Gold / Silver: What This "Large Non-Confirmation" May Mean

By: EWI

When a trend is strong, related markets tend to move in unison.

However, when a trend is near exhaustion -- either bullish or bearish, "non-confirmations" often occur. This is when one market continues to rise (or fall), but a related market does not.

As a case in point, the Feb. 3 U.S. Short Term Update, an Elliott Wave International thrice weekly publication which provides near-term forecasts for major U.S. financial markets, discussed the details of a non-confirmation between the price action of gold and silver. Here's a chart and commentary:

[Silver] plunged nearly 13% in a matter of ten hours from Monday night to Tuesday morning. The sketchy new stories of an impending "short squeeze" for silver prices were bogus. As we showed in Monday's Update, speculators are net-long a third of all open interest in silver, not net-short as some have erroneously reported.... The push to $30.09, Monday night's high, [was a] move not confirmed by gold, creating a large 5½-month non-confirmation. Fractured trends are often unsustainable.

Making portfolio decisions based on "sketchy news stories" can get speculators into hot water.

As Bloomberg reported on Feb. 2:

A single block of $30 June calls in iShares Silver Trust (SLV) sold for $3.4 million on January 28. Yesterday the same block was worth about $1.2 million.

Keeping your eye on a financial market's Elliott wave pattern can help you avoid such financial missteps.

That doesn't mean that the Elliott wave model can foretell the future to a "T," however, here's an insight worth knowing from the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path.

We've already learned that a non-confirmation suggests a trend turn is ahead.

Now, learn how Elliott wave analysis can provide you with even more precision for spotting key junctures in the chart patterns of the financial markets in which you are interested.

You can do so by reading the entirety of the online version of Elliott Wave Principle: Key to Market Behavior for free!

Free access to the book becomes instantly available to you after you join Club EWI, the world’s largest Elliott wave educational community (approximately 350,000 worldwide members).

Don’t worry about the cost of joining because Club EWI membership is 100% free and allows you free access to a treasure trove of Elliott wave insights into financial markets, trading and investing.

Following this link gets you started:

Elliott Wave Principle: Key to Market Behavior– free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold / Silver: What This "Large Non-Confirmation" May Mean. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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