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RoboStreet – November 11, 2021
Hot Inflation Read Triggers Buy Signal For Silver
As the market has done a masterful job of shaking off almost every negative headline that has been thrown at it all year, yesterday’s white-hot release of the October CPI was something the market had to grapple with. The Covid-19 Delta variant, global supply chain disruptions, $85/bbl crude prices, and the Evergrande financial calamity in China couldn’t derail the bulls, but the one thing that could if not reigned in is inflation.
Inflation is like a force of nature, something that appears to be beyond outside control once in motion. Inflation comes in several forms – commodity-related, professional services, and labor being the primary causes. However, when enormous amounts of debt are being created, what is known as monetary inflation can also have a negative impact on markets. In the case of the current economy, all of these forces are at work.
This week’s auction of 30-year Treasuries was also a red flag as the bid-to-cover ratio was low, meaning demand was soft. The yield on the benchmark 10-year Treasury rose to 1.56% and because Thursday was Veterans Day, the bond market was closed, so Friday’s session will be interesting to see if there is follow-on selling pressure or whether it was a short-term reaction. My view is that bond yields will continue to tick up.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
CURRENT TRADING LANDSCAPE
The $SPY continued to pull back today and settled at the short-term support, $467. The value/reflationary stocks traded lower and closed right above the all-time high. The technology stocks came under pressure as did most growth-oriented stocks.
The $DXY is short-term overbought, briefly broke through the $94.5 level, and closed right above the key overhead resistance level. The $TLT sold off on the CPI numbers. The VIX jumped higher to $19.
The $SPY short-term support level is at $463 followed by $452. The SPY overhead resistance is at $470. Short-term, the market is overbought and volatility can persist for the next couple of weeks.
Based on our models, the market (SPY) will trade in the range between $445 and $480 for the next 2-4 weeks.
Inflation is a big deal for market sentiment and for everything that affects our daily standard of living. Wages have to materially rise to offset increased costs for housing, energy, gas, food, education, healthcare, professional services, travel, and leisure. The October read of inflation running at 6.2% is the highest level in 31 years, and yet the market handled the stunning headline pretty well, all things considered.
There is a parade of economists out with all manner of viewpoints, many of which are calling that inflation is peaking right now. At some point, demand destruction does set in but heading into the holiday shopping and travel season, prices are up, but consumer demand is also solidly higher, willing to pay more in the near term for the things and experiences desired.
The price of cryptocurrencies, oil, precious metals, copper, nickel, and other commodities paused coming into November, but are now trending higher again as investors seek to hedge inflation while producers raise prices for raw materials due to strong demand, supply chain-related shortages, and spiking transportation fees. It’s a stubborn cycle when inflation gains momentum and will certainly keep the market second-guessing as to how persistent this sharp uptick in inflation will last.
Against this backdrop, one metal that serves as a storehouse of wealth, an inflation hedge, and carries broad industrial applications is silver. While Bitcoin and gold get most of the attention, silver prices are making a move higher that deserves investors’ attention. An ounce of silver traded at $29.42 back in February and today trades at $25.18 implying a steep discount to inflation and other inflation-sensitive assets.
Grant it, silver was the target of the meme crowd earlier this year, but inflation wasn’t on the radar at that time. Investors wanting to benefit from the likely rally due to the real threat of persistent inflation should consider buying the iShares Silver Trust ETF (SLV) on price dips. There are perfect storm conditions shaping up for a big rally in silver
Going back to 2011, silver prices traded at $48.65/oz. in a huge rally when the CPI jumped to over 6%. Well, the CPI is there again and silver is trading a steep discount but is shaping up beautifully from a technical standpoint to slingshot higher after having put in a quintessential flag formation during the past year.
Our RoboInvestor advisory service benefits directly from our proprietary AI platform that screens for trades in blue-chip stocks and ETFs that cover indexes, market sectors, sub-sectors, commodities, precious metals, currencies, interest rates, volatility, and shorting opportunities.
By applying our AI-driven tools to each trade we know when to buy and sell our positions to maximize profits and keep rotating our capital into new positions that offer the same profit potential. Our Forecast Toolbox has a Model Grade “A” rating for SLV with three of the four probability readings “Higher” over the next 50 days. That’s a very bullish outlook, but after a sudden 10% move up for SLV this past week, our AI system will pinpoint an ideal entry point in the days ahead to buy the dip at just the right price.
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If booking profits on over 9 out of every 10 trades you put your capital to work in the market is appealing – then take the next step and join our RoboInvestor community of successful members that are benefiting from the power of AI every day. My personal money is invested in every recommendation I bring to our service. My journey to building wealth is linked directly with the success of RoboInvestor. Make a calculated decision to bring the power of AI to your portfolio – and do it today!
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
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