Inflation Archives - Gold & Silver Stocks Newsletter

In part one of this article, I highlighted my opinion that the US and Global markets rolled through a hyper-active Kondratieff full-season rotation throughout the COVID-19 virus crisis. In 2017 and late 2018:

Bonds were trading lower
Gold and Silver were trading near multi-year lows
Real Estate had peaked in the short term as rates started to rise a bit
and the Stock market rallied to new all-time highs

All of these are components of a late Spring or early Summer type of Kondratieff Season.

If my assumption is correct, the COVID-19 crisis pushed the global markets into a 6+ month Summer, Autumn, and Winter seasonal cycle. This cycle transitioned back into an early Spring cycle in late 2020. Now, we are likely entering an Autumn Kondratieff season. Here, stocks boom, Bond Prices rise, and Real Estate and Commercial prices rise.

Gold, Bonds and SPY

The chart below shows Gold, Bonds, and SPY trends over the last 5+ years. It highlights the Kondratieff Seasons and the Kondratieff Hyper-Cycle that took place during the COVID-19 collapse. My belief is the COVID-19 crisis created a full Kondratieff Seasonal rotation in the global markets. Markets moved from a late Summer Season to an end of Winter/early Spring Season by January/February 2021. I believe that the Spring Season transitioned into an early Summer Season by June/July 2021. We are starting to shift toward a late summer season as we head into the end of 2021 and early 2022.

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If my research is correct, we’ll see large price trends last through January/February 2022. Following this, a shift in market sentiment after Q1:2022 – possibly into June or July 2022. Gold and Bonds will likely continue to trend higher over the next 5~6+ months as the Summer Season trends. The US Stock market will also continue to trend higher within the Summer Season. This means traders should prepare for increased potential volatility and more bullish trending into the first quarter of 2022.

Market Sectors Poised For Growth In The Current Kondratieff Season

I want to highlight several charts that I believe could see a continued bullish price trend over the next 6+ months. I also want to highlight why the Kondratieff cycles may play an essential role in trader/investor expectations over the next few years.

First, this continued Summer Season will transition into an Autumn season eventually. This is something for which we all need to be aware of and prepare. One could argue the current rise in Gold and Bonds may be an early indicator that we have begun the transition. Traders should be watching Gold and Bonds very closely for any continued rise in prices, which would indicate a potential end of the Kondratieff Summer Season. The Autumn Season is associated with “Disinflation.” Disinflation is more of a stalling of market trends while inflation is still trending higher. This type of activity pushes traders to become more protective of investment capital and risks.

IGF Weekly Chart

The IGF Weekly chart below shows how the Global Infrastructure sector is trending higher and about to break above all-time highs near $50. With the signing of the US Infrastructure Bill, this sector may continue to trend higher and attempt to move above $60 to $65 by April/May 2022. Should the Kondratieff cycles push markets higher as well, IGF may explode above $50 in the near future. Potentially, this could start a big rally higher.

IYC – Consumer Discretionary ETf

Consumer Discretionary ETF IYC has already rallied more than 100% from the COVID lows and begun to rally even stronger over the past 6+ weeks. Consumers continue to drive retail sales and core economic activity in the US, and this trend will continue through the Christmas holiday season. IYC will likely continue to trend higher, possibly breaking above $110 within the next 60+ days. Should the US Federal Reserve not do anything to break this trend, it may continue higher well into the end of Q1:2022.

XLI – AMEX Industrial Select ETF

The AMEX Industrial Select ETF, XLI, is just above a 100% move from the COVID-19 lows. I believe XLI may see a breakout rally above $110 over the next few weeks as the continued Kondratieff Summer/Autumn season pushes sector trends higher through early 2022. I believe the Industrial sector will rally due to the recently signed Infrastructure Bill and will rally following the S&P 50 and NASDAQ higher. In fact, given the current range between the GAP near November 2020, my Fibonacci Price Expansion technique suggests a target level near $124.

XRT – S&P Retail ETF

XRT, the S&P Retail ETF sector, is almost certainly poised for another broad move higher after US sales data came in stronger than expected, and we head into the 2021 Christmas holiday season. I would expect Q4:2021 retail numbers to be moderately strong this year – even though we hear about supply chain issues.

XRT has rallied almost 400% from the COVID-19 lows and may rally another 15% to 20% higher before the end of January/February 2022. Any pullback below $100 may present an excellent entry opportunity for new long trades.

As we explore the Kondratieff Seasonal cycles and attempt to apply this knowledge to the current market dynamics, I believe the end-of-year rally may be much more robust than many people think is possible. US consumers are still very active in the economy, homes are still selling, and the post-COVID recovery strengthens. Unless something happens to disrupt this trend, US stock sectors are still likely to continue higher well into Q1:2022.

Now is the time to consider where and how to participate in this rally phase while we watch Gold, Bonds, and these sector trends for any shift into a late Autumn Kondratieff season.

WANT TO LEARN MORE ABOUT MARKET TRENDS?

Follow my research and learn how I use specific tools to help me understand price cycles, setups, and price target levels. Over the next 12 to 24+ months, I expect large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase. Next, a revaluation phase may begin as global traders attempt to identify emerging trends. Precious Metals will likely start to act as a proper hedge as caution and concern drive traders/investors into Metals.

Kindly take a minute to visit www.TheTechnicalTraders.com to learn about my Total ETF Portfolio (TEP) technology and how it can help you identify and trade better sector setups. My team and I have built these strategies to help us identify the strongest and best trade setups in any market sector. Every day, we deliver these setups to our subscribers along with the TEP system trades. You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Chris Vermeulen

www.TheTechnicalTraders.com

Some interesting facts related to market trends and the global economy have come into play recently. After the COVID-19 virus event began, global central banks entered a phase of extended easing. This move was an attempt to transition through the economic concerns related to the immediate shutdown caused by COVID-19. These actions have translated into a new phase of market trending where the Consumer became hyper-active in the global economy while inflationary trends were somewhat muted.

COVID Shifts Global Market Cycles Into Faster & Broader Trends

Now that inflation is starting to rise, we may transition away from consumer and speculative market cycles. Over the next 6 to 12+ months, the markets may shift into a late-stage Bullish rally phase. My opinion is the COVID-19 virus, and economic event process has resulted in a speedy, possibly 24 to 36 month, extreme cycle phase.

Take a quick look at the Stock Market & Economic Performance cycle example below. We can see that Financials/Transports, Technology, and Capital Goods usually lead a market rally after a bottom in cycle trends. This trend is generally followed by a rally in Basic Industry, Precious Metals, and Energy before we near a peak level in the stock market.

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What has happened in the US since COVID-19 hit is vastly different than this cycle presents. First, consumers shifted away from metropolitan areas. This move started driving up Real Estate, Consumer Goods (Technology), Automobiles, and Capital Goods prices as they relocated and settled. Then, as supply chains slowed down and lock-downs persisted, consumers shifted gears again and began to alter spending habits, anticipating a longer-term COVID-19 recovery.

This shift in spending and earning prompted many retail investors and consumers to focus on the incredible price trends in the US stock market in late 2020 and early 2021. I’m sure you remember the “Reddit Rallies” that set the stock market on fire in January 2021? While many consumers could still earn and save because of the COVID-19 lock-downs, the shift in working schedules allowed many to become traders. This surge drove an incredible rally in the US markets over the past 12+ months.

What Market Trends Will Drive Through To 2022?

2020~2022 Hyper-Cycle Event May Be Shifting Into Autumn/Winter Soon

My opinion is that the globe pushed through a deep market contraction at the start of COVID-19. Following this was a strong global recovery phase – which happened within a 12-month window. After the November 2020 US Presidential Elections, while the extended COVID variants continued to plague the world, we entered a renewed type of Hyper-Kondratieff market cycle (Seasons).

Follow my thinking through this process:

A. COVID became a known issue in late 2019. The Global markets are holding up reasonably well at that time. (Likely Moderate Spring/Summer in Kondratieff Seasons)

B. COVID HITS (Late February 2020). Lock-downs start, and consumers shift their spending/saving habits. The mass transition begins for millions as the collapse of the global markets (a Hyper-Autumn/Winter/Spring Kondratieff cycle) takes place over only 4~5 months.

C. By July/August 2020, the global markets are starting to recover. Retail traders and institutions are eyeing the perceived recovery and believe the economic contraction is over. Retail traders begin to engage in the markets and start to drive trends (a post-COVID Spring and Early Summer event continues well into mid-2021).

D. The global markets, and many of the strongest ETFs and market indicators, peaked in February 2021 and entered an extended sideways/consolidation phase. That is, until recently. Inflation has started to become an issue. Global markets are struggling to find growth while the US markets continue to rally. (This is a late-stage Kondratieff Summer phase that is starting to transition into an early Kondratieff Autumn Season)

COVID Kondratieff Hyper-Cycle May Pressure Big Moves In Global ETFs/Sectors

Over the past 24 months, I believe we’ve completed a Hyper-Kondratieff Seasonal cycle phase. We may now be heading into an extended Summer/Autumn cycle phase lasting well into early 2022 – possibly longer. Following this, the Winter Kondratieff season may be longer and more extensive in scope as price trends have become exaggerated over the past 24+ months.

My research suggests global market trends and ETF sectors are poised for a powerful rally through 2021 and into early 2022 as Q4:2021 earnings and the continued Kondratieff Summer season extends. Retail and Institutional Traders will chase this rally phase while global central banks ease away from making any sudden moves to disrupt this cycle.

I believe many global central banks already understand the extreme trends and pressures pushed into the markets throughout COVID. These institutions continue to expect an extended Winter Season to creep into the global markets in the second half of 2022 or later. Given the inflationary pressures on the markets right now, one would think global central banks would be doing more to contain the potential for runaway inflation. They are, however, staying overly cautious.

The ECB recently commented that raising rates may do more harm than good (Source: Bloomberg). The US Federal Reserve also indicated extreme caution related to monetary policies recently. I think they are expecting a future contraction of inflation and pricing pressures as supply-chain issues resolve and as the current Summer Season shifts into Autumn and eventually Winter.

Traders need to stay prepared for any number of extreme price events over the next 12 to 24+ months, focusing on the strongest trending asset classes/sectors. If my research is correct, we should be transitioning into a late Summer Season – leading to an Autumn Season in early 2022. A Kondratieff Autumn season is indicative of a “Blow-Off Rally Phase” in the markets where a peak in price eventually sets up.

Want To Learn More about market trends?

Part II of this article will explore some ETF sectors that may benefit from the extended Summer/Autumn Kondratieff seasons.