Technical analyst Clive Maund assesses the precious metals landscape after Friday’s broad market selloff, and offers strategies for precious metals investors.
After what happened on Friday, many Precious Metals sector investors are naturally concerned about the effect of further heavy losses in the broad market on the sector. Let’s now review Friday’s action, starting with the broad market itself, before moving on to consider the likely impact on the PM sector.
After almost two months of quietly drifting sideways, the ground opened up beneath the broad market on Friday, as we can see on the 6-month chart for the S&P 500 index below. It gapped down at the open and plunged by 2.45%, heading ever lower as the day unfolded—there was not even the customary bounce in the last hour of trading.
This was predicted back on 1st September when we had correctly identified what kind of pattern was forming, in the article Complacency Rife as Very Dangerous Pattern Completes in S&P500, a Dumpling Top, although at that time it was not known what sort of collateral impact this would have on the PM sector. This was a severe and decisive breakdown and there was almost no place to hide—most everything tanked, with the exception of the dollar and some obscure paper of the Czech Republic, I believe. Bonds plunged and yields rose, and it is thought that this may mark, at long last, the start of a rate tightening cycle, necessary to the survival of a number of banks. Of course, the rate rises, should they occur, can only be minuscule, otherwise the entire system will implode. If it does mark the start of a tightening cycle, then bonds and stocks are in for a really rough ride.
The decisive breakdown in the stock market on Friday probably marks the …read more