To identify "buying opportunities" in "extreme" situations, we identify historical
extreme situations and use them for a benchmark. Provided that a correction
occurs in an active bull market, the insights from this kind of analysis can
be very helpful.
Most should agree that the credit crisis was a major economic event that pushed
nearly all assets down to an extreme low. We have used this kind of extraordinary
market action as a comparison for the current commodities correction.
In the above chart we simply measured the percentage drop of the current correction
and compared it to the extreme drop back in 2008. Based on this chart it is
safe to say that the current correction could be considered extreme.
The above chart illustrates the two extreme corrections relative to the Down
Jones Industrial Average. The above lines are a ratio of the silver price divided
by the Dow Jones, and we can see that the drop since August 2011 has been much
larger than 2008. Using the drop following July 2008 as a benchmark, it appears
that selling stocks and buying silver at this time may be a great opportunity.
Here are some other 2008 versus 2011, Dow Jones Industrials comparisons:
In the above chart we can see many examples of the extreme correction since
2011. The current drop from top to bottom (2011-2014) even exceeds the Credit
Crunch of 2008 & 2009. When silver hit a low of $8.88 in 2008, it then
climbed over the next couple of years to an impressive price of $48.70. Using
the past as a guide, it may make sense to sell some Dow Jones Industrial Average
(Stocks) and buy some precious metals related investments.
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