Here’s What Silver Investors Need to Know

Large Speculators have been making this bet on silver

By Elliott Wave International

Observations over the years reveal that hedge fund managers tend to extrapolate current trends of financial markets into the future -- just like most Main Street investors.

In other words, hedge fund managers are just as much a part of the "crowd" as the little guy.

So, this 2021 headline from the American Enterprise Institute is not surprising:

The SP 500 Index Out-performed Hedge Funds over the Last 10 Years. And It Wasn't Even Close

Hedge funds and trend followers are known as Large Speculators in the Commitment of Traders report published by the Commodity Futures Trading Commission. They usually take the opposite side of the trade from a group known as the Commercials; insiders who participate in a business related to a given commodity. The Commercials usually turn out to be on the right side of a trade.

With this in mind, let's focus on silver. Here's a chart and commentary from our May 15 U.S. Short Term Update:

Large Specs... are strongly betting that [Silver]'s rally will continue. The middle graph on the chart shows the Large Spec net long or net short position as a percentage of total non-spreading open interest. Two weeks ago, it was 23.49%. Last week, despite a 9% decline in silver prices over just five days, Large Specs are net long 23.14%, hardly budging from their prior stance... We will keep you apprised of new developments.

The U.S. Short Term Update makes clear that Commitment of Traders positions are not a great short-term timing tool. At the same time, be aware that extreme positions often occur at key trend turns.

Also keep in mind that silver's Elliott wave structure can help you to anticipate price turns.

Indeed, here’s a quote from the Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior:

It is our practice to try to determine in advance where the next move will likely take the market. One advantage of setting a target is that it gives a sort of backdrop against which to monitor the market’s actual path. This way, you are alerted quickly when something is wrong and can shift your interpretation to a more appropriate one if the market does not do what you expect. The second advantage of choosing a target well in advance is that it prepares you psychologically for buying when others are selling out in despair, and selling when others are buying confidently in a euphoric environment.

No matter what your convictions, it pays never to take your eyes off what is happening in the wave structure in real time. Ultimately, the market is the message, and a change in behavior can dictate a change in outlook. All one really needs to know at the time is whether to be long, short or out, a decision that can sometimes be made with a swift glance at a chart and other times only after painstaking work.

If you’d like to read the entire online version of the book, you may do so for free once you join Club EWI, the world’s largest Elliott wave educational community.

A Club EWI membership is also free and members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading.

Get started now by following this link: Elliott Wave Principle: Key to Market Behavior – get free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Here’s What Silver Investors Need to Know. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Is a Pension Fund Crisis Next?

"U.S. pension funds are on the brink of implosion"

By Elliott Wave International

Did you get a heads-up from the financial media that the U.S. banking system was vulnerable before the failures of Silicon Valley, Signature and First Republic banks?

There may have been outlier articles here and there but no real warnings.

By contrast, the 2021 edition of Robert Prechter's book Conquer the Crash, Last Chance to Conquer the Crash, reminded readers that:

In a crash and depression, we will see falling asset values, massive layoffs, high unemployment, corporate and municipal bankruptcies, pension fund implosions, bank and insurance company failures and ultimately social and political crises.

As you know, some of these things have recently been unfolding.

Let's focus on pension funds for a few moments. Yes, some recent articles have provided warnings, but they have not been widespread.

The headline of one of those news items is from the Washington Post (Feb. 14):

Time Bomb of Public Pension Funding Ticks Louder

Many public pensions suffer from funding shortfalls. In other words, they don't have nearly enough money to meet their obligations. More than that, investments are being made in potentially financially dangerous assets to boost returns, such as private equity.

Many people who are counting on a pension probably don't know that some private equity firms have invested pension-fund money in the housing market since the Great Recession -- yes, they bought actual houses. As the Atlanta Journal Constitution reported (Feb. 12):

Private equity firms like Blackstone Group, Pretium Partners and Amherst convinced public pension funds and other large institutional investors to bankroll their homebuying sprees.

If the housing market crashes, you guessed it, some pension funds will take a big hit.

Here's another headline from a British newspaper, the Guardian (Feb. 2):

US pension funds are on the brink of implosion -- and Wall Street is ignoring it

However, Elliott Wave International is not ignoring it.

As the Elliott Wave Theorist said in February [The Elliott Wave Theorist has published monthly since 1979 and covers major financial and cultural trends):

Unfunded liabilities of states’ pension funds in the U.S. stood at $1.3 trillion as of year-end 2022. Private pension funds are underfunded as well. The whole system has made promises it can’t fulfill.

And, getting back to the banking crisis, the FDIC may face challenges fulfilling its promises to depositors if bank failures become widespread. In other words, the FDIC can only “make whole” a limited number of depositors at one time (up to $250,000). Whether the federal government steps in is another matter. The point is: it may not be wise to count on the FDIC during a major banking panic.

So, the question arises: Are there viable alternatives to banks?

Yes!

Elliott Wave International is now offering a special report titled “Your 5 Top Alternatives to Banks,” which is excerpted from Robert Prechter’s Last Chance to Conquer the Crash.

You can access this special report for free when you join Club EWI, the world’s largest Elliott wave educational community. Just follow the link below:

Read "Your 5 Top Alternatives to Banks" now when you sign up for a FREE Club EWI account.

This article was syndicated by Elliott Wave International and was originally published under the headline Is a Pension Fund Crisis Next?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

More Banks Could Collapse -- A Lot More

This ETF "continues to make lower lows"

By Elliott Wave International

It's sobering to reflect on the fact that the second, third and fourth largest bank failures in U.S. history have all occurred in just the past few months.

They are First Republic, Silicon Valley Bank and Signature Bank of New York. The failure of Washington Mutual in 2008 still ranks first.

And here's an interesting factoid from the New York Post (May 1):

This year's 3 bank failures held $532B in assets -- more than all lenders that collapsed in 2008 crisis

The current banking crisis may be far from over, as another headline suggests (USA Today, May 4):

US banking crisis: Close to 190 banks could collapse, according to study

As the article notes, that study found that 186 more banks could teeter on collapse if only half of their depositors withdrew their money.

The Financial Times in Britain also piped in on this topic and expressed concerns about way more than 186 banks (May 2):

Half of America's banks are potentially insolvent -- this is how a credit crunch begins

The bottom line with these banks is that they are suffering losses from bonds and debt securities. The downturn in commercial real estate has hit banks hard.

Curiously, back on March 21, U.S. Treasury Secretary Janet Yellen was giving assurances about the banking system (US News & World Report):

Yellen Tells Nation's Bankers That the Crisis Is 'Stabilizing'

The May Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, differed from the Treasury Secretary's view on U.S. banking as the publication showed this chart and said:

The SPDR S&P Regional Banking ETF (KRE) continues to make lower lows since Secretary Yellen's pronouncements. The ETF is down 48% since peaking on January 14, 2022, several days after the top in the Dow and S&P 500.

Since that chart and commentary published, San Francisco-based PacWest Bancorp is another bank which has seen its shares crater in price.

Are there viable alternatives to banks?

Yes!

Elliott Wave International has created a special report titled "Your 5 Top Alternatives to Banks," and there's a way you can access it for free.

This special report is excerpted from Robert Prechter's Last Chance to Conquer the Crash. The book was published in 2021 and warned of the banking scenario we're experiencing now.

Read "Your 5 Top Alternatives to Banks" now when you sign up for a FREE Club EWI account.

This article was syndicated by Elliott Wave International and was originally published under the headline More Banks Could Collapse -- A Lot More. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Your Bank: "Use This as an Early Warning Signal"

First Republic Bank "customers had pulled $100 billion in deposits in the first quarter"

By Elliott Wave International

More dramatic news on the banking front.

On April 25, investors in the shares of First Republic Bank were hit hard (The New York Times):

First Republic Bank Enters New Free Fall as Concerns Mount
The bank's shares fell by about 50 percent on Tuesday, a day after it said customers had pulled $100 billion in deposits in the first quarter.

As of this writing on April 26, shares are down another 20% intraday.

Of course, there was no way of knowing the precise percentage decline of the bank's shares ahead of time, but we can say that the dramatic developments were no surprise to Elliott Wave International's Head of Global Research Murray Gunn.

On March 31, when the April Global Market Perspective published (Global Market Perspective is a monthly Elliott Wave International publication which covers 50-plus financial markets), Murray showed this chart and said:

Use this for [an] early warning signal ....

... Look at the relative performance of bank shares. If what's going on behind the closed door of banks is all good, the share price should probably not be UNDERperforming its peers. The chart shows that the relative performance of First Republic versus the KBW Bank Index topped out in November 2020. The relative performance had been trending down for many months before problems emerged.

The worry is that investors' confidence in other regional banks -- indeed, the entire banking sector -- could become even more shaken.

The worry is that investors’ confidence in other regional banks – indeed, the entire banking sector – could become even more shaken.

So, what should you do with YOUR money?

Allow EWI to offer 5 alternatives. "Your 5 Top Alternatives to Banks" is a special report excerpted from Robert Prechter's book, Last Chance to Conquer the Crash.

In 2021, Last Chance to Conquer the Crash warned of the banking scenario we’re experiencing now.

There’s still time to protect yourself. But as the book’s title says, the window is closing.

Read “Your 5 Top Alternatives to Banks” now when you sign up for a FREE Club EWI account..

This article was syndicated by Elliott Wave International and was originally published under the headline Your Bank: "Use This as an Early Warning Signal". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

How "Insane Optimism" is at Work in the Stock Market

"Stock investors are so bullish that they are..."

By Elliott Wave International

Many technical indicators are highly useful, yet the price moves of the stock market really boil down to two things: optimism and pessimism.

Major trend turns tend to occur when extremes are reached in either optimism or pessimism.

Most recently, optimism has been in charge. The question is: Has an extreme been reached?

Well, there are at least two signs which strongly point to a "yes" answer.

The first sign to which I'd like to call your attention regards the S&P 500 dividend yield. What you need to know is that stock prices tend to top when dividend yields are low and bottom when they're high.

Robert Prechter explains how this is related to optimism and pessimism in his recently published April Elliott Wave Theorist, which covers major financial and social trends:

Investors in a positive mood bid up stock prices regardless of dividend yield, and investors in a negative mood adjust stock prices lower regardless of dividend yield. Yield simply follows the waves of optimism and pessimism.

The April Theorist provided more insight with this chart and associated commentary:

[The chart] shows that S&P companies' dividends today yield only 1.66% annually. Investors are putting up with that low payout despite the virtually riskless 5% yield of Treasury bills, which is three times as much. Stock investors are so bullish that they are certain their capital gains will make dividends irrelevant.

The second sign of insane optimism is revealed in this March 29 Bloomberg news item:

They've become a high-speed, high-risk, high-reward tool in turbulent markets: Options with shelf lives so short they expire in less than a day [known as "zero-day-to-expiry' options].

... Success is far from certain, and even some Wall Street pros don't fully understand them.

That hasn't deterred thrill-seeking retail investors from piling into 0DTE options.

As the April Theorist says:

Options Gambling Is Another Symptom of Historic Optimism

Looking beyond sentiment extremes, the April Theorist also shows the stock market's Elliott wave structure in monthly and hourly charts. The information revealed in these charts is very much worth knowing.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote:

All waves may be categorized by relative size, or degree. The degree of a wave is determined by its size and position relative to component, adjacent and encompassing waves. Elliott named nine degrees of waves, from the smallest discernible on an hourly chart to the largest wave he could assume existed from the data then available. He chose the following terms for these degrees, from largest to smallest: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Subminuette. Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor waves, and so on. The specific terminology is not critical to the identification of degrees, although out of habit, today's practitioners have become comfortable with Elliott's nomenclature.

If you'd like to read the entire online version of the book, you may do so for free once you join Club EWI, the world's largest Elliott wave educational community.

A Club EWI membership is also free.

Get started now by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline How "Insane Optimism" is at Work in the Stock Market. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.