Given the US governments continuing catastrophic response to the coronavirus virus resulting in severe economic contraction then one would assume that the crowing from the rooftops perma bear deflationistas would finally be proven right with their decade long perma bear messages of a US housing market crash finally being fulfilled. So is that what happened? Were the perma bears finally proven right by chance, a black swan event courtesy of a leak from a wuhan bio lab?
We ll in economic terms the US as is the case for all western nations has come under severe economic pressures following the panic lockdown responses to an out of control pandemic with further economic pain expected during Q1 2021 in a race against time to deliver vaccines into american arms.
Following a necessary correction, the gold miners’ stocks have spent much of recent months bottoming. This healthy basing process is rebalancing sentiment, preparing the way for this sector’s next bull-market upleg. That is looking to coincide with gold stocks’ spring rally, one of their strongest times of the year seasonally. That stiff tailwind blowing behind bullish technicals and fundamentals should make for big gains.
Seasonality is the tendency for prices to exhibit recurring patterns at certain times during the calendar year. While seasonality doesn’t drive price action, it
quantifies annually-repeating behavior driven by sentiment, technicals, and fundamentals. We humans are creatures of habit and herd, which naturally colors our trading decisions. The calendar year’s passage affects the timing and intensity of buying and selling.
Here s what our preferred Elliott wave count said on Feb. 5, 2021
When financial historians discuss past manias, many of them point to the South Sea Company of the early 1700s as a classic example.
The enthusiasm to buy a piece of the action was so great that even Sir Isaac Newton became in investor.
He, along with many others, eventually lost big time when the South Sea Company Bubble burst.
And, in late January, it looked like the modern-day mania surrounding the cryptocurrency Bitcoin had burst too, at least according to one major financial magazine (Forbes, Jan. 27). Here s the headline:
Bitcoin Has Crashed. Is This The End?
Silver as well as the stock market peaked in February 2020, and crashed significantly into March.
Below, is a chart of silver (top) and the Dow (bottom):
On the silver chart, I have indicated how the current season is shaping up like the previous season by marking the similar patterns from point 1 to 5.
On both patterns, point 4 came in right at the beginning of the year (2020 and 2021respectively). If the two patterns on the silver chart continue in a similar manner, then we could see silver crash much lower like it did in March 2020.
However, if the patterns diverge, then we could see a move higher that is similar to the the move from about July 2020 (It is often the case that the big moves come when significant patterns diverge). The red and green lines are my feeling of what would constitute a divergence or a continuation of the similarity.