Silver Chartbook – How To Weather The Storm?

With US elections coming closer the density of negative news has as well. Who to believe? How to weather the storm?

If everybody is talking about the worst most often nothing bad is happening. Nevertheless, it is essential to be prepared which results in being calm, the essential state necessary for market participation. Most look for a single, final solution. When it is about money and safety we as humans do not like situations in flux since we are apprehensive to change. This is why there are a lot of long-term investors who enriched themselves for many stretches in history, but we do not see this approach to be working out this time around. In principle, a large drawdown is the most unhealthy thing for any portfolio, based on the phenomenon that a 50% loss requires a 100% gain to just break even again. We see three main risks that should be avoided!

S&P 500, Monthly Chart, Short term:

S&P 500, monthly chart as of October 1st, 2020.

S&P 500, monthly chart as of October 1st, 2020.

Short-term: COVID flaring up in the fall season alongside election volatility could be a trigger for a temporary market correction of a greater magnitude in percentage. Even though brief, a sharp price movement could be that severe that margin calls would drag down all asset classes severely. A time you want to be in cash and to repurchase precious metals and cryptocurrency at much lower levels.

The chart of the S&P500 above shows prices overbought. With price extensions in principle reversing from a deviation of the mean (grey dotted lines) by a likelihood of 95.4% for two standard deviations and even 99.7% at three standard deviations, we expect an extensive price decline.

Silver, Weekly Chart, Midterm:

Silver in US-Dollar, weekly chart as of October 1st, 2020.

Silver in US-Dollar, weekly chart as of October 1st, 2020.

Midterm: Governments around the globe try to solve problems by printing more money. The result is a crack-up boom, meaning money supply trickles into all tranches and as such isn’t creating value. Inflation is the most likely scenario as a result. Your cash will lose dramatically on purchase power. This means you want to be more exposed to markets versus cash. Buying the dip from the short term scenario is the way to go.

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