2020 Begins New Inflation Cycle; Projects Commodity/Grain Surges!
“Outlook 2020/2021 – 40-Year Cycle of Inflation
08-29-20 – There has been one primary, overriding expectation for the current 12 – 14 month period. It has been discussed in respect to multiple markets and has just received some noteworthy (Fed) validation. Before elaborating on that, let’s review a few key factors:
1 – The 12 – 14 month period being addressed was identified as beginning on March 16 – 23, 2020 – when a powerful convergence of daily, weekly, monthly & multi-year cycles bottomed in multiple markets like stocks and Silver – until April/May 2021. That is when corresponding cycles are projected to peak in a broader collection of markets and culminate the period in focus.
2 – The primary expectation/projection for this period has been an inflationary surge in multiple commodities, precious/industrial metals, foodstuffs, and even equity markets. It has been forecast to be a synergistic, though sometimes staggered rally.
3 – Coinciding with, and potentially causing, that was the forecast for a 12 – 14 month decline in the US Dollar – a sell-off that was/is likely to resemble the 2017 drop and reinforce the decades-long pattern of Dollar declines during Republican administrations and advances during Democratic administrations.
The US Dollar peaked in Jan. 2017 and could drop into Dec. ‘20 or Jan. ‘21 – a slow but overall decline that would encompass the entire administration. Since this is often the driving force for inflationary moves, it is important to review the cycles governing the larger swings (1 – 2 years or more) in the Dollar.
4 – This inflationary surge was projected to spur a proportionately greater advance in Silver than in Gold – something that Silver Bugs had been anticipating for years – beginning on March 16 – 20, ‘20 when Silver triggered a major buy signal.
The amazing thing about that action in Silver is how closely it correlated with the outlook for a major bottom in stocks – projected for March 23, 2020. In one single week, two diverse but sometimes corresponding measures of ‘inflation’ converged. One signaled the onset of what could be a larger phase of commodity price inflation while the other could be timing the finale in a broad period of paper-asset inflation.
In order to understand what was and is expected from this period, and to recognize why a key event of the past week was such powerful validation to this scenario, it is important to review some key analysis:
“04/01/20 – Gold & Silver fulfilled their late-Feb./early-March ‘20 cycle highs – highlighted for over a year – AND the resulting sell-offs with Gold plunging precisely to its downside target at 1450.0/GC. Silver, however, plummeted to the most significant convergence of cycles – calling for a major low while triggering an important buy signal:
Silver dropped into an uncanny web of 7-week-related cycles in mid-March ‘20 – perpetuating a series of cycles that has governed Silver for several years…
March 16 – 20, 2020 was the culmination of a 70-week low (July 10 – 14, ’17) – low (Nov. 12 – 16, ’18) – low Cycle Progression. March 16 – 20, 2020 was the latest phase of a 14-week low (July 10 – 14, ’17) – high (Feb. 18 – 22, ’18) – low (Nov. 12 – 16, ’18) – high (Sept. 2 – 6, ’19) – low (Dec. 9 – 13, ’19) – low Cycle Sequence…
March 16 – 20, 2020 was also the fulfillment of an overlapping 28-week high (Feb. ’19) – high (Sept. ’19) – low Cycle Progression. March 16 – 20, 2020 was also the fulfillment of a 7-week high-high-low-(low) Cycle Progression that was discussed in mid-Dec. and late-Jan. – when the two preceding lows were forecast…
And, on a much larger basis, a low in March 2020 would provide some important symmetry to the past decade in the overall metals complex…
Precious metals went through a topping phase in late-2010 – late-2011 with Gold providing the final peak in Sept. 2011. The complex then plunged into Dec. 2015 – setting a multi-year low. That 51-month decline set the stage for a divergent bottom in Silver – the weakest of the metals – in March 2020 – 51 months later (51-month high-low-(low) Cycle Progression).
With Gold reaching its 2 – 3 month downside target, in only two weeks, and Silver fulfilling an overwhelming synergy of weekly, monthly & yearly cycle lows, the corrections in metals could already be complete. The weekly trend in Gold corroborates that, having failed to turn down during the sell-off…
The XAU dropped sharply after peaking in late-Feb… It plunged to its monthly HLS (extreme downside target) and spiked down to 6 – 12 month support at 66.00/XAU – attacking the lower end of its ~4-year trading range…As long as it does not give a weekly close below 60.00, the XAU could set a multi-month bottom and begin to set its sights on May 2021 – the time for the next (expected) multi-quarter peak.
Platinum rebounded to a lower peak in the first half of March and then continued its projected decline… plunged to its lowest level since 2003 while potentially completing (or coming close to completing) a ~4-year cycle that bottomed in 1Q ’20.
That low perpetuates a ~4-year high (1Q ’04) – high (1Q ’08) – low/high (Dec. ’11 – Feb. ’12) – low (1Q ’16) – low (1Q ’20) Cycle Progression and is likely to trigger a new 6 – 12 month (or longer) rally…
Palladium peaked right on schedule and then plunged, losing 50% of its value in less than three weeks (plummeting from ~2800 to ~1400/PA)… As long as it does not generate a weekly close below 1400/PAM, Palladium could soon embark on a rally back toward its ~2800 peak.”
Inflationary Starting Pistol…
With so many metals then fulfilling major downside objectives, as well as multi-month & multi-year cycle lows, the buy signals generated in March 2020 set the stage for a significant uptick in price inflation that was forecast for March ‘20 into May ‘21.
The Dollar concurred, peaking on March 19 and entering what is likely to be a 12 – 14 month decline. Stock Indexes reinforced that, bottoming on March 18 – 23 in sync with the 40-Year & 2-Year Cycles and triggering their own multi-month buy signal.
As is usually the case, cycles and technical analysis fired this ‘starting pistol’ WAY before fundamentals revealed anything remotely similar. In most cases, a fulfilling fundamental factor will not materialize until the middle third of a move or trend.
So, if this trend was forecast to last from March ‘20 into May ‘21, the middle third of that ~14-month time period is roughly mid-Aug.- late-Dec. ’20. And that brings us to the key event of the past week (from a financial perspective).
40YC of Competing Inflation
40 years ago, inflation was considered the ultimate evil in the financial markets as 1980 was experiencing the culmination of a 3 – 5 year and 5 – 10 year surge in commodity and precious metals’ prices – a parabolic move that was crippling the economy.
Paul Volcker set the Federal Reserve into overdrive to combat that inflation.
Fast-forward to the present when the concern is suddenly that there is not enough inflation. So, Jerome Powell just announced a new Fed approach that would (paraphrased) help nurture moderate inflation.
Be Careful What You Wish For!
As is the case with so many cycles, the extremes (beginning and end of that cycle) often time opposing extremes – the beginning of one move and the end of another… or vice-versa.
In this case, 1980 marked the culmination of an incredible inflationary cycle… and ushered in a 40-Year Cycle of Inflationary Vigilance.
40 years later, 2020 marks the onset of what could be a new inflationary cycle – with the first phase unfolding from March ‘20 into April/May ‘21.
There is another irony at play here. It should be watched closely over the next couple years. The culmination of commodity inflation – peaking in 1980 – paved the way for a near 40-Year Cycle of Paper Asset Inflation with stocks and bonds beginning massive bull markets… in 1981 and 1982.
Could 2021 and 2022 provide contrasting action – showing that those bull markets have peaked?
Inflationary Scares?
A myriad of overlapping cycles have been forecasting price inflation – in diverse commodities and precious metals – between late-March ‘20 and May ‘21.
The following is a small sampling of the commodities forecast to experience sharp rallies in 2Q ‘20 – 2Q ‘21 – bottoming in a staggered manner and expected to subsequently top in similar fashion.
One of those was Lumber, which bottomed in 2009 and set a secondary low in 2015. Leading into 2020, Lumber was projected to set another higher low in 2Q ’20 – ushering in a ‘3’ of ‘3’ of ‘3’ wave advance projected to take hold in May ’20 and last into 1Q ’21.
In order to validate that scenario, Lumber was forecast to set an initial peak above 440.0/LB in Feb. and then correct – setting the stage for a new bull run to take hold in May ‘20:
01/30/20 – “Lumber is still attacking its intermediate upside target at ~440.0/LB. Based on the combination of this upside target being fulfilled, its monthly trend structure, monthly 21 MAC setup, annual (360 degree) cycles, and 6 – 12 month resistance, the expected scenario for Lumber is to see a spike high in February (ideally in first half of Feb.) followed by a correction into May 2020 – at which point a secondary (higher) low appears most likely.
That would then be expected to spur a new advance leading into when the next multi-year peak is expected – in 1Q (Jan./Feb.) 2021.”
Lumber followed that scenario pretty closely, spiking above 440.0 as it peaked in Feb. ‘20… and then plunging into early-April. It vacillated near its lows in April, awaiting bullish cycles to arrive in May ‘20 – at which time Lumber embarked on its new bull run. Little did anyone realize what kind of impact Covid-19 would have on lumber demand in May – Aug. ‘20…
Another bout of commodity price inflation was forecast for the grain markets with Soybeans forecast to see an initial surge into early-July and a larger overall surge into Sept. ‘20. The price action of the coming weeks will have to clarify if Sept. ‘20 will time the completion of this surge… or just an interim peak.
Then there is another key market that was projected to set a multi-year bottom in 1Q ‘20 and undergo an initial surge into Nov./Dec. ‘20.
03/31/20 – “For the past year, much of INSIIDE Track’s focus has been on the extremely challenging time that was expected to begin in late-2019. That outlook was based on a myriad of factors, including…
— Energy-related (Crude projected to drop to new multi-year lows based on its monthly trend pattern while Natural Gas was projected to decline into 1Q ‘20 before a multi-year bottom was/is likely)…
Natural Gas has fulfilled ongoing analysis for a drop from 4Q ‘18 into 1Q ’20. 1Q ’20 is the latest phase of a 4-year low-low-low cycle with multi-year support near 1.6000 – the March ’16 bottom.
A rally into June/July ’20 and ultimately into Nov./Dec. ’20 is expected. 1 – 2 year traders and hedgers can be phasing into long positions, and/or covering long-term short positions…”
Natural Gas set its lowest daily close on Feb. 28 and intraday low on March 9 – repeatedly testing 1.550 – 1.600/NG, where major support existed. It initially surged into May ‘20 and then pulled back into early-July. That ushered in the second phase of Natural Gas’ projected 2020 surge.
Most people associate Natural Gas demand with cold weather and the need for a widely-utilized heating fuel. However, Natural Gas was projecting multiple surges for April – Nov./Dec. ‘20, revealing something more. Ironically, it was the recent heat wave that spurred the latest demand for Natural Gas as power plants utilize it to keep up with the cooling demand.
When is the next inflationary wave likely to take hold? Stay tuned…
Soybeans, Corn & Wheat are fulfilling analysis for strong advances in June – Sept., with the second phase expected to be a surge from early-Aug. into mid-Sept. (after an initial surge into early-July). That should trigger further gains in the first half of September…
The Jan. ‘20 peak perpetuated an ~8-month low (Jan. ‘18) – low (Sept. ‘18) – low (May ‘19) – high (Jan. ‘20) that also projects a future peak for Sept. ‘20… At the very least, Soybeans should rally above 980.0/S and ideally back to ~1060/S in Sept. ‘20… The current phase could stretch all the way into 4Q 2020…
An overlapping ~16-year cycle incorporates the 1972/73 parabolic surge in Soybeans (from ~300 to ~1290) and a subsequent surge into 1988 – 16 years later… Soybeans triggered a new intermediate buy signal on Aug. 7. Corn & Wheat quickly followed that, producing related buy signals on Aug 12 and then reinforcing them on Aug 20/21. They are also expected to see additional surges in September…
1 – 3 month and 3 – 6 month traders could have entered long positions in Nov. Soybeans futures at 854 down to 846 and be holding these. w/avg. open gains of about $5,000/contract. The risk on these (where to exit if they head lower instead of higher) is now [reserved for subscribers]… TRADING INVOLVES SUBSTANTIAL RISK”
Grains are poised for accelerated advances as they enter the crescendo of a 40-Year Cycle of Drought & 80-Year Cycle of Agriculture (leading into 2021). The potential for a Dollar decline to drive commodity inflation higher (into at least 2021) corroborates that.
~11-Year, ~40-Year & ~80-Year Cycles converge in 2021/2022 and pinpoint the expected transition of natural, geopolitical and market cycles, at the same time many food/commodity cycles culminate. Inflationary cycles are emerging and project surging prices in the coming year(s)… providing a parallel to the inflationary surges of the late-1970’s.
On a 1 – 3 year basis, Corn has a corroborating 3-year low (July 2007) – low (Jun 2010) – high (July 2013) – high (June 2016) – high (May/Jun 2019) – high (May/June 2022) Cycle Progression – projecting a 1 – 2 year peak – that was reinforced by a 6 – 12 month peak in May/June 2019.
Wheat has a ~6-year low (2004) – low (2010) – low (2016) – high (2022) Cycle Progression that is being reinforced by a ~33-month low (3Q 2016) – low (2Q 2019) – high (1Q 2022) Cycle Progression. Soybeans have an ~8-month Cycle Progression that portends future peaks in Sept ’20 and then ~May ’21 & ~Jan ’22.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.