More On Daily Volatility In The Gold And Silver Markets

The Dow Jones took last week off; in four days of trading it advanced only 0.11% in the BEV chart below, or 31 points. After the advance seen since December 24th I guess it earned a break.

From here what’s next for the stock market? After the big advance seen below, a short term correction in the Dow Jones should be expected before it resumes its advance. That’s assuming the Dow Jones is destined to make another round of BEV Zeros in the BEV chart below. However, if the stock market actually saw its last all-time high of the Bull Market, its Terminal Zero on October 3rd, then we can understand the post-holiday advance as a correction within a continuing decline towards much lower levels.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 585\Chart #1   DJ BEV 2013_2019.gif

The one data set that may give us an early indication what is to come, whether:

  • more new all-time highs for the Dow Jones

  • pending declines in the Dow Jones below its BEV -20% line

...would be NYSE 52Wk Highs and Lows. This indicator is currently neutral, as both daily 52Wk Highs and Lows are very low, single or low double digits, but with a bias for more 52Wk Highs than lows since January 8th.  

I’m following the NYSE 52Wk Highs and Lows very closely as discovering what the future holds for the Dow Jones may be as simple as seeing which first develops the momentum to increases to triple digits in 52Wk extremes: the Highs or Lows. Personally I’m expecting the Dow Jones to once again rise to new all-time highs before the bottom falls out of the market, but I wouldn’t risk any money on it as the up side to this market is overwhelmed by the risks.

Moving on to the Dow Jones in daily bars below, it’s obvious daily volatility has decreased greatly since January 4, and that is very bullish. But all that could be said for the market in early October too. Then came October 10 and11, the first of many Dow Jones 2% days that came out of nowhere, triggering the deepest decline in the Dow Jones since March 2009.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 585\Chart #2   DJIA OHLC.gif

Keep in mind the stock market has been in a monster-bull market since August 1982. There are people born in August 1982 who then graduated from high school and college and went on to earn a Ph.D., hopefully in something useful to society, and have worked in their chosen profession for well over a decade during this bull market.  

To be sure, there have been the occasional unpleasant 50% plus declines, but to the general public, if there is one certainty in life it’s that valuations for assets trading on the NYSE and NASDAQ over the long term only go up. Thanks to the “liquidity injected” into the financial system by the Federal Reserve since 1982, that has been true, but it’s only inflation.

Here are two very interesting historic factoids. The editors of Barron’s August 21, 1961 issue covered the construction costs for the US Navy’s latest aircraft carrier, the USS Kitty Hawk (CV-63).  At $230 million Barron’s said the new carrier was too expensive.

This week the New York Times reported a 24,000 square foot penthouse unit at 220 Central Park South closed at $238 million, see link here.

So, fifty-eight years ago an aircraft carrier with five acres of steel flight deck, and all the related machinery to drive it through the seas at “30 plus knots” cost eight million dollars less than a New York penthouse in 2019.  Here’s a video of the Kitty Hawk in action. I’d like to see 220 Central Park South do this. Be that as it may, God help us when this bubble begins to deflate in earnest.

Look at the chart below; the correction seen in it for the 2007-09 sub-prime mortgage bear market was also the #2 largest percentage decline in the Dow Jones since 1885; a massive 54% market decline only exceeded by the Great Depression’s 89% decline. Yet within the context of the four decade long bull market seen in the chart, this massive bear market is only a correction.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 585\Chart #3   Dow Jones 1900 to 2020.gif

Uggh, what a mess then Federal Reserve Chairman Doctor Ben Bernanke, seen below making “monetary policy” with his FOMC colleagues; made in the financial system with his three bouts of quantitative easings to bailout Wall Street during the 2007-09 crisis. Don’t expect the next ten years to like the last, but that’s a certainty the general public has yet to accept.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 585\Photo #1   Bernanke Drunk.jpg

Here’s Gold’s BEV chart going back to 2008.  On March 18, 2008 gold made a new all-time high of $1003, from which it declined by 30% during the credit-crisis in November 2008.  I also noted our last all-time high of Aug. 22,2011 ($1888), yet within a BEV chart both new all-time highs are only valued as 0.00%, or as I call them BEV Zeros, and BEV lines are percentage claw backs from those BEV Zeros.

Since the summer of 2013 the -27.5% BEV line ($1360) has been the key level, a strong line of resistance for the past six years. I inserted a rising trend line anchored at the bottom of the December 2015 low, which until last summer acted as a line of support for the price of gold. In the past weeks gold has broken above this trend line and now appears to once again test the -27.5% BEV line. That’s only about 3 BEV points from where gold closed this week. Not much of a move.

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