Silver Foretells

Please click here for a chart of silver futures (SI_F).

Note the following:

• The chart shows the parabolic move in silver from $65 to $82.67.
• The chart shows a likely short term blow-off top yesterday evening.  Only time will confirm if it is a blow-off top in the short term.  Here were the triggers that came along on Sunday evening for a potential short term blow-off top:
  • China is restricting the export of refined silver starting January 1.  China is a net importer of raw silver but a big exporter of refined silver.
  • The exchange increased margin on silver futures.
  • The premium on silver in Dubai and Shanghai widened.
  • The momo crowd jumped in buying like there is no tomorrow.
• The chart shows silver is pulling back this morning.
• Year to date, silver has moved up over 160%.  iShares Silver Trust (NYSE:SLV) is in our portfolio.  We are long SLV from an average of $13.96.
• Momo gurus are out in full force saying that silver will cross $100 before the end of the year.   Prudent investors should keep in mind that momo gurus are almost always wrong at inflection points.
• All prudent investors need to pay attention to the price action in silver as it may be foretelling of opportunities and perils ahead for investors in a number of assets, including stocks.   To fully understand, investors should consider two cycles.  In the first cycle, we were giving ‘back up the truck and buy' signals for silver around $17.  Silver subsequently rose to close to $50.  The day silver was close to $50, we gave a signal to sell all the silver long position and short sell silver.
• Further, our call was silver would fall to $34 in a very short time.  That was the day we received the most hate email as everyone was extremely bullish on silver and the crowd could not stand the sole contrary call.  It turned out that the day of our call turned out to be the top in silver.  In a very short time, silver fell to $34 and went on to fall to the $11 range.
• In the second cycle, our call was to accumulate silver again for the long term.  The call was made near the lows.  At that time, no one wanted silver.
• Yesterday, Sunday evening, investors were rushing to buy silver futures, and silver futures hit a high of $82.67.  Over the last few days, silver has become the momo crowd's most favorite trade.  This time, we gave a signal to take partial profits on silver, but not a signal to sell all of the silver and go short.  Here are the differences:
  • In 2011, sentiment in silver was deep in the extreme zone.  In 2025, sentiment on silver has not even reached the extreme zone.
  • In 2011, supply and demand for physical silver was in balance.  In 2025, for the fifth year in a row, demand for physical silver is exceeding supply.
  • In 2011, the Fed was independent.  In 2025, there is a risk that the Fed will lose its independence going forward.
  • In 2011, the risk of dollar debasement was not high.  In 2025, the risk of dollar debasement is high.
• In our analysis, the last two of the foregoing factors can potentially impact all investments going forward, not just silver.  
• The pullback in silver as of this writing is dampening the sentiment in stocks and bringing in mild selling.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing cross currents related to silver.  Some bitcoin holders are selling bitcoin to buy silver.  Others are buying bitcoin, hoping bitcoin will do exactly what silver has done.  

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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