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Today's article focuses on an
"Aha moment", while drinking a bottle of home made
Port with a visiting friend . Fibonacci sequences
were discovered by Fibonacci around 1200 AD...it is only recently that
Fibonacci ratios, such as the golden ratio (1.618) were found to exist within
the framework of the Universe and evolution of life. Robert Prechter has written volumes of extraordinary articles
and books dealing with Fibonacci numbers etc. So I will assume that most
readers are familiar with concepts. The Fibonacci sequence is 1, 1, 2, 3, 5,
8, 13, 21, 33, 55, 89 etc. Which is based upon no, ni+no....
nj.. Ratios that are
derived from the Fibonacci sequence are 0.382, 0.5, 0.618, 1, 1.382, 1.5,
1.618 etc. These ratios play a significant role in market dynamics,
particularly in the field of Elliott Wave. Glenn Neely, the founder of NeoWave, which is a major advancement of the original
Elliott Wave Principle produced a book titled
"Mastering Elliott Wave". Anyone who is serious about Elliott Wave
should read his book. There are numerous advances Neely has made since this
landmark text, so going to www.neowave.com and reading "Questions of the
Week" can quickly bring one up to speed.
Fibonacci sequences are generally
seen as an expansionary trend, but what about if they were to occur in
reverse to a point of singularity. I borrow the term "Singularity"
from Einsteins field
equations which defines it as a point where matter is forced to a single
point, as in the centre of a black hole. Figure 1
depicts a Fibonacci spiral, with the reverse signature and noted future
dates.
Figure 1
Major crashes such as 1987 lose
perspective of percentage losses when examining the "Forest"
logarithmic picture of the stock market. Figure 1 below illustrates the
S&P 500 index from 1996 until present, as well as a window into the
future. Oscillators are included to show the 2000-2002 bottom
(blue) and the rise from 2001 till 2008 (green). Coloured
bars depict the 1, 2, 3, 5, 8 and 13 year cycles. As indicated for the past 1
1/2 years, a top in the broad stock market indices is not expected until
early 2013, as suggested by full stochastics below.
Figure 2
When people wake up on December 22nd,
2012 and realize the Sun was not sucked into a black hole and the birds are
still chirping, a "relief rally" is likely to last into
February/March 2013. At this point in time, the USD is likely to have based between 65-67 and will be set to rise sharply. A top in
2013 will represent a period of deflation lasting for at least 20-24 months,
which will see the US 10 Year US Treasury Index in wave (2). All of this
analysis was published last week for review.
While I was thinking this past
weekend about 2013, it dawned upon me that if this came to fruition, then
market tops from 1987 until present were following a reverse Fibonacci
spiral. The majority of Martin Armstrong's modelling
is based upon Fibonacci sequences...human behaviour
is predictable and follows a set pattern that tends to go to completion. So,
if the broad market indices are caught up in a Fibonacci spiral with a point
of singularity between now and 2019, how will this unfold?
The S&P 500 index is likely going
to complete the wave (XX).[B] correction in early
2012, with wave (Z).[B] to follow and complete in early 2013. During this
period of time, the 10 Year US Treasury Index is set to rise to near 5.2-5.4%
to complete wave (1). This will mark a top in commodities as well as broad
stock market indices that should see a sharp decline through 2014. This
period of time will be extremely hard on most, as commodity prices will have
consumed all disposable income, making cash a precious commodity. A
deflationary decline will see asset prices fall...rising asset prices are the
basis of sustaining pension funds so this will pose a huge problem. The price
of gold and silver will likely decline during this time frame as cash becomes
king.
From early 2015 until 2016, there
will be a bounce higher in broad stock market indices, but as the model of
the Fibonacci spiral indicates, volatility will become greater and greater
per unit time until the point of singularity is reached sometime in
2018-2019. During this period of time however, gold and silver bullion are
likely to go to levels only dreamed of before. Beyond 2014, when gold and
silver rise to above $3000/ounce and $100/ounce, respectively, expect
countries such as Mexico and South American countries to impose cut off
limits to gold and silver prices. For example, if gold goes to $6000/ounce, a
country might state that any rise in price above $2000/ounce is money that
goes to the government. Canada is likely to be the safe haven for gold and
silver companies until near the end of the crisis in 2018-2019. When this
point in time is reached, it will be time to quietly sell all positions and
hold cash and other assets.
Other asset classes besides commodity
stocks are likely to remain flat during the coming 7-8 years due to rising
interest rates and decreased available discretionary household income due to
rising costs, including transportation costs due to Peak Oil.
The period of time to act is now,
because money made from rising gold and silver bullion and their related
stocks lies directly ahead into 2012/early 2013. Money made from this will
help between the time frame of 2013 and late 2014 when prices of many stocks
become significantly cheaper. The S&P is likely to oscillate between
800-1400 over the next 7-8 years, which by 2019 will see many pension funds
wiped out due to excessive draw. Those with private pension funds could see
those assets seized in nationalization attempts to create stability
(short-term stability). So, the safest thing to do is own gold and silver
bullion and have precious metal stocks in trading accounts or tax-free
savings accounts.
Analysis from last week fits with the
above line of thought for this article, with respect to how market behaviour is likely to pan out over the course of the
next 7-8 years.
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
successful for wealthy and sophisticated investors, as it reduces risk and
enhances returns when the methodology is applied effectively. Those
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enhance your wealth should visit our web site at Treasure Chests
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