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.
