Craig: Welcome back to the March edition of Precious Metals Projections, a new service we're offering here at Sprott Money, that I think you're really going to enjoy. We got some great feedback on our first edition last month, so we thought we'd start doing this every single month going forward. I'm your host, Craig Hemke. And joining us for Precious Metals Projections is my co-host, Chris Vermeulen. Many of you know Chris, his company, thetechnicaltraders.com. Very valuable service. I know Eric Sprott absolutely thinks the world of it. And it's great to have Chris join me for these monthly videos. Chris, hey, good morning.
Chris: Hey, good morning, Craig.
Craig: I tell you, it's been a crazy month, and man, March looks like it's going to be something else. It's coming in like a lamb in some sense. We will see where it goes from here. You know, we've got so much excitement in silver, I do want to start by pointing out. I got an email from the folks at Sprott Money this morning. They said they've got a whole bunch of new Royal Canadian Mint, 100-ounce bars that they just got in. So, if you're looking to get some physical silver, and man, I couldn't agree with that more, we got to keep that pressure on, give us a call. You can go to sprottmoney.com and order directly. You pick up the phone, and give us a buzz at 888-861-0775. And whether it's this new program, or the "Weekly Wrap Up," or the "Ask the Expert" segment, or anything else, please give us a shout-out on that channel. Maybe send us a like. Maybe you can subscribe so we can help get the word out on this information. So, anyway, Chris, good to see you. It's been a crazy month. Let's start with just, I guess, the overall big picture. What are you seeing at present?
Chris: Sure. Yeah. Well, let me flip to my charts here. We'll take a look at what is going on with these charts. So, you should see my chart there?
Craig: There it is.
Chris: All right. So, let's take a look at silver first. So, if we take a look at silver futures, obviously, this is the weekly chart going back to 2010. And obviously, this is the monthly, kind of, wrap-up in the big investor type of view. So, we can see here silver has definitely got a nice bullish tone to it. It's made some higher highs in the last few weeks. It's still holding its lows. If we were to just zoom in on the chart here, you can see how it's making a series of higher lows. It's making a series of higher highs, which is the definition of an uptrend. Now, obviously, it's got a little resistance up in this area, up in this $28 to $30 range before I think it breaks rein. We could see a very big run to the upside.
And, of course, if it does that, we've got Fibonacci extensions on here that are going to give us an upside target. So, if we're to use a Fibonacci extension tool, if we take the low that we saw back in 2020, you get this big rally that makes a bull flag or a flagpole pattern, and then price flag down. And now it's working itself back up. And if it can break above this $28 to $30 range, the momentum is telling us, you know, silver, we're still looking at $40 an ounce in silver, which is really exciting. And I think that's when we might see some of that short squeeze actually come into play where once it breaks these highs, anyone who's short is not gonna want to keep holding it, and that's a real line in the sand, pretty much as $30 an ounce mark. And that's where I think the squeeze kind of comes in. So, I like silver a lot here. It has a much different tone than what gold does going forward.
Craig: Yeah, no doubt about that. Hey, how about the short-term, Chris? On my site, I was just talking last Friday about, one, the importance of $28 like you said. We haven't had a weekly close above $28 yet, but we're also riding the 50-day moving average higher as well, which is kind of a sign of a healthy market. In fact, each of the last two weeks, we dipped below that 50-day intraday and then immediately recovered. What do you make of that?
Chris: Yeah, so this is the daily chart. If we zoom out a little bit, you can see we're silver broke into this bull market. This top blue line across here, that's where silver broke out. It's also in the 50-day closed above the 200-day, known as the golden cross. That's when you know trends change from being either bearish or neutral to a strong bull market. So, you can see how we had that crossover. We broke short-term technical levels here that got some momentum and then broke this final line in the sand on the chart from the previous high, and that's where we saw the first short squeeze. But obviously short term. I'm actually a little bit bearish still on silver. I think silver is formed on a Bear Flag, and I think we could see a flush to the downside.
So, if we were to use just Fibonacci extensions, which is a great tool to get the idea of momentum of price patterns, and we use the high and we pull this recent low, and then you go up to this recent reaction high and carry that forward, it tells you where price is most likely to go. So, if I was to draw that out, you've got a sell-off, and then you've got this Bear Flag that formed, which is a halfway point. And 100% measured move to the downside is $24 an ounce on silver, which would put in potentially, you could argue, a nice double bottom. It's through the heart of all this consolidation. So, there's going to be lots of volume through there to act as support and it's at this green line, this moving average, which is the 200-day moving average. So, if silver pulls back to this area, it would still be seen as a really bullish pullback. And I do think silver and gold may still consolidate for a while if it pulls back there. I think we see gold and silver both consolidate and chop out for a while and they're going to build this launchpad, that eventually when it breaks through, it is when we're going to see a very big move to the upside.
Craig: Let's talk about gold, Chris. It has been...everyone's pulling their hair out. What are we, about seven months into this consolidation what still looks to be a bull flag, especially the longer you draw that chart out. But certainly, no fun breaking down below those earlier lows from back in November. What do you see?
Chris: Yeah, there's a lot of panic in the streets for the gold and gold miners really, in general. There's a lot of blood. I mean, it just continues to unwind. In the grand scheme of things, it still is a very sharp bull market that it's in. It's a sharp pullback, but I mean really, in the grand scheme of things, this is still seen as a bullish play. Obviously, short-term traders are under pressure, but this is still a bull flag. And if we were to use a Fibonacci retracement tool, which is a little different than the extension I showed you, it's saying from this low over here, and we go up to the recent high, it's going to tell us where the most likely places are where gold is going to find support. And if we look at this pink line here, this is the 0.38 retracement. So, generally between 0.38 and a halfway move, the 50% retracement is where price can pull back after a really strong run. And that's a very bullish sign-out. It starts to go below the 50%. It's done a little more damage. It's actually losing a lot of its upward momentum and the rally afterwards might not actually go to new highs. It actually might be more of a double top, is what I've found long term.
So, we really want to find gold, find support between 1,640 and pretty much where it is now, 1,750. So, that is going to be a real sweet range in here where we need to see gold chop around, maybe even flush out a little bit, go a little lower, and everyone panic and they get out of it. And we'll see that in the volume because volume should spike and gold will have like a big red bar. But if it has a snapback reaction, I think that'll be like the flush out and then we start to see this go a lot higher. So, I like gold from a long standpoint, but a shorter term, I mean, it is making a series of lower highs. It's making a series of lower lows. And it still has more room to pull back. From the current price, we can still see gold pull back, you know, 3% or 4%, which isn't huge but for gold, it's still a pretty substantial move for gold.
Craig: Might be enough to pull that rug out from under silver in the short-term like you were saying too, and get that gold drop a little further. Maybe that would be the impetus to get silver down into that level you were talking about.
Chris: Yeah. I think if we see gold drop to that level, we're gonna see there could be about a selling in the stock market. I mean, the stock market's really choppy. We're starting to see real fear creep into this market and when there's real fear, metals get hit with it. And that could be that flush where we see fear hit the stock market and people start liquidating everything because of margin calls and what have you. And we see gold dropped to that 50% retracement. We see silver dropped to 24. And while other people are panicking out, you know, if you watch this video, you'll be like probably licking your lips going, "This is amazing. I can accumulate right here at a critical support." And it should have a knee-jerk reaction high after that.
Craig: We've got some, I guess we'll call it fundamental things going on this month as well. The next FOMC meeting comes in two weeks, on the 16th and the 17th. Heck, instead of a green beer, we can all celebrate an appearance by Chairman Powell with a press conference in that FOMC on St. Patrick's Day. Between now and then, we're going to keep watching the bond market because it's this rise in nominal yields. Heck, that 10-year note, Chris, has gone from yielding about 50 basis points last August when gold was near $2,100 to now a 150 basis points. That's triple. In fact, it's up over 50 basis points just this year in the first two months of the year, and that is really weighing on gold. To me, it feels like that bond market is getting a little bit oversold. So, a little bit, kind of, off-topic here, just technically, how does that bond market look to you?
Chris: Yeah, the bond market looks oversold. And I was talking about it with subscribers over here. When it was pulling back I said, "This looks and feels like the bottom of the bond market is gonna fall out." Everyone was talking about how they wanted to get into bonds, and I was getting excited to get into bonds for another leg higher. But then the sentiment started to shift. And really, no one wants bonds. You can see there's just no demand. Bonds are collapsing, very similar to what we had. A similar setup over here. It wasn't quite the same kind of technical setup but similar type of price action. If you look at the markets, you know, the market usually goes in these cycles. And that looks like what's happening right now. We're getting to a cycle low. We're coming down to the 200-day moving average, which is this green line, a previous low. We're starting to see a huge spike in volume on bonds. And when we see a lot of red bars clustered together, especially followed by a big spike, typically we're getting close to a bottom.
So, I think there's still going to be another couple of weeks of some choppiness and price action going on here. But I do think we're going to see, eventually, bonds move up. And this is gonna play into that fear. Like, right now, we're just starting to see a bit of fear, I think, creep into the stock market. And when the stock market fear starts to jump, we're gonna see the average investor call their advisors and say, "You know, I'm getting uncomfortable. Put me into bonds." And so I think we're gonna see bonds start to rally, and that's going to put a bit of pressure on...that means the stock market, more or less, is going to be moving lower because people are selling their stocks and then dumping it into bonds. So, it's going to be very interesting. I think March is going to be very volatile. We're going to probably see some very big swings to the upside and the downside across stocks and commodities and bonds. So, it's really a month where... We actually stepped out of the market about a week and a half ago. And we're sitting in cash because the markets are giving all kinds of mixed signals in terms of equities, and so we're letting it just kind of shake itself out here.
Craig: Yeah. You know, and regarding the bond market in this FOMC meeting, I want to go back and plug the "Ask the Expert" from Sprott Money last month. I spoke with Danielle DiMartino Booth, who worked for the Fed for about 10 years, and she's pretty sharp when it comes to monetary policy and Fed policy. She mentioned it's a really tough spot that the Fed has put themselves into. If they keep buying the short end, they run the risk of even moving to negative rates, crowding out everybody else. So, she thinks they might start shifting to the long end. They might also want to put in some yield curve control, and that might change that bond market, too. So, please go back, get on the Sprott Money site, and look for that interview with Danielle DiMartino Booth if you want to hear more. Chris, you know, the other big thing impacting the precious metals is this ongoing silver squeeze. That's been really happening all through the month of February now. I think it was that very first weekend before the Superbowl even when that picked up. We're seeing that play out on a number of different levels, maybe providing some support for the derivative price to COMEX price. What are you seeing in some of these? You know, we had a lot of rush into, say, like the PSLV, even the Sprott...the old Central Fund of Canada. What are you watching here?
Chris: Yeah. Well, I like... I mean, I'm a big fan of the Sprott ETFs. I mean, years ago with subscribers, we always traded CEF, which is Sprott's physical gold and silver funds. So, you get a basket of both. And as you know, I like to keep risk really low. I like to balance things out. And so CEF gives you, like, the perfect, to me, it's like the perfect mix. One trade, you get gold and silver in there. But obviously, there's this huge move right now into the PSLV, which is on the chart right here. You can see the volume of this trust. Everyone's piling in. The big movement is everyone wants to... People don't trust SLV. It's too big. And they don't believe it's got the physical and so everyone's making this shift. And, I mean, it's all over the web. Everyone wants to go to PSLV, own the physical with Sprott. And I mean, I've pulled up the page here, and it makes perfect sense. I own PSLV. This is the Sprott page on it. And, I mean, it's a really strong fund to get into. Here's the Sprott sheet. Reasons why to own it. This is what I really like about it and why people trust it, right? It's fully allocated. I think SLV is supposed to be fully allocated, but there's so much questioning about that.
Obviously, you can redeem your shares, your units for physical metal. I mean, it goes on and on. It's got all these tax benefits, you know, 15%, 20% versus 28% if you're in an ETF, like SLV, things like that. So, there's all kinds of benefits. And so everyone's trying to do this big push to create that silver squeeze and people are piling into these funds. There's this one here, I talked about CEF. You can see in the top right corner. This is a mix of gold and silver, which I think is a great way to take advantage of the markets because, I mean, everybody's leaning towards silver to take off, but the reality is you never know which metal is actually going to explode and take off to the upside. So, I love CEF. If silver moves up huge, it's going to drag the whole fund up with it and gold should rally as well. But, I mean, these funds are great for that. So, I mean, everyone's accumulating, stacking. It's a huge movement and I think it still has more time before we start to really see it pan out. And I hope we see a big silver squeeze because, to me, silver squeeze will be like, you know, probably $80 plus an ounce, which would be pretty darn exciting if we could get there. So, we just have to let it play out and everyone needs to keep on buying and stacking, right?
Craig: Yeah. You know, and one more thing that was on my mind, and see what else is on yours before we wrap up, you know, in general, commodities have been rallying like crazy, especially this year. I mean, copper prices are at nearly 10-year highs. Lumber is making new highs nearly every day. Crude oil is back to the highest levels we've seen since the COVID crisis began. In the idea that a rising tide lifts all boats, do you watch other commodities? Are there any there that give you a signal that maybe, you know, we're just getting started with this, and maybe new commodity bull market?
Chris: I mean, I follow obviously natural gas. That's short term. Crude oil, let me pull up crude oil. Actually, I don't have it on here. I'll just pull up USO for now. It's the ETF that kind of mimics the continuous contract. Actually, it's a terrible fund for following crude oil prices.
Craig: Oh, yeah.
Chris: That's nothing like what crude oil is. But I think I might have it here. Hold on. I don't have it on this platform, actually.
Chris: But I like crude oil. It actually hit our target. I was looking for $60 to $64 per barrel on the continuous contract. We've got up to those levels. It hit 100% measured move using a Fibonacci extension, so, I really like the energy sector. The energy stocks are on fire. Crude oil to me looks like it's put in a pretty major bottom. But if I go back to this DBC ETF, which is the commodity, kind of, index ETF, it holds a basket of oil and in all those different commodities, it looks like it's putting in what could be a very big double bottom. This is a... Commodity cycles, they really take years and years to play out. Obviously, gold just took, you know, seven years to break out. Well, here we are in one, two, three, four, five, six. There's a lot of work to do I think for the commodity super cycle to really kick in. I think we can see this continue to go up. But when it breaks above this level, if you watch DVC, it gets above 18.30-ish. Closes up there on a weekly or a monthly chart. That could be the start of a major commodity breakout. And you and I talked about this a while ago that, you know, I think commodities are about to, or they're starting a major super cycle that could last 10 to 20 years.
We've got a big extreme right now where everyone's into real estate. Everyone's into equities. Very heavy in technology. And commodities are like one of the most undervalued assets, so it was very similar to what we saw, like in 2000, 2002. And I think we're going to see that kind of rebound. But precious metals are likely not going to go in a straight line because if the stock market does start to top out here over the next few months or later this year, there will be some panic. It will pull metals down during those few weeks or couple of months where there's real panic in the stock market. But I would say, if we were to look at this chart here, I think we could see commodities eventually break out here. The stock market starts to crash, and we see commodities flag out, what would be in a new bull flag because it's broken above here. And then eventually, when the stock market becomes a little more favorable, I think we start to see commodities, in general, take off. This is a good way to do it. This is a good fund. I think precious metals are going to benefit the most going forward. So, they're the ones I'd be more focused on than a broad Commodity Index. But, yeah, I think we're, within a year or so maybe, have a big commodity super cycle, kind of, breaking out here and starting.
Craig: As you said, it's going to be a very busy month. I look forward to seeing where we are the next time we host one of these presentations. But as we look into this month, you always talk about best asset now. What's your focus going to be, do you think? Anything else on your mind as we wrap up?
Chris: Well, the best asset now, believe it or not, it's cash. I mean, we've moved to cash because we've got a lot of mixed sell signals. A lot of leading sectors are showing heavy distribution. Distribution selling that is. We're seeing huge outflows in technology. We are seeing a lot of money flow into energy and small caps still. But the way that bonds are crashing and the VIX is still relatively low, the market, to me, is giving a lot of technical and sentiment type signals that there's something really gnarly coming around the corner. And the leaders that have been the leaders for the last year or so, they're actually taking a backseat and they're actually losing their momentum and they've lost their leadership. And so we're in this transition where, are we still in a tech leadership? Are we in new like economic stocks, I call them, which is like small caps and energy, industrials? We're in that middle shift.
And so when the market is not clearly favorable to be in stocks or equities, or stocks or cash, and we don't know what sectors are hot anymore, that's when the band's system just says, "You know, there's nothing here yet. Let's just step aside and just watch this market unfold." I mean, right now is we're getting into Prime Day Trading type of activity. These huge intraday swings are great for short-term day traders. It's also great for options. We trade options now. We've got an option specialist so we can do protection on our trades. When you get into this high volatility, I mean, it's perfect for doing non-directional option trades where it doesn't matter where the markets go. When volatility spikes, premiums are high, and you're just selling time. You're selling theta. So, you just let these options expire and you accumulate through the passage of time. You just can pocket money. So, that's the type of market we're in. Day trading, doing non-directional selling, writing options at this point.
Craig: Well, we hope to do these Precious Metals Projections every month going forward. We also hope to take some of your questions as well at the email address email@example.com. One last thing, Chris, we had just a couple of questions come in this month after we started this back in February, and they had to do with technical analysis. This is what you do for a living. And so I think you're certainly qualified to answer this. A couple of different question is that it seem sometimes a technical analysis is almost like a self-fulfilling type thing. You know, everybody's watching the same moving average or the same technical level, and then when it breaks up or down, everybody buys or sells. What is your answer to that? What do you think of that idea?
Chris: Yeah, I think it's true for sure. I mean, there's a huge portion of investors or traders, depending on the timeframe you're looking at that chart, that follow the technical analysis. They're gonna buy when price hits the 200-day moving average. They want to see it bounce off that. Or when it breaks to new highs, people are gonna pile in and chase it. And we see those surges all the time when those really clearly defined technical levels are tagged or broken. That's when we see floods of orders hit the market, whether it's just a quick intraday move or a big long-term investment move. But really, it's only a small group of us that are buying in and trading those because the majority of investors, you say technical analysis and they just look like they saw a ghost. They are like, "What the...?" Yeah, it sounds technical, and they just kind of blank right out. So, most people don't follow it, right? And that's the masses. We'd trade the breakouts that are in favor of the current trend, and then usually the masses catch on because it hits the media about a sector or an index hitting new highs, and then they pile on at the highs and keep driving it up for us and you easily trim off and we hear about it in the media.
Craig: Yeah. Right. No, I think that's a very good point, my friend. Again, if you want to send us a question for next month, that email address firstname.lastname@example.org. And, again, visit sprottmoney.com. We do have a handful of gold and silver products, especially those 100-ounce bars. You can get it all through the website or just give us a call at 888-861-0775. My friend, I wish you best of luck in trading this month. It's going to be a volatile one. I look forward to talking to you in early April.
Chris: Sounds good. Yep. Thanks for having me. Take care.
Craig: And from all of us at Sprott Money News and sprottmoney.com, we hope you enjoy this Precious Metal Spotlight and we will talk to you again next month.