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With almost three years of daylight now shown on the corrective profiles of silver and gold, what do we see from a comparative perspective with these other major asset trends that might help handicap the next stage for the precious metals sector?
If you had asked us in the spring of 2011 if we thought the underlying technical condition of the secular bull would survive the coming bear, we would have likely said no. This is in stark contrast to the historic Nasdaq, Nikkei and even the SPX (circa 2000-2002), that all made lower lows during their respective bear markets – which expressed pronounced negative momentum divergences going forward in their long-term profiles. Both the Nasdaq and the SPX eclipsed the cyclical bear market lows of the LTCM crisis in 1998 – and the Nikkei as well broke the lows from the 1987 cyclical bear.
One sector from the 2000-2002 downturn that came away in the best technical condition from both a structural and momentum point-of-view was the Russell 2000 small cap index. Hindsight 20/20, the 2000-2002 bear was just a corrective leg in the continuation of trend higher in the RUT that has widely outperformed both the SPX and NDX ever since the bear market lows in 2002.
Technically speaking, from a structural and momentum perspective, the lay of the land and performance of the Russell fits closest with what transpired in both silver and gold – despite the spectrum of performance (Ag -61% & Au -36%) the 2000-2002 RUT (-43%) sits directly between.