We have to keep our eyes on the bigger economic cycle. It helps in maintaining a proper perspective, and putting more emphasis on the bigger prize rather than the day to day movements.
The historical relationship between silver and the stock market provides great insight as to where we are currently in this cycle. Traditionally, the best part of silver rallies come after a significant Dow peak.
From previous work I have shared, it is clear that silver is still extremely cheap, and should be accumulated at these prices. The following comparison of silver and the Dow supports this, and gives us the proper perspective regarding the bigger economic cycle.
Below, is a comparison of Silver and the Dow:
The Dow/Gold ratio peak (marked as D/G) helps to put the Dow chart in perspective, and here it marks the start of the indicated cycles.
There was a period of about 7 years from the 1966 Dow/Gold ratio peak to the 1973 Dow peak (DP). The 2020 Dow peak came about 21 years after the 1999 Dow/Gold ratio peak.
We don’t know whether the Feb 2020 Dow peak is the top, but it does not matter for the silver medium- to long-term outlook. What matters instead, is whether the silver bottom (SB) is in.
Some years after the 1966 Dow/Gold ratio peak, there was an important silver peak (SP) in 1968. This is matched by the 2011 silver peak, which came about 12 years after the 1999 D/G.
Silver bottomed in November 1971 (SB) and rose to a silver top (SP) in February 1974. The recent silver bottom in 2020 is comparable to the 1971 silver bottom. We are therefore, likely in a move to a new all-time high just like the 1974 silver top, that will come after the Dow peak (which is already in or could still come a little later – but it does not matter).
We are still early in this rally, so we could see a huge move (given how strong it started). This is the prize we have to focus on.
It is interesting to note that the silver bottom (SB) in 1971 came about 3 years after the 1968 silver peak (SP), and the silver bottom (SB) in 2020 came about 9 years after the 2011 silver peak (SP). This is actually roughly proportional in the same way that the 2020 Dow peak came 21 years after the 1999 Dow/Gold ratio peak, which is 3 times longer than the 7-year period from the 1966 Dow/Gold ratio peak to the 1973 Dow peak.
The above scenario rhymes well with this long-term silver fractal: