I believe in patterns and cycles, particularly within financial markets, there is very often clear symmetry between time periods and price action and i believe wholeheartedly in the study of cycles, so let's begin.
1971/1991 cycle:
~ 20 year cycle from the start of the bull run, to the eventual low after the peak
~ 9 years of the cycle, approximately half, is bullish followed by an almost equal period of time to the downside
~ This differentiates commodities from stocks, whereby stocks usually recover faster and there is more asymmetry in how the cycle is skewed
~ The depth of the pullback of the cycle was approximately 70% of the total move
~ The final low was achieved AFTER the breakdown of the descending triangle pattern, in which it was a two stage move lower, with a sharp initial drop of around 16%, followed by a brief consolidation, then a final drop of 14%
~ The low also coincided with the initial breakout and subsequent consolidation
2001/2021
Whilst the cycle is not yet complete, there are obvious similarities in both pattern formation and price action, these include;
~ The bull phase appears to have followed the "20 year cycle" quite nicely, with the bullish component stretching close to 10 years
~ This would place the bottom on the flip side of that 20 year timeframe, in 2021
~ The clear descending triangle pattern, and the subsequent break lower, whilst this drop was substantially more violent, when measured from the lower support line of the descending triangle, the move is actually within a few percentage points of one another
It is worth mentioning that the forecast low may be calculated in one of two ways, the first is to measure the candle drop (29% in 2020) and assume an equal drop (an additional 29%) before the lows, this would coincide with the 70% retracement and give symmetry with the prior cycle.
The other way you may interpret the charts is to take the move that falls below the lower trendline (15%), and assume an equal drop (an additional 15%) and this move would equate to a move to the 61.8% retracement
Macro Environment:
I understand that the macro environments are very different and are not directly comparable, that being said, the macro outlook actually supports the analysis of the prior cycle that suggests lower silver prices are in the future.
The supply chain disruptions are going to directly impact the INDUSTRIAL demand for silver and therefore the prices of the futures contracts (i do not believe that physical silver will fall to these levels).
This pressure may very well result in a final flush out of the last hold outs who may believe, perhaps naively, that business as usual will commence sooner rather than later.
This could very well be the final leg down, as seen in the prior cycle that results in a final low.
SP-500 Index - down over 30%
Summary of Analysis:
~ Should silver follow the above analysis, this would suggest that single digit PAPER silver is in the next 12-18 months (between $7.00-$9.00)
~ After which, that should represent a more definitive bottom, in line with the 20 year cycle
~ Watch for another leg down to the 70% retracement of the prior move (within the outlined box)
~ Be aware that PHYSICAL silver is highly unlikely to mirror these drops, as these moves will likely be initiated by industry, who do not foresee a "V reversal" in demand, following the severe economic lockdowns around the globe in response to Covid19
-TradingView
1971/1991 cycle:
~ 20 year cycle from the start of the bull run, to the eventual low after the peak
~ 9 years of the cycle, approximately half, is bullish followed by an almost equal period of time to the downside
~ This differentiates commodities from stocks, whereby stocks usually recover faster and there is more asymmetry in how the cycle is skewed
~ The depth of the pullback of the cycle was approximately 70% of the total move
~ The final low was achieved AFTER the breakdown of the descending triangle pattern, in which it was a two stage move lower, with a sharp initial drop of around 16%, followed by a brief consolidation, then a final drop of 14%
~ The low also coincided with the initial breakout and subsequent consolidation
2001/2021
Whilst the cycle is not yet complete, there are obvious similarities in both pattern formation and price action, these include;
~ The bull phase appears to have followed the "20 year cycle" quite nicely, with the bullish component stretching close to 10 years
~ This would place the bottom on the flip side of that 20 year timeframe, in 2021
~ The clear descending triangle pattern, and the subsequent break lower, whilst this drop was substantially more violent, when measured from the lower support line of the descending triangle, the move is actually within a few percentage points of one another
It is worth mentioning that the forecast low may be calculated in one of two ways, the first is to measure the candle drop (29% in 2020) and assume an equal drop (an additional 29%) before the lows, this would coincide with the 70% retracement and give symmetry with the prior cycle.
The other way you may interpret the charts is to take the move that falls below the lower trendline (15%), and assume an equal drop (an additional 15%) and this move would equate to a move to the 61.8% retracement
Macro Environment:
I understand that the macro environments are very different and are not directly comparable, that being said, the macro outlook actually supports the analysis of the prior cycle that suggests lower silver prices are in the future.
The supply chain disruptions are going to directly impact the INDUSTRIAL demand for silver and therefore the prices of the futures contracts (i do not believe that physical silver will fall to these levels).
This pressure may very well result in a final flush out of the last hold outs who may believe, perhaps naively, that business as usual will commence sooner rather than later.
This could very well be the final leg down, as seen in the prior cycle that results in a final low.
SP-500 Index - down over 30%
Summary of Analysis:
~ Should silver follow the above analysis, this would suggest that single digit PAPER silver is in the next 12-18 months (between $7.00-$9.00)
~ After which, that should represent a more definitive bottom, in line with the 20 year cycle
~ Watch for another leg down to the 70% retracement of the prior move (within the outlined box)
~ Be aware that PHYSICAL silver is highly unlikely to mirror these drops, as these moves will likely be initiated by industry, who do not foresee a "V reversal" in demand, following the severe economic lockdowns around the globe in response to Covid19
-TradingView
