade worked. The miners outperformed the metals handily and if you watched it yourself you would see intraday while the miners would be going up the metal would head down. Traders were making money.
2) you expect the miners to move together with the metals generally, but because of 1) there is a lot of money wanting to reapply the previous trade. So, one could call the act of them not moving in tandem a divergence where it is possible the miners will signal before the metal that the correction is over.
3) Slw is a part of the index in Canada and it forms part of the index in the USA I don't remember which maybe nyse. With the indexes bouncing higher today and because Slw is a part of them, automated buying occurs with Slw despite the metal to keep the index balanced percent wise
I still believe it will go lower but risk management told me to close down my short by about 60 percent. I made some good money, I actually held that short for several days and you know I don't like holding overnight. There is headline risk this week from Europe and I think the expiry to watch for. The dollar is still bullish. It's about 65 percent bullish and if it can stay above 79.93 it will become about 80 percent bullish, so 4 in 5 chances it goes even higher.
But hey, I'm the dumb Canadian, what do I know:)
Big seperation today for your explanation. Hope its that the paper manipulators are losing their grip but you sound like you know alot about this. Tomorrow may tell us.
Sentiment: Strong Buy