UK and US Corona Catastrophe Trend Analysis, Stock Market State and Silver Price Trend Forecast Summer 2020

The devastating consequences of the chinese Coronavirus catastrophe continues in terms of lives lost and severe economic contraction, which given who it's effecting and to what extent (the West) has all the hallmarks of being a bio-weapon that has in large part been engineered to target western population groups to a greater extent but which through negligence prematurely leaked out of the Wuhan bio lab and then proceeded to go on the rampage across world aided by infected Chinese travelers allowed to travel internationally whilst domestic flights out of Wuhan were suspended.

UK Corona Catastrophe Trend Analysis

Britains half witted response to the coronavirus pandemic continues to unfold catastrophically, with bringing the pandemic under control virtually wholly left to the good sense of the general public to achieve as Government Ministers, MP's and Advisors fail to follow that which they have been preaching since the government ordered lockdown on the 23rd of March (a good 3 weeks too late).

THEY DO NOT PRACTICE THAT WHICH THEY PREACH! Which effectively means that Britain's LOCKDOWN is largely OVER! As the general public have been played for mugs. As illustrated by Dominic Cummings the Rasputin character at the heart of Boris Johnson's Government who at the height of the pandemic panic during late March, went on a 600 mile road trip across the UK whilst INFECTED, spewing viral particles all over the place, and especially in and around Durham, which included visiting a local beauty spot Bernard Castle for his wife's birthday, ALL WHILST INFECTED! NO self isolating for 14 days for this selfish ####!

Furthermore now that he has been exposed for BREAKING THE RULES, Boris Johnson's yes men cabinet has been busy explaining why Cummings was justified in BREAKING THE LOCKDOWN RULES! So Cummings instead of being sacked for effectively breaking the Lockdown law the politicians instead have done what they are good at which is using mealy mouthed excuses to subvert the truth.

Therefore Britains Lockdown is largely over because if the double standards of the Tory Government who never followed that which they ordered others to do. 

Britain's official death toll now exceeds 37,000! It was only a couple of months ago the mad scientists advising the government were warning to expect upto 20,000 deaths if the people of Britain did not follow the lockdown rules, which they in large part have done with only the Tory Government MP's, ministers and their advisors breaking the lockdown rules. So Britain's response to the pandemic has been catastrophic even on the official government data.

Though as the ONS keeps reminding us every Tuesday, the real Covid-19 death toll is far higher than the official data, about 50% higher, so actual UK extra deaths right now are about 65,000 (including Scotland and NI)..

To further illustrate just how incompetent and negligent Boris Johnson's response to the crisis has been is to look at the world league table of deaths that has Britain only number 2 to the United States which has about 6 times the population.

Meanwhile Pretty polly Patel is announcing that anyone entering the UK from the 8th of June will need to self isolate, ignorant of the fact that it is the people of the UK who need to be quarantined when leaving and infecting the rest of Europe! Maybe if the morons in charge had quarantined infected Chinese in January and February when they landed in their hundreds spewing viral particles all over the place then Britain would not be in it's current Coronavirus crisis!

It gets worse, the NHS in all of it's wisdom discharged infected elderly patients to care homes to make space during February, and March and into April who then went on to trigger outbreaks across Britians care homes, with the same idiots now promising to investigate why there have been so many deaths in Britains care homes. Remember that when one claps for the NHS every Thursday. It's as though there is a cunning evil mastermind, a bond-esk villain who has been successful in every action to both spread the virus and cripple Britain's economy. 

Trend Analysis

A better picture of the current state of the UK pandemic can be gleaned from the daily deaths chart coupled with moving averages.

The daily trend is definitely downwards on a weekly basis as illustrated by the 7 day average currently standing at 251, down from a peak of 1116. Whilst the 14 day moving average stands at 305 down from a peak of 959. In technical terms as long as the 7 day moving average remains below the 14 day average then pandemic is reducing and thus the UK should be okay to start relaxing lockdown rules soon, perhaps by Mid June if the 7 day average dips below 100. Which would be useful timing because the the government has lost a lot of it's authority in ordering lockdown's following revelations of those in charge failing to follow their own rules. Nevertheless the hot sun means that the viral particles are soon broken down by heat and UV rays so the reducing deaths trend should continue during June at least. 

Though if this were a stock chart then that the pattern looks CORRECTIVE which means we need to brace ourselves for a 2nd peak and more lockdown's later in the year as the sun goes down and people become more relaxed about their social distancing, we may not pass the 3713 deaths per day peak but it's definitely going to surge above 1,000 deaths per day, lets see if a vaccine appears during September to help prevent a 2nd peak.

FEEDING THE INFLATION MEGA-TREND 

Meanwhile the UK government is continuing to pay 80% of the wages of about 31% of the workforce! THAT IS A LOT OF REAL INFLATION BUBBLING AWAY under the UK economies hood! You don't get deflation with money printing on that scale regardless of what the wrong for decades academic economists keep babbling on about in the mainstream press. No the primary economic mega-trend is INFLATION. The perpetual devaluation of currency by means of governments spending far more than they earn in revenues that is the primary cause of inflation and the same is true for all nations as all currencies are in a perpetual state of free fall that is masked by pseudo stable exchange rates.

So folks don't be fooled by any temporary dips in the likes of CPI, just like the stock market crash into Mid March, it WILL BE TEMPORARY! Instead continue to follow my mantra of the the past 10+ YEARS by leveraging one selves to the Inflation mega-trend by owning assets that cannot be easily printed. And it is highly probable that HIGH inflation WILL be THE real consequence of the Pandemic down the road as we leave 2020 and enter 2021. After all how else will the extra £400 to £500 billion the UK government is set to borrow this year be devalued if not by means of high inflation.

Which means the time to act is NOW when most are looking in the rear view mirror at the deflationary consequences of the lockdown's that will undoubtedly feed through into lower official inflation indices over the next few months.

US Corona Catastrophe Trend Analysis

President Trump recently successfully bullshitted the gullible mainstream media into believing that he was self medicating on the anti malaria Hydrosychloroquine, that includes side effects such as paranoia, delirium and herat attacks, so unlike Vitamin D, definitely not to be taken on a whim, bur rather after considering the evidence in its favour of actually working to combat a coronavirus infection for which there is a building case against as previous tweets by nut jobs have been exposed as being BS. 

Meanwhile whilst Trump plays his ratings game, the US corona catastrophe continues to unfold with the official death toll now passing 100k, my last look late April concluded a trend trajectory towards 110,000 by the end of May that looks set to be reached.

Similarly to the UK, the daily deaths remains on a volatile downwards trend trajectory with the 7 day deaths moving average currently standing at 1024, down from a peak of 2696. Whilst the 14 day moving average stands at 1183 down from a peak of 2405, for a spread of 159. Where even if this trend persists suggests that the US is still a good 3 weeks away from when the US should consider relaxing lockdown's else risk triggering a trend to a significant second peak. Still the overall trend is in the right direction which goes some way to explain the stock markets shoulder shrug response to the pandemic as so far an expected correction of about 14% has largely failed materialise.

And as is the case for the UK, the declining trend picture looks corrective, so unfortunately a second spike is highly probable that will take the daily number of deaths to above 2000 in a few months time.

The Corona Riots of 2020 Have Begun!

Making over 40 millions workers unemployed in matter of weeks inevitably has societal consequences, throw into this powder keg an unprecedented death toll, far beyond that off all US post WW2 wars combined then all it would would take is one spark, any spark to ignite this powder keg as happened this week. Where the killing of an unarmed black man by a white cop caught on camera was the spark that triggered the angry protests that soon descended into riots and looting on a scale not seen for decades that is fast spreading to more than a dozen cities, which is just a harbinger of worse to come.

The same fundamentals of economic collapse, job losses on an unprecedented scale AND then having hundreds of thousands of excess deaths thrown into the mix is happening right across the Western World. and thus the UK, and Europe will too eventually witness their own widespread rioting and looting not seen for decades.

This is what happens at a time of economic collapse when people who have lost virtually everything with little hope that things will get better soon, which this time is coupled with having seen loved ones and friends die premature deaths tends to act as the tipping points that the criminal classes and other dubious actors seek to take advantage of as an excuse to go on the rampage, raping, pillaging and looting which is even more contagious than the coronavirus!

This looting and rioting pandemic is only just beginning and it looks set to spread exponentially across the western world.

Stock Markets Failing to Give Another AI Mega-trend Buying Opportunity

My analysis of late April concluded in expectations for a correction to about 21,000 by the 3rd week of May. 

The subsequent correction turned out to be a lot milder than expected and begs the question whether the current rally is sustainable. 

(Charts courtesy of stockcharts.com)

After all corrections are healthy for bull markets. So I suspect we are in for a more significant correction than so far experienced during May as soon as the Dow is done trading higher. As the Dow is basically ignoring ALL of that real world economic pain of ordinary people right across the western world, that has seen over 40 million jobs lost in the US alone, wages cut, industries experiencing severe contraction with the academic crowd that populate the mainstream press focused on the V shaped recovery becoming a U shaped to now becoming an L shaped recovery and then we have the Corona riots! But despite despite all of this the stock market heads north! Why? 

My readers should know why in terms of the big picture of the twin mega-trends of INFLATION and AI which is CONVERGING towards the Quantum computing EXPLOSION, towards which Coronavirus is acting as an accelerant. And it WILL be an EXPLOSION! 

For an idea of what's unfolding in terms of practical quantum computing then watch this 30 minute video from IBM before buying more stock. Remember we're investing in the FUTURE not the PAST and stock markets discount the future.

https://youtu.be/zOGNoDO7mcU

And do take note that today's Quantum computers are NOTHING compared to what is to follow pending innovations, just as CPU's went from hundreds of connected transistors to tens of billions on a chip so will today's 53 Qubit IBM processors go to hundreds, then thousands, then millions and eventually billions of Qubits! It's hard enough for me to get my head around the amount of processing power a 1000 Qubit processor will be able deliver let alone 100,000 qubits, then millions, and billions, it will be EXPLOSIVE! That AI will capitalise upon towards ends we can only imagine, such as rendering reality from the quantum fields upwards into whatever we. or rather the AI wants it to be.

So basically the stock market is stating this - Humans (workers) are fast becoming obsolete. In fact I'd happen a guess that most of those 40 million US of millions of jobs lost are NOT coming back! Automation PLUS machine intelligence means humans now really are becoming OBSOLETE! And that is what the stock market is discounting, corporate cost savings on an epic scale that the Pandemic has accelerated the trend towards.

This trend was in progress BEFORE coronavirus HIT, after all we have been investing in it at every opportunity for the past 5+ years. What coronavirus did was give us all that RARE once in a decade opportunity to easily get rich by BUYING AI mega-trend stocks at deep discounts of upto 40% on where the stocks where trading just a couple of months earlier! As I wrote at the time in Mid March in the midst of the panic collapse in stock prices.

The bottom line is that unless the virus is such that a working vaccine is impossible, then the Coronavirus market panic of 2020 is TEMPORARY!

So if I expect the AI stocks to eventually trade back TO NEW ALL TIME HIGHS, and it does it matter how low they trade during this panic or whether one buys Google at $1200 or $1100 or $1050, as in the long-run it's not going to make that much difference, the main thing is to be INVESTED, and the Coronavirus despite the palpable FEAR it is generating for genuine reasons, is still giving ALL a golden opportunity to pick up stocks selling typically 1/3rd cheaper than a few weeks ago.

Of course the other big mega-trend at play in this is INFLATION! The Fed prints money to buy assets such as stocks and bonds because they understand that to avoid a depression they need to prevent asset price deflation.

To further illustrate the point about 120 years ago our cities were full of intelligent giants that were nearly as numerous as humans, then within the next 20 years over 90% of them disappeared forever! you would know them as HORSES!

As I stated in my end April article, Coronavirus should be viewed as a disruptive technology that is acting to accelerate the AI mega-trend which means that the corporations that emerge from this crisis won't be looking to hire flesh and blood workers but invest in algorithms , AI cloud machine learning systems, which means it won't even be necessary for most to buy new hardware to profit from AI. Even the distant dream of Quantum computing is fast becoming a reality via cloud services as virtually anyone right now can create an account on IBM's quantum computing site and then run queries using their growing number of cloud Quantum computers (18), all without much know how about how the Quantum computers do their Qubits computational magic as IBM has been busy creating the circuits deployed as functions that programmers using classical computers and more importantly classical programming languages such as C++, Python and even PHP to call Qubit circuit functions.

We are getting there fast folks, and the stock market rising when it should be correcting is just one more sign of the consequences of this EXPONENTIAL mega-trend. Hopefully my Patrons are already well on board the AI mega-trend gravy train given the buying opportunity of a decade that the markets delivered mid March 2020 with hopefully several more to come this year, though of course we will likely never see the March lows again. for our key stocks

Meanwhile most remain blind to this mega-trend with politicians in America especially still harping on about immigrants taking american jobs. It's not the mexicans who are taking the jobs it's automation! And it's going to get exponentially worse! For instance before the end of this decade access to beyond human level intelligence will be able to be deployed via cloud computing services for whatever purpose users wish to utilise it, either as a brain for a robot, or as workers in virtual offices all administrated from something as small as smartphone, much as we today subscribe to the likes of netflix and itunes! 

And the only solution I can see to the obsolesce of human workers will be for some sort of universal income that would allow most humans to have the means to spend a large part of their lives in virtual worlds.

Where the general stock market indices are concerned (Dow) then it would be too simple to look at 2009 for what to expect to happen next, i.e. a new bull market that persistently trends to new all time highs and then beyond. THAT WOULD BE TOO SIMPLE FOR HISTORY TO REPEAT. So whilst AI stocks undoubtedly ARE heading for new all time highs, I suspect the general stock indices are going to have things much tougher this time round.

Anyway in the meantime just repeat this mantra, whenever you see the stock market take a plunge - BUY AI stocks Whilst keeping an eye on those forward P/E ratios so as to make sure were not making the mistake of buying thin air, as was the case for most Nasdaq stocks during the 1990's. And don't fret there will be more buying opportunities as this chaos theory balancing act the central banks are running is prone to temporary market panic events.

In terms of the general stock market trend, it really should correct, but so far it's refusing to do so, maybe setting itself up to enter a Fed engineered stable trading range for a while. More in a future stock market analysis article.

Silver vs Gold Trend

The silver price has managed to recover from the Corona crash of 2020 with the price back within it's trading range of $17 to $20. Though contrary to the Silver bugs perma expectations for the Silver price to track the Gold price higher, that's not what usually tends to happen as the below graph illustrates,, which if you have followed my previous Silver analysis articles than you would know this is the expected behaviour of Silver, Gold's volatile and unresponsive to events cheaper cousin.

Gold price rises to new bull market highs whilst the SIlver price just manages to recover to it's trading range. 

My last look at the Gold price was in Mid January (Gold Price Trend Forecast 2020) that concluded in mild first few months of the year to give way to a strong Bull run from Mid April to target a trend towards $1800.

I will cover the prospects for Gold in a separate article because it's probably better to analyse Silver before Gold, else one can fall victim to the tendency to extrapolate Gold to Silver.

Whilst my last look at silver on the 29th of January at the very beginning of the coronavirus catastrophe when most of the world thought it uniquely as a Chinese problem and then continued to remain largely deaf, dumb and blind to it's apparent consequences for nearly another 2 months !

29th Jan 2020 - Silver Price Trend Forecast 2020 

Given the exponential rate of spread of the virus, then by the end of February 2020 as many as 1 million people could be infected globally, that at a 3.5% fatality rate would result in 35,000 deaths. Though the true fatality rate will likely be significantly higher, and likely the virus has already spread to most nations (including Britain) given that approx 1 million Chinese students have traveled back to foreign Universities after the New year holidays. 

So a potential AI mega-trend stocks buying opportunity. Though stock sectors likely hardest hit will be travel, tourism and retail.

Silver Price Trend Forecast 2020

Initially I am expecting a very volatile trading range between a low of $16.50 to a high of $19 for the next 3 months or so, following which the Silver price 'should' respond to a Gold price rally and follow the yellow metal higher. The trends not going to be pretty but I expect Silver to trade above $20, and likely reach a peak near $21 later in the year as the forecast graph illustrates.

The bottom line is that Silver is in a 6 year long trading range of between $21 and $14. And we are all waiting for the breakout higher. For which there is a low probability of happening during 2020. However, my long-term expectations remain of being invested for a spike to $35+, which on the current price would represent a gain of 100%. 

So the strategy is to invest in Silver rather than to trade Silver, to accumulate when cheap and given the gold / silver ratio of 89, Silver is still cheap today relative to Gold. Just remember Silver tends to under perform Gold during most of the precious metal bull markets, and tends to outperform towards the end of powerful bull runs as retail investors start waking up and start jumping on board, hence expect a series of spikes higher through resistance levels over the coming years. 

All things considered, and given that on 29th of Jan no one could have imagined our governments would be incompetent and negligent to the extent they have been in response to the Coronavirus then the forecast has managed to prove remarkably accurate given that the forecast was for SIlver to be currently trading at about $17.4 against actual last close of $18.4. Namely for the expectation for Silver price weakness into Mid 2020 ahead of an attempt at a break above $20 later in the year, set against the perma silver bugs who have seen every up day as the start of the silver gold rush towards $50 and beyond.

Silver Investing Strategy

Firstly, my long standing approach to Silver has been one of buying (accumulating) when the Silver price is cheap to invest to capitalise on long-term Spikes, as the silver price tends to be quite erratic in behaviour, prone to a lot of false signals so Silver can be a difficult market to trade i.e. tends to run stops and sharp movements contrary to the likes of Gold, just as we experienced during Summer 2019, with the bulk of the silver moves taking place towards the end of precious metals bull runs as illustrated by my analysis of May 2018 investing for a $35+ Spike. 

Silver Forecast 2018 and Beyond, Investing for the $35+ Price Spike! 

In terms of a Silver market position then as is currently the case the silver market can usually be expected to be a dead market with the tendency to flat line not just for many months but even years as it tends to play second fiddle to Gold in terms of tradable swings, usually only really coming alive towards the latter stages of precious metal bull markets.

Which remains my long-term target for a Spike to +$35, at which point I would likely be distributing (selling) holdings as usually investors only have a short window to sell before the spikes come and gone. Anyway the basic principle is to buy when cheap (which for me is a sub $15), and sell when it spikes which for me would be for around $38. I don't really care if it goes all the way to $50 and beyond as 170% profit for a 5 year investment is good enough expected return for me.

This year we had a crash lower to under $12! But no I did not buy any this time around because: 

a. I already hold Silver (SLV).

b. My focus was on loading up on AI stocks for the KEY mega-trend of our times that will change EVERYTHING!

c. Silver is a side show, but for some reason many people want to know what Silver will do next. I would put far more importance on likes of Microsoft, Amazon, AMD or IBM than SIlver. Usually Silver is not on my radar. . 

Gold Silver Ratio

I am afraid I have got some bad news for all the Silver bugs out there, for the gold / silver ratio chart makes it crystal clear that Silver is NOT a safe haven precious metal. Yes you may still call it a precious metal but it is NOT GOLD! That's for sure!

So come to terms with the fact that Silver given the facts on this chart is NOT a safe haven. For if Silver were a safe haven the Gold / Silver ratio would not have rocketed to over 130! When the SHTF investors did not buy Silver they bought Gold! In fact they DUMPED Silver!

SILVER IS NO LONGER A PRECIOUS METAL! If it were a precious metal than the ratio should not have gone about 95, instead it rocketed to 132! So Silver whilst we can all buy silver coins and bars, Silver is mainly an industrial metal, a bit like copper, so we should not look towards silver for immunity during crisis.

That's not to say that it won't be influenced by the inflation mega-trend it's just that contrary to the financial crisis when Silver WAS a precious metal rising from about $12 to $25. This time Silver has not done what a precious metal should have done at a time of crisis.

All we can glean from the Gold / Silver ratio chart is whether Silver is cheap relative to gold or not. However the problem is that Silver cannot be expected to react in a similar manner to Gold in a crisis which means Cheaper silver can get a whole lot cheaper than anyone can imagine!

So is Silver cheap relative to Gold? YES it is, as long as there is not another market panic which would trigger another sell off in Silver. 

A fair ratio to Gold would be about 85, which would put the Silver price at $20.30, so there is further room for Silver to play catchup to the Gold price as long as there is not another market panic around the corner! Whilst recent extremes have seen the ratio fall to 50, which would project to a Silver price of $34.86, obviously the ratio falling to 50 is not very probable anytime soon.

Long-term Trend Analysis

Silver faces very heavy overhead resistance from $18 all the way to $21 which means that it is going to be tough going and take significant effort for Silver to reach let alone breach $21. Whilst there is strong support at $16 and $14.5 (ignoring the crash low of $11.64).

Therefore as was the case in January the long-term chart continues to warn to expect Silver to mark time before it manages to break above it's 2019 high of $19.75 to target a trend towards $21 that it may fail to reach during 2020. What happens if Silver manages to break above $21 during 2020, well then it would target a trend to $25.

Trend Analysis

This chart illustrates that Silver tends to spend more time drifting lower / sideways then trending higher. So expect short sharp rallies punctuated by periods of drift. Which is where we appear to be finding ourselves after the failure of Silver to clear $19 at the start of the year, greatly under performing the Gold Price. Whilst I am ignoring the March crash low because Silver is prone to making false signals, thus the break below $14.30 was a false break lower.

The SIlver price is currently trending higher towards resistance at $19, and then $20. The odds of Silver clearing resistance does not look good. Whilst it may well assault on $20, I think a trend lower to stay in the $19 to $16.5 zone is more probable than a break higher.

MACD - MACD has unwound its oversold state, so Silver looks primed for a significant correction that could take silver into the $14.5 to $16.5 support zone.

Elliott Waves - The rally off the March low looks corrective i.e. multiple ABC patterns can be observed, if so then the current rally should terminate before Silver gets to $20, so quite soon which then implies to expect a trend to support between $14.50 and $16.

Formulating a Trend Forecast

It is clear that Silver is NOT Gold, so NOT to make the mistake of looking at what Gold has done and thinking Silver will replicate that move, it rarely does! At best Silver tends to play catchup towards the end of precious metals bull trends.

Silver is in a strong bull trend off the March low that is targeting resistance at $19 and then $20, beyond which lies $21. The big question mark is can Silver break above resistance or not. Balance of evidence suggests Silver's going to correct before it is able to clear resistance.

Therefore the Silver price could top out at any point between $18.50 (last close) and $20, maybe reach $19.30 before weakening.

On the plus side, Silver is CHEAP relative to Gold which should contain any declines i.e. we are unlikely to see Silver revisit $11.64. UNLESS the Gold price takes a huge tumble at the same time.

What does my January forecast conclusion say for Silver? It says the forecast rally began in Mid March rather than Mid May, and thus the trend higher could terminate during late June rather than late August.

Therefore I am finding it very difficult seeing Silver sustain a breakout higher anytime soon.

Silver Price Trend Forecast Conclusion

Therefore my forecast conclusion is for an imminent peak in the Silver price, probably before Silver breaks above $20, though it is a volatile critter so could gave a false break to the upside before turning lower. Nevertheless, I don't see much upside in Silver after which the price is likely to revisit the $16.3 to $15 area as my forecast graph illustrates.

The bottom line is that Silver is in a 6 year long trading range of between $21 and $14. And we are all waiting for the breakout higher. For which there is a low probability of happening during 2020 as I stated in my January update. However, my long-term expectations remain of being invested for a spike to $35+.

So the strategy is to invest in Silver rather than to trade Silver, to accumulate when cheap and given the gold / silver ratio of 95, Silver is technically still cheap today relative to Gold. Just remember Silver tends to under perform Gold during most of the precious metal bull markets, and tends to outperform towards the end of powerful bull runs when retail investors start waking up and jumping on board, hence expect a series of spikes higher through resistance levels over the coming years, but not this year. 

Disclaimer, I am invested in Silver (SLV)

My next analysis should be to update my Gold price trend forecast. 

Your Analyst

Nadeem Walayat 

http://www.marketoracle.co.uk

Copyright © 2005-2020 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.


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