Roundup

Yesterday we had a geomagnetic storm that although forecast was stronger than predicted. Today is the full moon. Later today we have the Greek swap decision result. Tomorrow is the key US jobs report. I will be letting all that play out and see on Monday whether there might be trade opportunities.

The storm:

With reports of enough creditor consent to pass the Greek debt swap, the markets may get satisfaction, but as one or two on here have suggested, the Euro debt issue may rise again. I keep my eyes on CDSs and yields and although still contained currently, the Spain CDS chart looks like it has unfinished business eventually ahead – still in a solid long term uptrend:

Source: Bloomberg

Supportive of such developments would be Spain’s peak debt rollovers this year:

Source: Bloomberg / Acting Man

Turning to the stock market, a look at the US small caps that rolled over first shows them already at rising support, whilst there remains a lower twin support of fib and horizontal s/r.

Laslo Birinyi has been in the media making analogies based on bull market internals and action that followed overall sideways years like 2011, and quotes  1982 and 1990, both very bullish years that just kept on rising.

Source: CNBC / Ticker Sense

Meanwhile, Market Anthropology make an analogy with 1994 which implies first a pullback then revisit of the highs in April for a double topping process.

Source: Market Anthropology

And turning to gold, we see it has bounced at the 38 fib and has the potential to make an inverted head and shoulder pattern.

And Goldrunner indentifies similar chart patterns from 2005 and 2006 that would be supportive of a bullish upward break from here.

Source: Goldrunnerfractalanalysis

The problem with analogies and fractals is that even the most compelling can sometimes turn out to be red herrings. Recall that stocks in the first 9 months of 2011 made a series of waves that looked very similar to the 2007 top. It was only once a higher low was printed in November that the fractal was decisively negated. That said, historic repetitions and time cycles are fundamental in my approach and I can point to many that work out. The Mammis sentiment cycle was a recent example of an analogy that played out very accurately.

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25 thoughts on “Roundup

    1. I bet not this time. Afortunatly we have now -after 8 years of irresponsable socialist goverment- professional ministers and the situation is delicate, but in medium term we are on the right way.

      From St. Sebastian, north Spain.

      1. Now, there is a quit in the debt in energy deficit, private builder debt, tax …… a quit of 20% in private debt

  1. As well as 2005 and 2006, the current gold corrective pattern is also uncannily similar to Oct/Nov 1979. There is a detailed chart in this article:

    http://www.bullnotbull.com/archive/gold1980.html

    By my calculations, the current correction is consistently taking 3.65 times longer than 1979 (measured in three ways – from peak to first low, from peak to second low, and from first low to second low). If this propartion were to continue, a breakout would be due towards the end of March or early April…

    1. Mark, thank you for your link. I have a different opinion related to that 1979/1980 chart. I think that we haven’t seen the final low yet and we are now circa at Oct 23, 1979. This would mean that the current correction is not 3.65 times but approximately 8 times longer and the breakout above $1,921 would occur cca in March 2013. The final peak (around $3,500) would then occur cca in March 2014 which would be btw pretty consistent with John’s predictions based on solar/geomagnetism peaks. I don’t suppose some substantial upward moves to occur this year because there will be no US QE this year probably (Fed isn’t usually active in the last year of the pres. cycle).

      1. Milan, its always interesting to hear alternative opinions. I’m not convinced that gold will definately breakout during March 2012 – just a possibility. I agree its also possible that it could wait until March 2013 – it could take that long to get rid of the “weak hands”, or it could break quickly to leave them behind.

        If you’re right, and gold dips to $1500 or below, I’ll be buying some more..!

        As for waiting for more US QE, it seems the markets don’t want to make any decisive moves until something is announced. I noticed the legendary Richard Russell (Dow Theory Letters) recently described it as “like waiting for a hip injury to heal”!

      2. Hello Mark, if my interpretation of the chart is correct then the last dip should occur in May 2012 and reach somewhere between $1,445 (38.2% fibo from the 2008 low) and 1,470. And then, there should be more than a half-year sideway action which would be very frustrating :-).

        Thank you for your interesting thoughts.

  2. Re Gold/Inflation, I accept that we are unusual times but I can’t help noticing that the the last time Gold went parabolic it was in Yr 3 (1979) of the Pres cycle. This is when metaphorically the US administration would have its foot full to the floor. This cycle has been slightly corrupted because Obama inherited a falling rock economy and instead of dampening growth in the first 18 months and then stoking it after that: he has had to adopt a more aggressive policy response from day one but then manage the levers to achieve full effect by polling day in year 4.
    If you assume that the climax to the parabolic stage is in a year 3 of Pres cycle then the next yr will be 2015.
    If you again make a rhyming comparison with the 70’s then we would be 1976 now: A year when gold fell and real interest rates though negative rose in real terms. You could argue that Gold has been going nowhere or even falling since it’s overbought position last Aug …..Not dissimilar to 76?
    Again working with this theme then Gold bottomed in August 76 before its parabolic move ensued. Over 3yrs.
    If you look at the rhymes of the tech market and Gold ….so far they have been very acurate.

    Here are the major tops on the tech market bubble.Stages 1 – 5.
    Stage 5 being the mania stage.

    Here are the same levels with tolerances on the Gold market. As JH says we have either already had the mania stage or price has just got over- extended and once that has been unwound then the full stage 5 will flow.
    If we are equivalent to 76 then Aug would be a good buy point. Which it often has.

    This shows how the US funds are largely underepresented in precious metals.
    So my general take is…to be long …which I am ….to add when congruent signals suggest……..first fall was 20%, second 15%….third would take a low to 1610?
    Seems like a reasonable level to add again if it gets there as it works along the falling wedge.
    Just thoughts

    1. Anyone who is interested can track it here: http://www.swpc.noaa.gov/
      Yesterday’s storm made the spike I showed earlier, but then the storm ceased but today we have another one. It’s currently a G1, the worst being a G5. The chart at the bottom left of that link shows the 3 day history and updates every few hours. It shows red bars currently – this means storm – when they turn to green again it’ll have ceased.

  3. Preston 123 2011 was the third year of an election cycle when the foot was to the floorboard the whole time. Thus mamimum speed should have been achieved. Not one comment considered a bear mkt parallel.

  4. Hi guys, I’m going to away the rest of the day, but I have updated the short term models and you can see the impact of the persistent geomagnetic disturbances – namely, downside should be ahead. On the flip side, sunspots have shot up, and looking at other technical indicators it’s a mixed picture. As stated I am sat on my hands until Monday, when I expect there to be a little more clarity. The jobs number today is historically a market mover. So let me suggest two scenarios: one, we sell off today on the jobs number, confirming a market correction began 2 March, and in line with my geomagnetic models; two, we continue higher into around 22 March to create a significant divergence from the models at new market highs, and a potentially nice shorting opportunity.

  5. Hello John

    Many thanks for making your fascinating research public!
    Noticed you use the word ”inversion” a couple of times in your work, and when looking at your charts over several years one can sometimes see your curves appearing out of phase with the stockmarket for months at a time. Is this something you’re looking into, hence your reference to ”inversions”?

    Seems the Chinese were well aware of sunspots as early as the Shang-dynasty from 1500 B.C. onwards.
    Aurora Borealis from space:

    Thanks again!
    HP

    1. Hi HP, I see some clear inversions but I can’t find a scientific or logical explanation why yet. I have read cycles analysts referring to inversions appearing to just accept them, but I want to know why. So for now I acknowledge them but they need further investigation. If on the other hand you are referring to seeing some general drift away from my idealised models or concepts at times, as opposed to true inversions, well that happens at times as other factors influence and there’s no holy grail discipline. Hopefully my analysis during the trading week demonstrates that whilst I believe solar phenomena deserve a more central role in trading, other disciplines very much need consideration too and I try to draw all together. Trading is a game of probabilities and so we need to bring all valid influences into that equation. My site highlights the error traders make in ignoring solar phenomena in that – but ultimately by their nature sometimes low probabilities do occur, and normally reliable phenomena don’t work. It’s the nature of the beast.

  6. Hi John.

    Agreed on all points.
    Our eyes will ofcourse easily find patterns were they might not exist, but it surely ”looks” as if the slow drift in and out of phase between your model (mostly the lunar-cycle) and the stockmarket might not be totally random, it looks modulated.
    Hope you have a mathematician buddy who could crunch the numbers and tell if there’s any statistically significant intermodulation going on (phase or frequency or amplitude in any combination) between your model and one or more other external cycle.
    I’m sure you’ve already thought about this, I’m just talking, sorry 
    Would be fun if “back-engineering” 30 years of data reveals other cyclical components in the difference between your model and the “reality” of the stockmarket.
    I know there’s been alot of searches for “the inner cycles” of the stockmarket, but this would be a bit different, as the basics are already in place with your cycle.

    South-African website with recession forecasting. Very interesting:
    http://www.powerstocks.co.za/recessionspublic.php
    http://recessionalert.com/a-stylized-approach-to-recession-forecasting/

    Regards
    HP

  7. John
    I posted this on another thread but it seems more appropriate here:

    after seeing you work John I got curious about the Moon-Gold relationship. I plotted the New/Full phases on the continuous gold price chart XAU/USD. There is a pretty accurate relationship between New/Full phases and High/Low phases with an 8-10 days lag.

    see here for the chart:

    This model signals a low for gold price tomorrow or monday although I rather hope we hit the low yesterday (early) as gold has taken a beating recently.

    Check it out and let me know what you think or any inout you feel is useful

    thx
    L

    blackswancrash@gmail.com

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