SILVER Set to Explode Beyond $50 (Uncut) 01-31-2025
SILVER Set to Explode Beyond $50 – Here’s What Will Trigger It: Michael Oliver
Hello everybody and welcome to Commodity Culture where our goal is to make you a better investor in the commodities sector. My name is Jesse Day and on this episode I’m joined by Michael Oliver, a veteran of the finance industry who started his career in 1975 at EF Hutton’s International Commodity Division. He is currently the founder of Momentum Structural Analysis.
We’re going to focus on the silver market today and ask the question, is 2025 the year we’ll finally see $50 silver? We’re also going to get his thoughts on gold and silver mining stocks along with other commodities that are on his radar. I hope you’ll enjoy today’s conversation with Michael Oliver. Michael Oliver, great to have you back on the show.
I want to start by honing in on a silver update you recently released from Momentum Structural Analysis. You discussed how we recently reached a new all-time high for the S&P 500. And alongside the broad market, gold and silver are also putting in a strong performance.
Now, as of today, the date of this recording, we are starting to see a correction in the broad market. I want to get to that a little bit later, but break down what you’re seeing for us right now when it comes to gold, silver, and the performance of the S&P. I think gold and silver have begun to emerge from the recent pullback.
Silver got whacked today, but silver, we call silver the little dog on a leash. And the mama, the holding the leash is gold. So anytime you think you see silver jumping off a cliff, it’s got a leash attached to it.
And if gold didn’t jump it off a cliff, then silver’s not. Keep that in mind. The next thing you know, silver turns around to dollar off the low, you know, that kind of thing.
I think we’re turning back up after the congestion. Gold got within, yes, a couple of days ago, within a buck and a half of its all-time high. And somebody said, oh, I think I’ll sell it and risk a nickel to make a dime.
Okay, they did. Okay, great. But I think the major trend there remains positive.
It remains no longer congestive like it was all during mid-2020 through early 2024, where gold was in this up-down range. In March of last year, we declared that that process of corrective process in silver and the miners and sideways process of gold was over. We’re going up.
Okay. At that point, gold was just above 2,000. At a place it had been three or four times before in the prior couple of years, so no big deal, but it was to us.
And sure enough, you’ve reached 2,800 recently. Silver at that point was 25 bucks, headed toward 26. Didn’t mean much on a price chart, but, you know, within nine months, it reached 35.
Right now, we’re either side of 31 for the last couple weeks. I think they’re continuing up. I think the main thing to propel them at this point is fracturing of the stock market.
When the money flows out of that beast, as it will, it always goes somewhere else. And that place has almost always been gold, if you go back through history. And I think that’s likely to happen this time.
So when you see the downticks in the stock market, take that as a positive background feature for gold. Period. Hey guys, just a quick break to hear from today’s sponsor, ARK Silver Gold Osmium.
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He is a straight shooter. So go to ARKSGO.com and contact Ian Everard today at 307-264-9441 or by email at ianatarksgo.com and make sure to tell him that Commodity Culture sent you. Let’s look at the broad market for a moment, because as we sit here today on January 27th, we’re seeing the NASDAQ down 3.36%, which seems fairly significant.
The S&P only down 1.8%. But at the moment, Twitter is abuzz with people claiming, here we go, the stock market’s going to crash, the broad market’s going to crash. It seems people are so expectant for a very serious correction when it comes to the indices that they’re jumping on any percentage loss above 1% or 2% as something significant. How do you view things? Now, we’ve been viewing the action in the stock market as topping action for the last couple of quarters, actually.
And if you look at the S&P, just for example, right now you’re trading, oh, probably about where you were in the peak in mid-July. So you’ve gone nowhere. Okay, yeah, you’ve been up, you’ve been down, but it’s really not the dynamics.
If you even just stand back and look at price since the 2009 low in the pullback into 2022, and then since 2022, it’s really getting sluggish up here. And the S&P made a new high in order to get those headlines. They love it.
All-time new high, Trump’s elected on this stuff. NASDAQ 100 did not. It missed it by a little bit, no big deal.
But the spread relationship, which is a technical feature we measure between the S&P and the NASDAQ 100, NASDAQ 100 being the leader index, leader meaning it’s the most percent gainer from 2009 to the present, and it will be the most percent loser once you go into a bear trend. This was the case back at .com, for example. Internet was going to take us off the planet.
It changed the world. And in fact, it did, but NASDAQ 100 dropped 82% between 2000 and 2002. It was the leader then, it’s the leader now.
The technicals we see on NASDAQ are such that the recent price lows we’ve seen a couple weeks back, which were just below 21,000, the 20,700, 20,800 zone, I’m talking NASDAQ 100 now, you don’t want to go back there again and close a week there. Not because of price, but because we run quarterly momentum of the NASDAQ 100 and the S&P. S&P has already fractured itself prior to the recent rally, but the NASDAQ has yet to break our key structure.
And when it does, we think there will in fact be a sharp layered decline. It doesn’t have to be a crash. It could be, but it doesn’t have to be.
Instead, I think you probably should expect something more like the bear market, and I think that’s where it will begin, will commence in double digit percent slabs of decline. You get to those numbers that I just defined, you could drop another five in a second because there’s no more support for another 5%. When you blow that level, you could really start to go down in a more panicked way.
And it’s the panic factor that is not in the market. Most of the people who’ve been bearish based on the norms of excess that people look at, the old textbook things, fundamental type things, they’ve been skeptical for some time, and yet it’s not gone down. So they’re really frustrated.
And most of them are just now, oh, well, we need a correction. You know, they’ve given up on the bear market idea. We have not.
Okay. We think we have the biggest stock market bubble in U.S. history. You go back and look 1923 to 29, look at the age of the bull trend, percentage dynamics on the upside.
Look at the dot-com move, mid-90s to 2000 percent gain over what span of time. And then the move from the 2002 low to the 2007 high, the real estate mortgage crisis bubble. Each of those was far less long-term, in terms of the years accumulated, and second, in terms of upside dimension.
And you say, well, I guess the economy’s been good. Well, instead, go to the St. Louis Fed site and punch up an M2 chart, money supply, and look at the rate of growth over the last 15 years compared to any other 15 years. And then especially look at the Fed funds rate chart, the rate that the Fed controls, the very short end of the market.
Never have we seen, you know, the last 10 or 15 years, free money for 10 or 15 years, effectively. There was an uptick there prior to 2000, and then they yanked it back down when COVID occurred. Kept it at zero for a while, then took it back up again.
Now they’re cutting it again. But of the last 15 years, 10 of those have been effectively zero rates. And even with the rate rise we saw that ended a year ago, you know, they paused and now they’re starting to retreat, even that peak was very low historically when you go back 50 years and look at interest rate levels.
So there’s a good causative factor of why is this particular asset category, this paper asset category, the stock market so boosted over such a period of time? Well, it had, you know, a drug injection in its arm, okay, free money. And that’s one of the key factors that anybody integrates into their thought process when they’re making an investment commitment, a commitment to build new factories. Hey, dear, let’s build a new house, buy some new property, you know, and so forth.
So all kinds of decisions, personal and corporate and government are based on the cost of money. Well, if that was false for 10 or 15 years, then a lot of errors have been made. And so somebody who comes into office now with an idea, well, we’re going to go more free market.
You know, we’re not going to have government spending like it used to be. The problem is it’s too late. You already have a bubble of monstrous size.
And when it unleashes, you can do anything you want to do, cut rates to the bone, and it’s not going to help. In fact, if you go back and look at any of the bull peaks and bear markets that followed, 29 to 32, the mid-70s to the 74 low, the dot-com peak to the 2002 low, and the 2007 peak to 2000, they cut rates all the way down, and it didn’t help. It did help gold, and it did help T-bonds during that period of time, and even longer for gold.
Gold went up through 2011. This time, I think when the panic sets, we’re going to see a lot of exposed errors, the kind of fundamental mistakes that corporations say, oops, we shouldn’t have done that. Families say, oops, we shouldn’t have done that.
And those errors, when exposed, will impact data points. This is what the Fed likes to talk about. You know, they’re scientists, right? You know, okay.
So look at it, the scientific data points. Those data points are going to go dark very quickly. It’s very rare when a bear market starts in stocks that the data points went south in a hard way first.
They go south last. They follow the stock market. And what’s the Fed going to do? Well, you want to place a bet? They’re not going to be fooling around at that point.
They’re going to realize, uh-oh, we kept it too high, too long, and they’ve got a lot of critics out there, even friends of the Fed, who’ve been arguing, you guys kept it up there too long. You need to cut. And they’ll have the excuse to do so, not just because Donald Trump tells them they got to cut rates, but because they’ll have the data points and the argument to do so.
And monetary expansion, and we won’t be the only ones. Because when you survey the world right now, I would say China and emerging markets are far less vulnerable than we are. Why? They’re only double from where they were at the 2009 low.
You know, they’re not bubbles, okay? So yeah, they could economically turn down with us. Naturally, they would. We’re a world marketplace.
And even Europe, when you look at the Eurostox 50, which is the blue chips of Eurozone, nowhere compared. It’s only double plus, double and a half from the 2009 low. But watch India and Japan.
India is up 12-fold since the 2009 low. S&P 500 has gone up 9-fold. And the Nikkei went up 6-fold.
So those three markets, which are key economies, you know, India and Japan, they’re not developing countries, okay? When they go, when they snap, coincident with us, and right now they are breaking our technicals. MSA has long-term momentum trend factors. And I would say the Nikkei right now, about a percent below where it is close the month, any month this quarter, it’s over.
Sensex is already well below its breakage point, India. And you take NASDAQ down back to those price lows we just saw and close a week there, it’s over. Now those will cause data points.
And again, what does gold live for? It’s money. It’s money. And when the government degrades the paper money, the real money rises.
And I think that’s what we’re going to see. And I also think we’re going to see a commodity boom. That’s a fantastic breakdown.
I want to circle back to silver for a moment here, because the price target of $50 silver keeps getting thrown out there. I think people are a little fixated on that previous all-time high. And when will we return? Gold hitting all-time highs.
Why hasn’t silver gone back to all-time highs? Obviously, price predictions are often very difficult to come to terms with, and it’s not possible for most people to say for certain. But what are your thoughts? Do you think 2025 could be the year that we get back to $50 silver? It’s been our pivotal point in our reports, because we look at all four major asset categories. We don’t just look at gold and silver.
You can’t do that. They’re impacted by other markets that impact central banks, that impact the growth in money, et cetera, et cetera. So they’re all tied together.
And when you break the stock market, I think that’s when you will start to see the verticality, which we’ve already seen some pretty good stuff. If you stand back and look at it, ignore the zigzags that always occur. Gold, for example, last year, close of 23 to close of 24, was up more than the S&P.
Silver matched, basically, the S&P. So nobody cheered that. It wasn’t on the major financial channels.
It was all stock market. So they’ve ignored that reality. And I think you’ll start to see a further separation where gold continues up and its related markets, and the other paper assets start to bleed.
And when they bleed, that money goes somewhere. Now, as far as silver versus gold, it’s dirt cheap off the page. We know that, historically speaking.
Now, it’s either fundamentally lost any rationale for being, which we know isn’t true, or it’s an error. Silver is just priced too low. These things happen in markets.
Markets get priced too high, and they pay the dues. Markets get priced too low for so long, and they go up. You hardly need an excuse.
It’s just that they were underpriced for too long. And I think silver is in that category. Technically, we can measure the spread relation between silver and gold.
And I’ve got some numbers that we’re monitoring that wouldn’t take much on the upside over the next few weeks, even, where silver gains a bit to gold and it will break out on these technical metrics of the measuring the relationship between the two. And I would bet that that would probably coincide with gold one being back to and through its highs 2800, but silver also back up to its highs 35. At that point in time, silver is still cheap to gold.
Like you said, gold’s way over 2011 high and so forth. Silver’s not above its dual highs at 50. I think it’s the next move that’s likely to blow that stuff out.
And I don’t think 50 is a target, by the way. If we get going in this next leg, and I think we will, stock market being a key factor, that 50 bucks is just a paper target. Everybody’s looking at it, but you’ll blow it out.
You’ll well up in between there and 100 or something. I’ve got some reasons to think the mid 60s before you even stop for a pause. But the key right now is that what happens in this current situation, break that stock market, break the Sensex, break the Nikkei, and you’ll have central banks go berserk.
And we know what wins when they go berserk. So given this expectation and the rise of the price of silver, are you looking at silver mining stocks at all as a potential levered play on the silver price? Any thoughts on how, for example, the SIL and SILJ ETFs would react and perform in the case of a rise in the price of silver like you’re anticipating? I’ve personally bought four major silver miners recently, and it’s disclosed in all of our reports in the back. I own this and that.
I’m emphasizing right now not gold and silver, but silver over gold, but also the miners. The miners are dirt, dirt cheap compared to gold. Historically speaking, go back 20, 30 years, you can look at the relationship between them.
And also the gold miners as a subsector of the stock market are off the page cheap compared to the S&P. But that sort of hides the truth. The top chart shows the XAU index, which is the Philadelphia Gold and Silver Miners Index.
It’s been around a long time, since the 1980s. So this is why we use it. It’s got a lot of history.
And when you look at that spread chart versus gold, you’ll see that the spread relationship between XAU and gold, what we do to measure that is we measure the price of XAU divided into gold expressed as a percent. And so back in the 1980s through 2008 or so, XAU index was trading at 25, 30 percent, even got up to 38 percent of the price of gold. XAU versus one ounce of gold.
And the lows were around 17, 18 percent, meaning whenever you get a dip and the price of XAU dropped to about 18 percent, it would find support. And so in that top chart, you’ll see there was this range at a high level. But in 2008 and 2009, just prior to the onset of the gold bear market, the spread broke where the miners started to break in relation to gold and their performance collapsed down to when? To the December 2015 low.
So the spread, that was the lessening performance of the miners versus gold, dropped until gold and silver and miners actually made their price low, which was December 2015. But if you look at that spread chart, you’ll see that over the last nine years since late 2015, the spread has gone sideways. Yes, it’s a very depressed level, but it hasn’t gone down anymore.
Now you say, well, that’s a dog. Well, actually not. Right now the spread is a little bit higher than it was at the close of December 2015.
Now what does that say? It says that miners have been a par performer, sideways performer to gold, meaning they’ve gone up just as much as gold has during the last nine years. You tell the average investor that and he’d chuckle, but it’s a fact, measurable fact. The miners have matched the gains in gold.
The question is now, when do they break out? And you can see I plotted a three-point downtrend line on that spread, but there’s also this basing range of nine years. I think we’re going to break out of this range and we measure various things to determine when that’s occurring, not just this spread chart. But when you break out, look at that line overhead on the spread, the old lows at about 18% over.
That’s resistance level now. It was support for years and years. If you break out now from where we are, you’re likely to find resistance up there.
But let me tell you, we’re trading just above 5% now. That’s a triple and more in the spread relationship. What that says is if that spread breaks out and you even just go to the bottom end of the prior multi-decade range, that means gold miners will have tripled the performance of gold in getting there.
So at that point in time, if we see that kind of breakout, I’m of the view that in this phase of the gold bull market, the miners will wake up and no longer just par perform to gold, but vastly outperform it. And just go back to an old low. It’s hardly asking for a home run even.
Anyway, there’s another relationship to this, the chart below it, which shows similar type behavior of the XAU index, the gold silver miners, versus the S&P 500. And as you can see on that chart, if you go back also back into the mid-1980s, you’ll see it was up at 50%. I mean, XAU was trading half the price of the S&P at that time.
Wow, okay. And it declined in a staircase manner, but up until 2006, it was still above 20%. Okay, so we’re now down at about two, let’s see about, I guess about two or three, 2% or so price of XAU versus the S&P.
Now, it also has a multi-year range at the bottom there, that little deadpan action that you see on the spread. Same thing occurred there a little better. XAU is actually up more than the S&P over the last nine years.
Hard to believe, but that spread low that we made in late 2015 is actually below the current level, meaning the current spread relationships higher than, meaning it’s actually gained some versus the S&P. So a net price, if you measure, where was XAU in December 2015 and now, S&P December 2015 and now, XAU has beat it. Tell somebody at a cocktail party that and they’ll laugh their head off, okay? It’s a fact.
The issue now is to break out of these bases. And I’m suspecting that when you break out of the gold base, XAU versus gold, you’ll simultaneously be breaking out of the S&P versus XAU spread base. And if you look at that line that I’ve drawn on the XAU versus S&P chart, it’s up around 17, 18% where the highs, there was a low back in 93 and then the highs that we reached back at the 2011 bull market peak in gold, XAU then was up around 18% of the price of the S&P.
If you go from where you are now, 2 plus percent up to about 18%, you do the math on the multiples there, okay? It’s enormous what the gold miners could do in relation to the S&P. And they’ve certainly earned the right to do it because that’s a nine-year wide base. They’ve proven we’re not going any lower in relative value to the S&P.
The only issue is when are we going to turn back up? And that’s why I think that you got to watch these relationships because if these break out, it will coincide with a net price acceleration in the monetary metals and also a downward price in S&P, but a resurgence in the miners where, again, money flows out of a broken asset category into a tiny subsector of the stock market where investors say, what’s been working? What’s not going down? And the gold miners are it, gold and silver miners. And so when it comes to the silver mining space, you mentioned that you’ve taken position in some miners. Without naming any names, are you more interested in the bigger producers? Are you getting more adventurous into the smaller market cap? What are you looking at now? I’ve gone into four of the bigger ones.
But one reason, we used to measure SIL. We measure GDX week by week in our reports. And it is somewhat more heavily weighted in the front end with a couple of top symbols within GDX that have more weight in them.
Whereas XAU is a little more evenly weighted in the percent weighting of the top, let’s say, 10 or 15 stocks. So to some extent, I like that better. But there’s no ETFs on XAU.
There is one on GDX. I own Nugget, which is a double long of GDX, for example. It’s starting my emphasis on the miners now.
We don’t use SIL lately. The reason is that it had one of its top three holdings was Korea Zinc. You go to their website, and it’s in the SIL, I guess, because they produce silver as a byproduct in some quantity.
But even when you go to their site, it’s not an emphasized metal. And yet they were the third heaviest weighted symbol within SIL, Global X Silver Miners ETF. And it collapsed huge over the last couple of months, like 50% collapse.
Okay. That didn’t happen to the other silver miners, just to it. And it distorted SIL because of the heavy weighting of Korean Zinc.
So we shifted to analyzing some of the bigger names like Pan American and so forth within the silver sector. So as far as the junior miners go, it’s my assumption, and so far I feel like I’m right, that once we engage the miners in a way that turns heads, and I think that could be soon, the juniors will be somewhat lagged to it. And they’ll suddenly get electrified at the point where you get larger public interest in that overlooked sector.
And people like to buy cheap little things, you know, 10 cents. Hey, man, it goes up to a buck, I’m tenfold, you know. That’s when you’ll have more interest, I think, in the juniors.
And also probably at that point, some of the majors will be coming in, scooping up the juniors. But I think it’s probably going to be a bit lagged to the first surge in the miners. I mean, they’ll go up too, but I think the real potency of that sector, subsector, will be later in the move.
I wonder what your current thoughts are on the uranium market, switching to another commodity that the equities themselves have not been doing great. In fact, as we sit here today, it’s a bit of a bloodbath across the board. Everything in my uranium portfolio is down between 8% and 14% right now.
What is going on with uranium in your view? We turn correct, first off, we turn bullish on uranium futures. Now, they’re a highly illiquid market, okay. Uranium 308, you can’t even trade them, okay.
But it’s a good measurement for the uranium CME futures contract. Back in, I think it was 2018, we got bullish just above 20 bucks. And that was based not on price.
Price was cheap, obviously. But our annual momentum of uranium said upside breakout. And I’ll be darned, since then, there’s been nothing to alter that.
Until last August, when it was coming down into the mid-80s on uranium after being over 100, we saw enough breakage to indicate a corrective decline that would probably take uranium down close to its rising three-year moving average, which it hadn’t visited in quite a while. That number is, I think, 71 or 72 this year. I think we got down to the low 70s already.
I don’t think you’re going to do much worse than that. I think it is a major corrective decline in uranium, not a bear market. And I think you’ll start to find support.
But see, the uranium mining sector ETFs, they tried to goose their way out of here, though uranium is still under pressure. So they ignored the mama market. And I think they’re getting whacked now, back more in line with the metal itself, which didn’t go back up to its highs recently, which instead, I think URA went back to its highs.
So I think they get a little discipline here and get back in line with uranium. But I don’t think uranium is in a bear trend. I think it’s a major corrective pullback since the highs of last year.
And you’re likely to find support around the low 70s. And at that point in time, I’d be focused on the uranium miners, obviously. Sprott has a uranium fund.
That might be a place to look if you want to go into uranium. And I think he’s got a uranium stock fund as well. But that’s the place where once you see uranium start to stabilize, let’s say in the lower 30s, and prove it’s not going down anymore.
And we watch it month by month. We issue reports on it. And that’s the futures contract that you’re seeking? That’s the futures contract of uranium, which is in line with the spot.
But at that point, when you see uranium stabilize and give some signs of upturn out of this correction, that’s the point where you look at the miners again. But they got a bit out of line recently where they were pushing at the highs and uranium wasn’t at all. And so they said, you know, like they knew that uranium was going up and they were wrong.
Okay. So they’re paid their dues now. But I would watch uranium primarily.
And if it simply stabilizes, then treat URA as a potentially basing situation as well. Let’s talk about the copper market. This is something that I’ve heard conflicting opinions on.
Some people, I spoke to Lobo Tigre, he’s extraordinarily bullish. I spoke to Lee Gehring, Adam Rosenswag, and they’re tentatively bullish, but they just think that the energy transition demand for copper is not going to materialize as so many people have reported it would. And so the demand side is nowhere near meeting what the expectation is out there in the market.
I know you’re looking more at technical. So I’m wondering, from your side of things, how does copper look to you? It looks like it’s basing. Also, the recent surge in copper a year ago, when they got up over five bucks, which is an all time new high, by the way, they’d be like silver going to 55.
Okay. They got whacked back down, back under four, in fact, at one point. Now I think they’re 420 area.
They’re stabilized. But when you overlay, we run a monthly report on the entire commodity complex, including copper. But the Bloomberg Commodity Index is a good, pretty well balanced index of the commodity sector.
It’s not too heavily weighted on energy and so forth, like some others are. Copper’s a component, obviously. Copper behaves in sync with the Bloomberg Commodity Index.
So you can treat it as a separate metal with its own fundamentals. That’s fine. Okay.
But in fact, it inhales and exhales broadly with the overall commodity complex. It doesn’t go off on its own. Recently, it tried to.
The Bloomberg, remember, between late 2020 was at a low. Mid-2020 was making a low. Gold had already doubled in price, but the Bloomberg was making a new low after the 2015 low.
It kept going down to 2020 and was under 60. When it got above 70, we turned major bullish and said there’d be a commodity explosion. We shot up to 140 by early 2022.
So did copper. Okay. Then Bloomberg pulled back and went into a corrective mode for the last one and a half, two years, either side of 100, just sleepy, dead quiet, nothing going on really.
Copper during that time tried to shoot up. It got shot up to a new high, but it looked back and the Bloomberg wasn’t doing it. So copper got yanked right back down with the Bloomberg.
It is now in the basing pattern. So I think copper tried to deviate there, like I’ve got my own fundamentals. Fine, it does, but it tends to move with the Bloomberg.
And if I’m correct on the Bloomberg, our assessment is that the Bloomberg is trying to emerge upside. So you close this month out above 101, for example, that’s our first signal. You close a month out above 104.
Right now it’s trading about 101 and a half. Okay. We think the next leg is starting and we could see the evidence in various subsectors of the commodity complex.
See in the energy area, see if oil closes anywhere between where it is now and the high of the month, it’s going to break out on our quarterly momentum. Copper looks like it’s basing, trying to turn up again. Bloomberg is trying to break out upside on momentum.
Grains in particular, corn’s already broken out, so forth. At that point, I think that’s when copper will engage. But it tried to do it on its own and it normally doesn’t do that.
You go back a decade or so and it tends to be more in line with the Bloomberg. How about the oil and gas markets? This is another area that seems to be presenting a contrarian opportunity at present. There’s been a lot of buzz around natural gas with the AI data centers potentially.
Natural gas seems to be the main beneficiary of that narrative if indeed we do see a lot of data center build outs. But again, the technicals, I’d love to hear your side of the story. How are you seeing both oil and natural gas markets positioned right now? Well, natural gas broke out by our metrics after a major decline.
It’s a wild dog. It really is percent wise. It has massive percent gains, massive percent collapses.
And it broke out a few months ago and gained about a buck or so. Now it’s probably 75 cents above our buy level. So it’s in positive mode, but it’s not dynamic, obviously.
I think it’s probably waiting on the Bloomberg. But crude oil stayed in its base. In fact, if you see what crude got to 130, it collapsed and then went into a multi-year range, just like Bloomberg did.
Bloomberg went dead between the mid 90s and 105 for two years now. Oil went dead either side of 70 bucks. It got in the mid to upper 60s and it could run up to 90 one time briefly.
But basically, it’s just oscillated dead sideways for a couple of years, a year and a half anyway. And it’s trying now to break out upside via our quarterly momentum. In fact, if you close this week out with the end of the month, we’re going to break quarterly momentum out on crude oil, which will tend to echo what Bloomberg is trying to do, will echo what corn has just done, what soybeans are about to do.
So they’re all like a chorus. And I think we’ll probably see if the Bloomberg breaks out, the crude will break out too. My working assumption is though that the energy complex on a percent gain basis is likely to be less of a leader this time than it was between that October 2020 upturn and the February, March 2022 high, where energy tended to lead the other sectors up on a percent basis.
I got a sense that grains could be the leader this time, corn, wheat, and beans on a percent gain basis. But they’re still a chorus. They tend to move together, which is quite interesting.
You think, well, it’s got its own fundamentals. Yeah, but you lay a Bloomberg chart and lay them on top of it and take a look. We’ll see what I mean.
And I think that when the stock market breaks, that again is the key factor possibly for commodities. It has been in the past. Remember, but the late 70s, early 80, we had global deflation, stagflation, they call it recession.
And yet commodities exploded on the coattails of gold. 77, 78, 79 to 80, commodities CRB index went up with gold, not as strong, but went up with it during global recession. Defies people’s fundamental assumptions.
So like the fundamental assumption of copper is it’s Mr. Economics, Dr. Economics. And therefore, if we have a weak economy, copper goes down. Don’t take that bet.
It’ll be the other way. But I think probably grains will beat the energy complex this time in terms of percent gain. But again, like you said, it’s sort of contrarian.
I mean, Trump has said drill, drill, drill. The problem is you can’t push a button and drill, drill, drill. It doesn’t happen that way.
And there’s other factors in the world besides us drilling, drilling. Maybe oil has been too cheap for too long. Maybe you should inhale and exhale again.
Next time we need to inhale and go up. And I think that’s what it’s set to do. Now, around 70%, I think it’s above 70% of this time of global stock allocation is in the United States.
Incredibly high number historically. As a contrarian opportunity here, are you seeing anything in emerging markets or just non-U.S. jurisdictions in general when it comes to the stock market? Yeah, we run EEM routinely, Emerging Market ETF, and about 30 some odd percent of that is Chinese weighted. And we watch the Shanghai composite as well.
Shanghai recently had a nice boost. The government came in and did some paperwork, and less so than our Fed does, by the way. And that’s why the Shanghai is only double where it was in 2009.
It’s not a bubble in the stratosphere. When I measure EEM, again, which includes, by the way, China, which is relatively steady, and India, which is not. India looks vulnerable.
It’s much less weighted though than China within EEM. But when I look at EEM, right now you got three and a half days left in the week, in the month. You don’t want to close the month where you are now or even half a point higher.
You’re going to break some quarterly momentum. Similar to what NASDAQ 100 is doing. The difference is that it is not a bubble at all in terms of where is the EEM versus where it was in 2009.
It’s not a bloated bubble deserving of collapse. It might, due to economic factors, global slowdown, for example, which will follow a U.S. and an Indian and a Nikkei collapse. It may hurt the emerging markets to some extent, but they’re not bubbles.
So I can’t say be net long emerging markets now. There’ll be a point at which that will be the case. But you could probably, if you really want to go dumb and neutral, buy X amount of EEM and short X amount of S&P, market neutral, global market neutral.
And I think you’ll make a ton of money on the spread. Meaning even if EEM goes down, it ain’t going down like the S&P. So you’re betting on a ratio difference between the two categories.
And I think EEM is a far better place to be, or China, than the bloated, what we call bubble club. Do you think there’s any risk of Chinese equities getting sanctioned in the same way that happened in Russia? People investing in the ETF there, they basically lost everything, had it essentially stolen from them. I don’t have any opinion on that, except to know it doesn’t work.
And it creates desire by many governments, including ones that aren’t our quote enemies, to find alternative ways to make payments. And so that’s another area to watch, is the dollar, because it’s BS as far as we’re concerned, technically. It’s right now trading 107 area.
It had been 110 a few weeks ago. It’s totally moving now in relation to the US T-bonds. In other words, you can take all the factors you want to, to say this is going up because of this and that reason.
Not really. It’s an inverse of the T-bond market. And our assumption is that the high yields in T-bonds, which have prevailed for three years now, choking high yields, people have mortgages, companies that made debt commitments that are now coming due, et cetera, et cetera, commercial real estate problems that’s likely to expose themselves, have been choked by high rates for three years.
Yes, short ends has come down because the Fed took it down. They started to take it down. But the long end, while they cut rates, went back up again, back to the high yields we saw two years ago, 2022.
But the T-bonds have normally been an alternative to a breaking stock market. This time, I think it’s going to be different in one way. I think T-bonds are going to get some of that asset flow out of the stock market into the T-bond market.
I think today is a good example. For example, T-bonds shot up strongly when the NASDAQ broke sharply. Totally opposite.
They’ve been behaving totally opposite. So lower yields on the long end is not bullish for the stock market. It means there’s money moving out of the stock market into a normal alternative category, which behaved well, for example, with 2007 top to 2009.
If you owned T-bonds, you did well. If you owned gold, you did well. In this case, I think the T-bond rally is likely to be a phenomenon that lasts maybe a quarter or two, which I don’t think it’s a long-term trend change where you buy T-bonds for the next couple of years.
Why? Because the long, long-term trend of T-bond futures momentum, or if you do it inversely, the yield, you know, which broke out upside. I think it’s merely a counter trend move if you get a rally in T-bonds now and a slight drop in yields, meaning it’s a nice rally. It’s going to sting if you’re short, but it’s not going to be sustainable.
But it will probably be coincident with the breakage in the stock market. And therefore, when you watch the T-bonds, think about the NASDAQ 100 and also look at the dollar because the dollar right now at 107 area, you ever close a month out during this year around 104, kiss it goodbye. You’re going to collapse.
The dollar index will probably plummet 20 points or so in the following year or so. It’s a very vulnerable level in annual momentum at 104. Now, when you look at a price chart of the dollar index past couple of years, it had a range from about 100 to about 107 and change.
We briefly pierced the top of that range a couple weeks ago, get to 110. Oh boy, we’re going to break out, right? I think it’s aborting that. It’s back down to 107.
You close it, even close price a month out much below 107, you’re back in the range, meaning the breakout was a trap. And I think you’re about to abort and therefore go down. So the dollar could be a factor.
It has not been a factor for the last couple of years because it’s been dull. I think it could be a factor that impacts a lot of markets. Fantastic insights from you today.
Tell us about momentum structural analysis, what it is you do there and where people can find it. Well, since 1992, I quit the future side of the business. In 75 and 92, I quit and started selling my research, which is different type of technical analysis.
It’s primarily momentum-based and I don’t mean these wet noodle type things like MACD and RSI, but structural momentum to institutional subscribers. And recently in 2015, we opened up to retail. But we analyze all four major asset categories because they need to be pieced together and one affects the other.
And we put out about five reports a week, including the long weekend report, but we do it from a different technical perspective than what you normally think of as technical. And it’s been quite successful. And to go to the site, Oliver MSA, and you can check out our background and what is our methodology? Why is it different? So forth.
You see a lot of archived reports calling tops and bottoms in the stock market, for example, and request some samples. Great. I’ll put a link in the description below to momentum structural analysis.
For those who want to check it out. Thank you once again, Michael, for coming on and sharing your knowledge with the audience. Thank you so much.
Thank you. And thank you for joining us today. This episode was brought to you by ARK, silver, gold, osmium for all your precious metals needs.
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