Commodity Trader's Almanac 2O11

86

SILVER SLUMPS IN OCTOBER

Silver has a tendency to move up in September,

as jewelers and manufacturers accumulate inven -

tories in preparation for increased demand for

jewelry during the year-end holiday season. In

addition, the harvest season in India is underway,

where tradition has been that farmers sell grain

and buy precious metals, including silver, in

preparation for their wedding season. Once this

demand has been satisfied, silver tends to peak

in early October.

This trade goes short silver on or about

October 6 until about October 31. In the last 38

years this trade has worked 23 times, for a success

rate of 60.5%. The over-arching commodity bull

market of 2002–2007, negatively impacted this

trade in five of the six years.

The weekly chart below shows Newmont Mining

(NEM) stock prices overlaid on the price of silver.

This company’s main business is mining precious

metals, such as gold and silver. As you can see, the

stock price does move in close correlation with

the price of silver, and the line on the bottom shows

the seasonal tendency for silver prices to move

lower through the month of October.

Traders have several ways to take advantage

of this seasonal tendency, with an outright short

position in silver futures, options on the futures,

the exchange-traded fund, iShares Silver Trust

(SLV), and stocks or options on stocks like

Newmont Mining that correlate well with the

underlying commodity price moves. See pages

133–138 for additional correlated trades.

Chart courtesy TradeNavigator.com

SILVER (SI) BARS AND NEWMONT MINING (NEM) CLOSES

(WEEKLY DATA JANUARY 2009–MAY 2010)

ENTRY EXIT PROFIT/

YEAR DATE CLOSE DATE CLOSE LOSS

1972 10/5 178.0 11/01 185.5 –$375

1973 10/4 275.5 10/31 288.1 –630

1974 10/4 513.0 10/30 489.0 1,200

1975 10/6 446.5 10/30 422.5 1,200

1976 10/6 431.7 10/29 433.2

–75

1977 10/6 469.0 10/31 489.2 –1,010

1978 10/5 588.5 10/30 636.5 – 2,400

1979 10/4 1691.0 10/29 1665.0 1,300

1980 10/6 2165.0 10/29 1943.0 11,100

1981 10/6 968.0 10/29 938.0 1,500

1982 10/6 833.0 10/29 1009.0

–8,800

1983 10/6 1042.0 10/31 863.0 8,950

1984 10/4 773.5 10/29 723.0 2,525

1985 10/4 640.0 10/29 625.0 750

1986 10/6 581.5 10/29 563.0 925

1987 10/6 773.5 10/29 692.5 4,050

1988 10/6 637.0 10/31 634.8 110

1989 10/5 524.3 10/30 528.3

–200

1990 10/4 473.0 10/29 415.7 2,865

1991 10/4 417.0 10/29 411.5 275

1992 10/6 375.5 10/29 376.5

–50

1993 10/6 428.7 10/29 436.7 –400

1994 10/6 566.5 10/31 526.2 2,015

1995 10/5 530.7 10/30 534.3

–180

1996 10/4 487.5 10/29 482.0 275

1997 10/6 520.7 10/29 479.5 2,060

1998 10/6 509.0 10/29 507.5 75

1999 10/6 553.0 10/29 518.0 1,750

2000 10/5 493.8 10/30 477.0 840

2001 10/4 466.5 10/29 424.3 2,110

2002 10/4 449.0 10/29 451.0

–100

2003 10/6 481.5 10/29 514.2 –1,635

2004 10/6 724.5 10/29 730.5 –300

2005 10/6 759.5 10/31 758.0 75

2006 10/5 1107.0 10/30 1225.0

–5,900

2007 10/4 1350.0 10/29 1443.0 –4,650

2008 10/6 1128.5 10/29 980.5 7,400

2009 10/6 1729.5 10/29 1665.5 3,200

38-Year Gain $29,845

OCTOBER SHORT SILVER (DECEMBER)

TRADING DAY: 4—HOLD: 17 DAYS

Silver Seasonal Pattern since 1971

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MONDAY

12

TUESDAY

13

WEDNESDAY

14

THURSDAY

15

FRIDAY

16

SATURDAY

17

SUNDAY

18

Charts not only tell what was, they tell what is; and a trend from was to is (projected linearly into the will be)

contains better percentages than clumsy guessing. — Robert A. Levy (Chairman, Cato Institute, founder,

CDA Investment Technologies, The Relative Strength Concept of Common Stock Forecasting, 1968, b. 1941)

When a country lives on borrowed time, borrowed money and borrowed energy,

it is just begging the markets to discipline it in their own way at their own time.

Usually the markets do it in an orderly way—except when they don’t.

— Thomas L. Friedman (NY Times Foreign Affairs columnist, 2/24/05)

You know a country is falling apart when even the government will not accept its own currency.

— Jim Rogers (Financier, Adventure Capitalist, b. 1942)

I will never knowingly buy any company that has a real time quote of their stock price in the building lobby.

— Robert Mahan (A trader commenting on Enron)

It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first.

— Ronald Reagan (40th U.S. president, 1911-2004)

Start Short Crude Oil(G)—66.7% Accuracy Since 1983—End Dec. 9—Page 80

Start Short Cocoa(Z) –70.3% Accuracy Since 1973—End Nov. 1—Page 127

SEPTEMBER

LT:

C(U), S(U), W(U)

LT:

SP(U), CC(U)

OE:

SP(U), CL(V), SB(V)

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