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On holidays this week has definitely been
interesting. The new term for investing in today's market should be coined
“Volatility Investing”. Since most trading is done by computers
with complex algorithms that when their stops are hit, cause mass liquidation.
For this reason, everyone should know that the expected move expected in 2012
is going to be finite in price and time, not “To Infinity and
Beyond”. When I first made the observation that the markets were
following a Contracting Fibonacci Spiral, my first thoughts were that
something must be overlooked in my mind. Further thinking on this topic over
the past six months just makes one realize the entire Universe runs on
mathematical principles at many levels and under different conditions...the
collective human psyche is just another example.
As analysis will show today, the US Dollar still has
another 3-4 weeks of sideways to upward grinding upward price action.
Sideways to slightly negative markets at the end of January will convince
most that the year will end lower than this year and that deflation is going
to kick in. Everything travels in waves and will continue to follow course
until conditions have been satisfied for a reversal to occur.
There are a few interesting points to note:
- At
every time point on the Fibonacci spiral thus far, each subsequent point
in time has reached a higher high and on the same note, each gain has
been smaller and smaller on a percentage basis than the prior move (e.g.
DOW at 40 in 1932 to 995 in 1966 versus any other time period
examined...nearly 44 fold higher during the above time frame).
- Each
top has been followed by an excruciating decline of at least
40-50%...this cycle calls for tops, not bottoms.
- Each
point of the contacting Fib cycle is more condensed than the former, so ergo, volatility will increase as we continue to
reach the point of singularity nearing 2020-2021.
- The
collective human psyche is driving this cycle...all events that occur on
an individual basis be it personal success or failure, deaths, births,
accidents wars etc. etc. are randomly occurring while the cycle tops are
like towns on a road map with a train holding a constant speed between
them...the destination will be reached at a particular point in time and
what happens to people on the train during the trip does not affect the
outcome of reaching the destination. Like anything, this cycle could be
stopped by a nuclear war, asteroid hitting the earth or any event as
large as those mentioned...cycles can be stopped, but recognition that
we are in a large cycle nearing completion is worth taking note over.
Because the broad stock markets are trapped in a
spiral does not mean that tops are limited to other sectors. Here is another
revelation I just had as I finish my third cup of coffee...gold bottomed
around 2000 and topped in 2008....that is approximately 8 years... September
10, 1999 was the low and May 1, 2008 was the high....this represented 3156 days, or 8 years, 7 months and 21 days (7.5% above the
perfect value of 2922 days for an 8 year time frame). If we take 61.8% of
this value, then the next top for gold is due on Monday September 2nd
2013...If we put +/- 5% onto this and assume that it will be earlier rather
than later (due to the first part of the cycle), then the earliest expected
top is February 25th, 2013. Since the first leg was longer than 8 years by
7.5%, it is more than likely the end of January 2013 is a target date...it
could occur nearer to mid January 2013, but this is
the time frame to expect action.
The above is an observation, but it is rather
interesting that gold is operating on a smaller Contracting Fibonacci Spiral
Cycle that is in synch with the larger Contracting Fibonacci Spiral the
markets are in. Adding together the sum of parts, the price of gold will move
up in price in 2013, 2016, 2018, 2019 and 2020, with each subsequent leg
moving less in percentage terms than the prior move. Gold advanced 4 foldish from 1999 until 2008 ($252/ounce to $1046/ounce).
This suggests that gold should top out below $4000/ounce over the course of
the next year (Personally, the highest I think it can reach is $3074/ounce).
The price of gold is likely to top out near $7-10,000/ounce by 2020, but each
advance will be lower in percentage terms of the former leg.
I thought I would share this thought with everyone,
because the cycles the markets are presently in will be difficult to
navigate. So, as many over the next month come out with some new but rare
fish head pattern or something like that, remember that all markets are
interwoven and that the principles of Fibonacci are throughout nature. The
cycle we have been in since 1932 has dates locked in, with all events
randomly occurring. When late 2012/early 2013 arrives,
remember to take money off the table. Everyone, including fish head guy will
be screaming hyperinflation, when in fact the exact opposite (deflation) will
be in place.
I have mentioned this enough over the past six
months so any future articles will simply be index related. I wanted to post
this gold info to illustrate that the principle behind the Contracting
Fibonacci Spiral is not a one-off thing, but likely to be seen in many other
examples in history, either as a pure number or some transformation based
value.
Have a great day.
David Petch
Treasure
Chests.com
Treasure Chests
is a market timing service specializing in value-based position trading in
the precious metals and equity markets with an orientation geared to
identifying intermediate-term swing trading opportunities. Specific
opportunities are identified utilizing a combination of fundamental,
technical, and inter-market analysis. This style of investing has proven very
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