A few days ago I was on The Ochelli Effect talking with the host about what has been starting to happen with the US dollar this summer. During the conversation he asked me about a precious metal that I hadn’t been paying attention to much at all. In fact almost no one does except those that use it. It looks like it is likely to follow the lead of gold and silver and breakout before the year is over.
Precious metals bull markets tend to have a cycle to them in which the various metals and stocks breakout one by one in this order:
1)Gold and big cap mining stocks begin to run first.
2)Silver and small cap mining stocks then breakout.
3)Other precious metals such as platinum and palladium and copper if economic conditions or inflationary forces warrant begin new bull markets after gold and silver do.
Well as you know gold really broke through a stage one base last year and the big cap mining stocks have been beating the performance of the S&P 500 since the Fall of 2018.
Silver though didn’t breakout of a stage one base until just a few months ago. And of course that triggered a blastoff up to $30 an ounce and brought buyers into the small cap mining stocks in a big way. You have seen that with Aftermath Silver for one, but here is the silver chart.
Silver smashed through a stage one base when it went through the $20 level a few months ago. That resistance held silver prices down marking the top of its range for over four years. As a rule of thumb the longer the base the more explosive the breakout will be and that rule came true again.
A stage one base is formed after a bear market and happens when something trades in a range with the 150 and 200-day moving averages trending sideways. It’s a concept I cover in my book Strategic Stock Trading.
The hidden metal I am now looking at closely is platinum. Take a look at this ETF that tracks it.
As you can see the platinum ETF is still locked in a stage one base. It hasn’t broken out and surged like silver has done, but it is likely to do so before this year is over. It doesn’t look like it is going to do it today or this week, but is likely to consolidate for several weeks at this level before surging. That said in a precious metals bullish environment the surprises will be to the upside. That’s why we saw Barrick Gold soar this week on Warren Buffett news even though gold and silver themselves are still in a short-term consolidation period.
I have the discussion I had with Chuck Ochelli posted on the website here.
-Mike
