Baseline Shifts In Commodity Prices Since 1957

Gold, Bars, Wealth, Finance, Gold Bars, Deposit

 

Since November 16th when the Dow Jones made its first BEV Zero since its -37.5% market bottom of last March, it has remained within 2.5% of its BEV Zero as well as making two additional new all-time highs.  The current chaos resulting from the presidential election of November 3rd hasn’t bothered the bulls too much.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 682\Chart #1   DJ BEV 2007 to 2020.gif

Last week we saw many BEV Zeros in the table below.  The best day this week was Tuesday with ten of the major market indexes making a new all-time high in the table below, but by Friday’s close they had all cooled off a bit.  My best guess is that in the weeks to come, the market will continue seeing new all-time highs in these major market indexes.  

I’d expect the uncertainty of not knowing who was going to be president for the next four years many weeks after the election would have resulted in lower valuations in the stock market, but so far it hasn’t.  Maybe that is the best proof that the big bulls in this market are the idiot savants managing “monetary policy” at the FOMC.

The above post March 23rd returns remain amazing, but they really haven’t done much for about two months.  With #20 (DJ Utilities) coming in with a 40% advance in the past ten months, and most of the others advancing well over 60%, expecting them to do something other than correct some in the next few months seems a bit greedy to me.  Typically, precious metal assets do well when the broad market comes under pressure.

I like having a theoretical basis for modeling my market expectations in the coming weeks and months.  I can be wrong, but it’s what I do, so what the heck here goes; before we see April’s showers the broad market will shed a good percentage of the gains it has seen since the lows of last March as gold, silver and the XAU (gold and silver mining) above advance to higher levels.

The chart for the Dow Jones below plotting its 52 week high and low lines supports my theoretical basis for modeling the next few months.  From the summer of 2016 to the end of 2017 the Dow Jones for the most part advanced from one new all-time high to its next, then beginning in 2018 the Dow Jones began to struggle.  Sure it was advancing; pushing up on its 52 week high line, but when it did it needed a long rest before it did so again.

Then came October 2019 and the bulls began running up the hill as they did from 2016-17 – until February 2020 when the deflating Dow Jones pushed its 52 week low line down a whopping 10,900 points in only twenty-eight trading sessions.  

Unphased by this stunning 37.5% market decline, on March 23rd the bulls once again began taking the Dow Jones back up into record territory eight months later in November.  That the FOMC had “injected” $2.74 trillion into the financial system during this time may have had something to do with this nine-month advance.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 682\Chart #2   DJ & 52Wk H&L Lines.gif

I’m looking at this chart and wondering what’s coming for us in 2021:

  • a blow-off top for the Dow Jones far above today’s close;
  • continued wild market oscillations as seen since January 2018.

This bull market has been going on since August 1982.  A historic bull market such as this deserves a historic ending.  Looking at how the FOMC has been “injecting liquidity” into the market since late 2019 below, the likelihood of this bull market ending in a whimper is very slim!

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 682\Chart #3   Wk Cng Fed Holdings.gif

Here’s the Dow Jones in daily bars; from here we move on to gold (DIA).

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 682\Chart #4   DJIA OHLC.gif

Gold’s (GLD) current correction from its all-time high of $2061 seen in early August below is developing into its longest and deepest correction since its December 2015 bottom.  What does that mean?  Not much, but it does test the resolve of the bulls.

I don’t think it will happen, but should gold decline to its BEV -20% line ($1648), I wouldn’t like it but what am I to do about it?  Exit my precious metal positions and buy Wall Street glamor shares as the Dow Jones rises above 30,000?  Thanks, but I think I’ll pass on that one!  In today’s uncertain world, gold and silver are very attractive assets to hold and just leave it at that.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 682\Chart #5   Gold BEV 2015-20.gif

Here’s the silver to gold ratio (SGR) going back to 1957.  During precious metals bull markets, the SGR declines to lower levels.  During precious metals bear markets the SGR increases to higher levels, but why?

Silver (SLV) is gold on steroids.  During bull markets silver advances more than gold.  During bear markets silver deflates more than gold.  At bull market tops, an ounce of gold is only worth fifteen ounces of silver, as it was in 1968 and again in 1979.  

Though I have to note that in 1968 gold was fixed at $35 an ounce.  The decline of the SGR in the 1960s was because the price of silver was rising as the US Government flooded the global economy with paper dollars in excess of the Bretton Woods $35 gold peg.  This is why the US Treasury stopped minting coins from silver in 1964; “silver became too expensive.”  The Treasury has been minting base metal slugs into dimes, quarters and half dollars ever since.

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