Expectations For Silver Given The GameStop Price Action And The Reddit Revolution

Near the end of 2020, we identified trends, pullbacks, and overall upward/downward trends in US major markets as well as those for Gold and Silver. It is time we revisited these early 2021 predictions in relation to what is happening in the markets currently. You can revisit our original publication entitled What To Expect in 2021 Part II – Gold, Silver, and SPY.

At the time we made these predictions, we were unaware of the global phenomenon, the Reddit #wallstreetbets movement, that was taking place. Our expectations are based on our advanced predictive modeling system and what it sees as the highest probability outcome for price. The recent news that this Reddit group has targeted a number of symbols (GME, AMC, BB, amongst others), as well as SILVER, may change the dynamics/liquidity of the markets very quickly.

What we are witnessing is the incredible strength of the retail trader when they act in a “pack-form”.The retail traders of the world, using a social media platform, have found new strength as the global markets continue to struggle with COVID-19 and institutional weakness. In a way, these retail traders are focusing on an institutionally authorized “exploit”, like a game exploit, where short-sellers have been permitted to overrun many smaller traders and companies over the past decade or so – ever since the “Uptick Rule” was removed. 

This has created an environment where excessive risks were allowed by many institutions as short sellers were able to enter short positions far in excess of the floating shares available. With extreme leverage in place, these positions were ticking time-bombs waiting to explode. And then along comes the Reddit group – hungry, happy, and en mass. They identify this structural weakness, which was legally allowed to happen, and begin their “autist wave” of buying these heavily shorted symbols. 

GameStop became a “shot across the bow” for these hedge funds and has sent a liquidity ripple across the global markets. Is the financial system at risk because of excessive leverage, derivatives, and institutional manipulation? What would it take to completely disrupt these hedge funds and what are the consequences of these short-squeeze runs? Is this issue bigger than many people expect? Could it turn into a “liquidity trap”?

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