Going forward we feature one analogy per week that compares a relevant market situation with day-to-day situations we are all familiar with. This week’s analogy comes from the precious metals market. While USD breakout might be have left precious metals unimpressed we would argue that prudence is required here. Sooner or later we will experience the impact of USD strength.
The road you can see on the visual represents the path precious metals are on. It looks like a smooth road. However, we see a pretty sharp turn coming up, and we do know that these rocky mountains may come with unexpected surprises. The weather is not stable. It feels really uncertain. What is going to come next?
And this is the point: the road may continue to be smooth, the dark clouds may disappear and make room for a blue sky, we may not encounter any unpleasant surprise in these rocky mountains other than lots of turns (which is just a little inconvenient but nothing more than that).
Everything can turn out to be fine in precious metals. Our sentiment at the time of writing is similar to driving on the road which is shown on the picture: hard to predict as we focus primarily on those signs that create uncertainty.
All this should inform precious metals positions and position sizes in individual portfolios. As long as the sky is not clear and there a long smooth road is not visible it is better to align positions and position sizes to the market reality which is expressed on the visual embedded below.
In our premium services we use these type of analogies to explain complex things in simple terms. Markets are complex even if you simplify it to ‘simply’ trend following or price point analysis. The weekend updates are not only full of market analysis they also are full of market wisdom and educational tips. In this weekend’s Momentum Investing update we featured this analogy and shared the one, most fabulous, absolutely gorgeous precious metals miner to own (worth owning amid the USD breakout). In this weekend’s Trade Alerts update we feature the key price points behind our short term SLV trade.
