Michael Oliver, founder of Momentum Structural Analysis, joins us to outline the technical momentum factors that project the bear market in US equities has much longer and lower to go, but conversely that gold, silver, and the commodities still have much higher to run. We start off reviewing what will happen as the largest asset bubble in history continues to pop, and that last week’s market weakness was the signal that the bear market rally, that started last October, has mostly run it’s course at this point.
We discuss that the prior dozen years (2009-2021) leading up to last year’s initial corrective year in 2022, was an unprecedented rise in paper assets, fueled by easy money and low interest rates. However, this artificially created environment created incorrect assumptions and bad financial decisions from so many market participants, from individuals and institutions, to businesses and governments. The economy and markets became hooked, like a junkie, on the constant injection of central bank liquidity. Now the Fed has yanked the needle out of their arms and there will be further economic ramifications that we see unfold for some time. The dynamics have now drastically changed, after more than a year of the Fed’s intense period of monetary tightening, taking rates up over 5%. Michael believes that what we saw in 2022, is only the beginning of the unwind in markets, which could be one of the worst bear markets to come in US history.
We review the relative strength that gold and silver showed in 2022, compared to almost all other asset classes, something he expects to continue moving forward. A primary factor that gold is sniffing out is that as the central banks will need to get busy printing more money in the near future, it will continue to devalue the purchasing power of fiat currencies, and will underpin a move higher in the precious metals. While silver and the PM mining stocks have lagged the moves in the gold, he expects that when sentiment does truly shift back to bullish in the sector, that they will take off to the upside catching up and outperforming the upward moves in the yellow metal.
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