Image Source:
Over the last 54 years, there have been virtually no significant silver rallies during a period when the US Dollar Index (DXY) was rising. If you are expecting a massive silver rally while US dollar strength continues, you will have a very low probability of success.In fact, the most significant silver rallies occurred during a period when the DXY was declining. For this reason, the direction of the DXY is an important signal for silver bulls. Below is a chart that shows how the significant silver rallies happened during a time when the DXY was in decline:(Click on image to enlarge)
After the longest DXY rally since 1971, the US dollar was still not able to surpass its 2001 high and is now hovering near a very important level. Below is a DXY chart showing that important level (the double blue line):(Click on image to enlarge)
Notice how the DXY broke down at the double blue line, close to a multi-year silver rally in 1977 and 2003. It is likely setting up another one of those breakdowns, which will be a great signal for the silver bull market.Another major leg down would also complete the regulation pattern of three major moves down (ending at point 5) before a new cycle. This is certainly consistent with a US debt default looming.More By This Author:
The US Dollar Or Silver: Make Your Choice
