It’s been a great start to Q3 thus far for the silver price (SLV), with the metal gaining 9% in barely 20 trading days, helping to claw back some of its significant year-to-date losses. Investors who invested their silver in silver miners had to deal with a losing year. This is in addition to a decade of losses in the silver producer sector. The good news is that these poor returns are forcing many long-time investors and newcomers to the space to throw in the towel, creating enough bearish sentiment to increase the probability of a durable bottom and a multi-quarter rally in the metal.It’s been a great start to Q3 thus far for the silver price (SLV), with the metal gaining 9% in barely 20 trading days, helping to claw back some of its significant year-to-date losses. Silver is down over 7% so far this year, contributing to a bearish mood surrounding it and the Silver Miners Index. Investors who invested their silver in silver miners had to deal with a loss year after a lost decade. Good news is that investors who have been in this space for a long time are now feeling the pinch. It has caused enough negative sentiment to raise the likelihood of a sustained bottom and a multiple-quarter rally. The correction, though violent, has caused no technical problems. Let’s take a closer look below:

Source: TC2000.com

We must start with sentiment. It takes more than 3 years back to witness the same level of pessimism we currently see. With the silver long-term average falling off a cliff, and sitting at 20% bulls, it is difficult to determine if this trend continues. It is quite a drastic change from the sentiment that was nearing 80% bulls nine months ago, during an unsuccessful silver squeeze. This means that we have transitioned from a market with four bullish market participants for every one bearish market participant to a market with four bearish market participants for every one that’s bullish. When everyone is a bull, and the sky is the limit for an asset class, the asset class typically corrects sharply, given that everyone is bullish and there’s no one left to buy. However, the majority of investors are now interested in selling, and there’s significant firepower available if they decide to increase their exposure.

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