What happened to STEEL?

This is a normal question to ask if the top steel stocks collapse 70%. But is it really about Steel or is it linked with the CRB (Commodity Index), which retraced 50% of its gain since 1968? And now is back below 1980 highs. Or is it about Silver, an industrial metal which retraced 61.8% of it’s rise from 1991? Or is it about the Gold – Silver ratio which started rising from Dec 2006 suggesting that the prosperity was over?
Gold – Silver ratio also know as the prosperity index has indicated two previous recessions of 1990s and the 2000 slowdown in US (SLIDE 3). And the very fact that silver, a proxy for industrial metals started underperforming Gold was an indication that industrial metal should start underperforming too. As you can see Steel vs. Silver (RIGHT) is a tight pair (more correlated) than other pairs like Gold and Silver (RIGHT). The silver vs. steel intermarket ratio moves around parity more than the gold vs. silver ratio. A crack down in silver had to effect Steel and other base metals, which happened. This was also in sync with our call on CRB in July 2008, when we highlighted the impending collapse in CRB including OIL (INTERMARKET CYCLES 140708).
In April 2008 (THE METALS MAZE) we also said, “According to metals, this was no big collapse. We need another few months to see what works, the news and emotional chaos or the Gold – Silver ratio.” The Gold Silver ratio rushed up from 31 July 2008 and we all know what happened (SLIDE 3).
Now what? The answers to this question regarding Steel and base metals also comes from understanding Gold and Silver relationship and other metals. First, Gold can not keep outperforming Silver. There is an outperformance – underperformance Cycle between Gold and Silver, which is nearing an intermediate top and suggests either a fall on Gold or a push up on Silver (SLIDE 3). So in any case we should be nearing a bottom on Silver and so on for Steel, at least for an intermediate time frame. Second, After a 61.8% collapse most assets generally witnesses a respite. Third, Silver has reached a key primary level, and we see it leading metals to the next up cycle till 2015 (THE SENTIMENT THEORIST). So the first cues of a turn around should come in Silver, before bases metals and Gold turns up. Fourth, An Oct low in equities should also help the steel stocks. And a rising stock market helps steel prices more than Gold. Fifth, Silver prices have also reached all time historical oversold zones of a decade (SLIDE 13). The last two time it happened prices bounced. And we expect them to bounce again.
We have carried anticipated and happened cases on Gold and Silver. And the complete steel complex, which we see bottoming soon. Let’s see.
Enjoy the latest WAVE.GOLD.221008
WAVES.GOLD is a perspective product published on Monday and Wednesday. The report highlights GOLD and other precious and base metals. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.
REUTERS RICS: XAU=, XAG=, XPT=, CU-NYC, .SPGSIZ, SPGSIA, .NSTL
ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM
ORPHEUS RESEARCH AT REUTERS – USA