clivemaund.com / By Clive Maund / February 17th, 2013
If this is the best that the Precious Metals sector can do when the broad market is rising, as it has been, then what is likely to happen when the broad market drops? This is the question that is, or should be, exercising the minds of investors or would be investors in the sector right now. Today we are going to address this issue head on.
Before we look at the prospects for the Precious Metals sector itself, we are going to examine the charts for the broad market S&P500 index in an effort to determine its course in the months ahead.
We’ll start by looking at a very long-term chart, in order to get a grasp of the big picture. What we find on the 20-year chart for the S&P500 index is that the market is marking out a gigantic flat-topped Broadening Formation. Thus far from the 2000 peak, which marked the culmination of the preceding major bullmarket, the market has marked out 4 clear distinct waves, labeled A to D. The key point to make here is that even if the market is destined to go on to enter another major bullmarket like the one from the mid-70’s to 2000, these broadening patterns normally complete with an E-wave that ends below the C-wave trough. Quite clearly, if this is what is set to transpire, then we are looking at one helluva drop from here – and there are various indications that this is going to happen, including the extreme bullishness of newsletter writers, the Smart/Dumb confidence ratio, the VIX and VIX COT etc, which we have recently examined on the site, and of course the fact that the market has arrived at a zone of massive resistance approaching its 2000 and 2007 highs, which is as good a point as any for it to turn down.
Thanks to BrotherJohnF