What To Expect in 2021 Part II – Gold, Silver, and SPY

This second part of our special “What To Expect In 2021” article highlights our proprietary Adaptive Dynamic Learning (ADL) price modeling system and is specifically authored to help you understand where trends, price rotations, and risks may set up throughout 2021.  In the first part of this article, we covered the ES, NQ, and INDU symbols – highlighting how each one of these US major indexes showed a moderately deep price correction would setup in Q2 or Q3 of 2021. The INDU showed the deepest correction event with a specific “ADL Price Anomaly” setup. This second part of the series will cover Gold, Silver, and the SPY. 

GOLD ADL 2021 Price Predictions

We will start out focusing on the Gold Futures Weekly Chart.  Overall, the ADL Predictive Modeling system is suggesting a moderate melt-up in Gold prices – targeting the $2200 to $2400 level throughout the first 6+ months of the year.  We don’t see the ADL system making any bold predictions about Gold prices reaching levels above $2500 in 2021.  This is likely because we don’t see any real risk factors lasting longer than 3 to 4 months on the other ADL charts.

Yes, we do see some weakness in the ES, NQ, and INDU charts in Q2 and Q3, but we also see a recovery taking place near the end of 2021.  Therefore, Gold will likely continue to melt up at a rate of about 15% to 25%+ per year.  If Gold ends 2020 near $1900 and is predicted to reach levels near $2400 near the end of 2021, that would represent a 26% price increase in Gold for 2021.

SILVER ADL 2021 Price Predictions

The ADL predictions for Silver show two unique setups/peaks that are likely to prompt a much stronger price rally in 2021 than we see in Gold.  While Gold continues to rally in a fairly consistent trend, Silver sees a rally phase in March through June 2021, then another rally phase in September through December 2021.  You can see these drawn on the Weekly chart below as to “humps” in the YELLOW areas.  Each of these peaks suggests that Silver will enter a phase where it will likely rally higher and faster than Gold.  First, targeting the $33 to $35 level in May or June 2021, then targeting the $39 to $40 level in November/December 2021.

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What we find interesting about this rally move in metals in 2021 is that the US major indexes are also rallying.  This suggests that the fear and hedging that drives the rally in precious metals is not subsiding (very similar to the period from 2004 to 2008) when the US stock market appears to be trending moderately higher.  This unusual setup suggests that precious metals are trending in a manner that suggests a broad market contraction is expected in the future (much like what happened in 2008-09).

SPY ADL 2021 Price Predictions

The following SPY chart shows the ADL predictive modeling system’s very unusual call for a deep late Q2 or early Q3 price collapse in the SPY.  The deep target, near $230, suggests that a market event is likely going to unfold sometime between June through August 2021 which aligns with the INDU deep downside price point.

The other thing that we find very interesting is that the SPY shows very little upside price trending throughout most of 2021.  The ADL predictive modeling system suggests the SPY will stay mostly flat to sideways in 2021 (excluding that big pullback potential near the middle of the year).  The lack of trend being displayed by the ADL for the SPY suggests the current rally highs may be reaching a near-term peak – where sideways volatility becomes more of a normal type of price trend.

Overall, taking all of these individual price predictions into consideration and attempting to consolidate a general response for 2021, it appears that trends may be a bit more muted in 2021 for the US major indexes and that a late Q2 / early Q3 deep pullback may be the big trend for next year.  It is difficult to see anything other than some moderate concern after May or June 2021 when we take a look at that deep ADL price prediction on the SPY and INDU charts.

We’ve recently highlighted that the major cycle phases of the markets have started to transition from Appreciation to Depreciation and 2021 may become a year where that transition phase reaches the end of the “excess phase”.  When this happens, we see a sideways volatile range in the market set up before the Depreciation phase trending begins (similar to what happened in 2010 through 2012).  Trending normally begins again after the transition phase is complete.

It appears that 2021 will stay somewhat muted regarding the major index trends. That means that skilled traders need to find opportunities by looking for unique sector/symbol setups that buck these lack of trends in the bigger indexes. We will be using our Best Asset Now tools and strategy to uncover and trade those rising sectors in an overall sideways or downward trending market. You can learn more about our services by visiting www.TheTechnicalTraders.com. You won’t want to miss out on some of these big trends in 2021!!

I want to wish you all Happy Holidays – get some rest so you are ready for all the action coming our way in 2021!!

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com