Since gold and silver are "joined at the hip," much of what is written about gold and the dollar in the parallel Gold Market update applies equally to silver, so here we will look mainly at the points that need to be made separately for silver.

The first point that we will look at is that silver's giant Head-and-Shoulders bottom pattern is downsloping compared to the flat-topped one forming in gold, as we can see on its latest 8-year chart shown below. This is because silver tends to underperform gold in the late stages of bear markets. One important effect of this is to camouflage the incubating bull market in silver, as investors tend to take one look at its long-term chart and say "Well, that's not much good, is it?—it's still going down." This gives silver—and silver stocks—considerable "snapback" potential once both it and gold break out of their respective base patterns, meaning a sizable rally that for many investors "comes out of the blue." Silver at this point is still spluttering along sideways at a low level marking out the Right Shoulder of its H&S bottom pattern, but as the "neckline" of the base pattern is downsloping, it won't take all that much for it to break out of it. Once it does it will encounter a zone of quite strong resistance in the $26–$28 zone at the underside of the earlier top pattern. Note the big volume buildup as the Right Shoulder has formed, which is bullish, as it is with gold, although in the case of silver, there has not been so much upside volume, which is why its volume indicators have not advanced much—yet.

On silver's latest 6-month chart we can see that it made a plucky but short-lived attempt to break above a line of resistance in the $17.30–$17.50 zone last week. It failed and is now vulnerable to reacting back on a short-lived dollar relief rally, although it shouldn't drop far, probably no lower than $16.80, and any such drop will be viewed as presenting a buying opportunity, especially in the better silver stocks.

The latest COT for silver is considerably better looking than the latest COT for gold, which is rather surprising, and is viewed as an indication that any reaction will be minor, and also supports our contention than when silver does break out of its base pattern, the resulting rally could be sharp.