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.
