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
c01_CTA_2011_pgs_12-119_c01_cta_2011_pgs_12-119 7/21/10 2:03 PM Page 86
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 wayexcept 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)
c01_CTA_2011_pgs_12-119_c01_cta_2011_pgs_12-119 7/21/10 2:03 PM Page 87

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