Alessio Rastani and Manuel Blay discuss silver's bull market correction and Dow Theory signals
Trader and analyst Alessio Rastani interviews Manuel Blay of thedowtheory.com on the current state of the silver market.
Summary
Alessio Rastani interviews Manuel Blay, a trader and analyst who applies Dow Theory to markets, to assess whether silver's recent sharp pullback represents a correction within an ongoing bull market or the beginning of a bear market. Blay argues that the weight of evidence — including gold's confirming price action and bullish gold and silver miners ETFs — points to a secondary reaction within a primary bull trend, not a bear market. However, both analysts note that if silver and gold were to close below their recent March lows, a Dow Theory bearish signal would be triggered, which could open the door to significantly more downside. Rastani adds his personal view that silver remains undervalued and that he expects new all-time highs above the 2011 peak in the coming years, though not imminently.
Key Takeaways
FULL TRANSCRIPT
Introduction and background on silver's bull market
Alessio Rastani: Hello and welcome. In this video, we're joined by trader and analyst Manuel Blay of thedowtheory.com. We're going to talk about silver and cover a lot of ground on the chart. Manuel, I know you're into metals — gold and silver. We've covered the chart of gold in the member video already, but we're going to cover the chart of silver here. You've been a bull on metals for quite a long time, and I think you've been riding this bull market on silver for about two years now. We've seen a sharp pullback in silver and gold in the last few months — a pullback, by the way, which we anticipated, because after silver and gold reached extreme overbought conditions and a parabolic rally, there were a lot of warning signs we mentioned in previous videos. We saw a pullback down on silver to the expected levels more or less, but the question we're wondering is — I have a chart here, let's go into it.
This is a chart of silver going back all the way to 2009. We can see the 2011 high and the 2026 high. The reason I mention that particular chart is because some people may not know this, but I've been bullish on silver from 2022. I put out videos back in 2022 and 2023 where I mentioned that silver could likely move to new all-time highs and take out the 2011 highs as well. My own personal view is that I still think, even at the prices silver is at right now, it's quite undervalued and relatively cheap. Personally, if I see another pullback, another major correction in silver, I'll still continue to load up on the metal. I personally think we have much higher levels to come on silver in the next few years. I think in the longer term, silver could test the prior highs seen in 2011 near the $45–$50 region. That was a prior high in 2011 at about the $49–$50 region, and I think we could go to those levels and perhaps take them out in the next year or two.
As far as this recent action is concerned, we've seen a nice pullback correction to the 21-week and the 34-week moving averages. It is composed at the moment — it's a three-wave structure on silver, so we've got a three-wave pullback. The question I want to ask you, Manuel, is: do you consider this pullback at the moment to be a correction before we move to new highs? I'm sure there are a lot of people watching who want to hear that we're going to move to new highs above $120, $140. But as you guys know, we prefer to remain as objective as possible in our analysis. What's your view on silver? And I think you also want to mention something about the Dow Theory model.
Manuel Blay: Yes, because I see markets through Dow Theory lenses — it's the only way I see them. It is still a bull market. What we are seeing right now is a secondary reaction against a bull market. So a correction, but it is not a bear market yet. I say that not only because of the price action in silver itself — which in itself wouldn't constitute a bear market — but also because gold is confirming. If you look at a gold chart, it displays the very same structure we see here. In other words, both silver and gold are in a secondary bearish reaction against the primary bull market. The primary trend remains bullish.
This correction for silver is a painful one — very painful — because silver has very high volatility. Many people say, "Look, if it has dropped 45%, this is a bear market." But it depends, because you have to measure it against its own volatility. The same goes with Bitcoin, for instance. You have to adjust for volatility. So what we are seeing here is painful, of course, but it is a correction within a bull market.
Dow Theory bear market signal — what would trigger it
Alessio Rastani: I agree with you. From an Elliott Wave perspective as well, the drop so far has been composed of three waves — a three-wave structure — which is a corrective structure. However, you actually have a much more radical point of view as well, which by the way is not a forecast or a prediction, but you make the point that if both gold and silver were to breach the recent lows they made in March, that would actually trigger a Dow Theory bearish signal, which would potentially increase the odds of a bear market in metals. Is that correct?
Manuel Blay: Yes, that's correct. We're not saying it's going to happen, but we're just saying that if the metals — gold and silver — were to drop below the lows of March, the respective lows, and if those levels were taken out on a closing basis — for example, on a daily chart close — that could trigger a Dow Theory bearish signal.
Alessio Rastani: And if that occurs — let's say hypothetically that occurs — how much lower could silver drop down to? We've already covered gold in the member video, so go ahead and check that out. As far as silver is concerned, what about that?
Manuel Blay: Well, we can see a support level around $45 on the chart. It could well go down to that resistance-support level we see on the chart.
Alessio Rastani: Which I think for gold is something similar, so the structure is really quite similar for both. Looking down below — for one thing, we have the 50-week simple moving average there, that grayish-white line, which could get tested. That's approximately $55 or $60, probably. That might get tested. But yeah, it could go even lower than that. I totally agree with you, because if a bear market signal gets triggered, you could see severely more downside. Absolutely.
Miners ETFs and the weight of evidence
Manuel Blay: But this is not in the cards right now, because we also have to look at the GDX and SIL — the gold and silver miners ETFs — and they are also bullish. Normally there is also a big influence there. If the miners ETFs become bearish, then it's also a negative influence, a negative background for gold and silver. Right now they are bullish. They're also under a correction within a bull market. So in other words, I see the weight of evidence tilting towards a bull market. We had a bull market in silver and gold. There is a correction — that's okay. There is also a correction in the gold and silver miners ETFs — that's okay. But they are also in bullish trends. So right now, the weight of the evidence says it is a bull market.
Near-term outlook — sideways consolidation expected
Alessio Rastani: Can I ask you — is it your view that in the next several months, you're not expecting a rally to new all-time highs anytime soon? Am I right?
Manuel Blay: Anytime soon — yes, I agree with you.
Alessio Rastani: So in other words, you're of the view that if we don't make new lows, we might just consolidate for some months, go sideways?
Manuel Blay: Sideways, backing and filling, a range — but it's not a bear market. This happens within corrections.
Alessio Rastani: Within corrections. Yeah. So even if we don't make new highs, we could be stuck in some kind of very frustrating range for several months — maybe towards the end of the year — just going sideways up and down between, say, $100–$120 on the upside and $65–$60 on the downside. Do you think that's possible?
Manuel Blay: Yeah, it's possible. It's possible because silver was very overbought. So now you need to digest this overbought period. It went parabolic, and you know that when it goes parabolic, history shows that a bear market follows. In this specific case it seems not, because the chart is behaving well — but it means I may be wrong, because I'm not a fortune teller. Technically, I don't see all-time highs anytime soon. But I don't see a bear market either. I see a sideways, range-bound period.
Alessio Rastani: My personal view is that after this recent bounce we've had on silver, I would not be surprised to see another drop. I'm not saying the drop is going to go all the way below the lows of March, but I think a potential drop could happen into the $70 to $65 region. We shall see. But I think there's a potential for that.