Thursday, March 17, 2011

The Same All Over Again? Q1 2008 vs. Q2 2011

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I have been saying for some time now that our current situation is very similar to Q1 of 2008.  I'll get to that in a minute but first a quick look at the price action of the US Dollar in the last hour or so.

Click on the chart to ENLARGE
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This is a daily chart of the US Dollar continuous contract.  The current daily cycle began with a low of 76.12 which was taken out to the downside after the market closed yesterday, Wednesday.  In the mean time, this price level was assaulted just a couple hours ago and the dollar was dropped all the way to 75.85. 
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The implication for the dollar is ominous as it has become both a bearish left translated cycle topping in only 4 days, but also a failed cycle as it has taken out the previous low of 76.12 in just 8 days.  The annual cycle low established last November at 75.63 appears to be the next destination.  After that it could be quite a fall for the dollar with 71 as a possible target.
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I have made a chart, actually it is something of a collage of charts, to communicate where I think we could be headed next.  I believe that Q1 2008 was a period of time in which the same dynamics were in play as today.  The stock market was just beginning to roll over into what turned out to be a protracted and very painful bear market leg - ultimately taking the S&P from prices north of 1500 to 666.  The dollar began a series of left translated daily cycles that then took out the annual cycle low and continued south with panic intensity.  Gold, silver and their miners were at the half way point toward the completion of their C wave.  Ultimately, both gold and silver finished that C wave with a parabolic finale.
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So, here is my collage detailing the price movement of mid December 2007 to mid March 2008 in the US Dollar, S&P, HUI miner index, Gold and Silver.  It seems to me that recent projections of $1600 gold and $50 silver are still very realistically possible.
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14 comments:

  1. John -- Your studies are truly outstanding. THANK YOU VERY MUCH for sharing them with all of us.

    I'm going through your "Gold and Silver Parabolics -- Part II". Was Part I the November article you did that appeared in a number of sources? (I saw it at Minyanville, titled: "Gold Heading for $1,600"). Was that Part I?

    THANKS!

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  2. Hi John,

    If you look at the monthly for goldcorp and angico eagle you notice that volume has been falling for a while... it seems that we may actually be heading down instead of up. Just a thought

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  3. Very minor point: on your gold chart, you have the C-wave peaking at 1029 (3 years ago today! -- Happy St. Pat's!!)

    I believe it actually peaked at 1033.90. (It was a Sunday night, and the rest of that daily candle is Monday the 17th.) Ahhhhhhhh -- I remember it well! I lucked out and sold half my entire gold stock portfolio the previous Friday, and the other half that Monday. "All out at the top" has stayed with me! ;^)

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  4. Thank you for the compliment.

    Well, to be honest, there never was officially a Part I. "Gold's 7 Parabolic Waves" published in early November and "How High Could Silver Go in December" published in later Novermber were essentially Part I.

    As gold, silver and the miners are about to embark on the upper leg of this gigantic C wave now literally IS Part II, but that is a play on words and context, admitedly.

    I do have a page dedicated to identifying some of my published articles - www.thetsitrader.blogspot.com/p/my-published-articles.html

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  5. P.S. That 2008 C-wave topped on "Bear Stearns destroyed" weekend.

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  6. Personally I like the possibilities for a leveraged play on silver now. Percentage-wise it likely will be THE out performing investment. (With a leveraged Soros-style gamble, it could even be one of those "once in a lifetime" moonshots).
    As you noted in one of your earlier posts, there's literally no overhead resistance level left on some of the stocks in the sector.

    PM's all up slightly this afternoon :-)

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  7. John, I try to study the PM market as dispassionately as possible. It's not easy. With due respect to all your readers of the finer sex this market is very emotional. That said, your near term bullish call in this part of the market is a very brave call and can only be admired. I feel the LT outlook is compelling. ST evryone has an opinion. I honor your willinness to provide an unambiguous SH call.

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  8. Rick - I take your comments as a compliment and thank you. And I will admit this has been an emotionally disturbing week for me, as well as for many others.

    I don't feel my call is particularly brave, fwiw. I have seen and studied how these cycles work, I have studied each of gold's 7 ABCD wave patterns, the silver parabolics and the mining index behavior in relation to their metals, the stock market and the dollar, and I am simply trying to communicate how all of these things are working together right now to produce an expected outcome.

    These intervention manuevers, such as was announced a couple hours ago do not work. All that is going on is some countries are agreeing to be bullies and print more useless paper (money)to manipulate the free market. As I believe you cannot ever get something for nothing, this "creation of wealth" out of thin air just works for so long and then it is ineffective. And I do not believe this will do one iota to stop the gold and silver parabolics that are ready to go.

    What pains me to think about is what our country will be like after the dollar collapses from too much of this fantasy policy. There will come a time and soon that the dollar will be falling in such a panic that the FED will have to stop throwing tinder on the fire by printing more. Then what?

    Anyway, thanks again for the compliment and enjoy the precious metal ride as liquidity comes racing out of the dollar to find a home that is not made of paper.

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  9. John,
    great work-on the subject of intervention by the BOJ and the G7--i believe as you have stated how much panic there is about the massive reversal of capital flows with respect to Japan.
    This announcement is of course designed to allow even more capping of precious metals but i suspect it will have the opposite effect and could trigger one of those unintended consequences that could be the start of the end of gold and silver manipulation .

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  10. "What pains me to think about is what our country will be like after the dollar collapses from too much of this fantasy policy. There will come a time and soon that the dollar will be falling in such a panic that the FED will have to stop throwing tinder on the fire by printing more. Then what?"

    another war, eep the public connfused all part of the "continous war" doctrine as led by sec of state(that women surrounded everywhere by monsanto x vps, agents,).
    then what? costofwar.com

    and the repeat of the failed nazi economies AGAIN, as the middle classes are turned on each other and they eat themselves.

    My thought is THAT most WW2 vets have passed on, the plan is to do it again, and be dammned what happens to the 'public' as war fevers heat up.
    WHO will pay for it?
    and how have they paid for it so far?
    (the queeens says "cut cut cut!" from her jeweled carriage- the Tories jump up to do so..)never, never cut the wars and 'police costs" that are bleeding this Democratic Republic.

    Another war for the Monarcies oil? attack ALL republican forms of governments, to support their King(and) queendoms oil leases. NOTE: iraq
    bp/royal dutch shell, china oil ...paid for by the you-knighted states.
    to THEM war "solves" everything, O re-elected, continuous wars go on and on...war stocks boom, on deaths of american forces and people eat themselves. 'cut cut cut" will not work either.

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  11. Hi.

    what is the timeline for gold to top according to this?

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  12. Thank you John...that sounds good

    sorry..follow up question:

    based on the charts above, HUI seems to have a target of 750 (rough estimate)in 6 weeks..is it possible for HUI to do that? It's already been super lagging...it hasn't even taken out its old high yet

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  13. That is an interesting question. I just did some quick calculations on the speed of the HUI when it finally broke above previous consolidations and it looks possible to reach 750 in 6 weeks. Underline the word possible.

    As for making a new high, the 2007/2008 episode did similar bobbing and weaving above the consolidation line before it exploded to new highs.

    My hunch is that the longer the consolidation, including this bobbing and weaving, the more likely we get an even more explosive move than seen in the past.

    As best I can tell, most folks are leaning toward first base, fearing a pick off from the pitcher. Instead they should be stealing second and thinking about third on the same play. When they get confident enough to try this play price will be much higher than it is now and that itself will make it very difficult for them to get in the game. Only when it is a "sure thing" will they get in and, of course, that will be near the very top.

    In any event, as it becomes obvious that the stock market is going to tank right along side the dollar, and miners are out performing everything in sight, you should get a very powerful move. Hot money will flee both the dollar and the general stock market in search for an asset that is actually appreciating (precious metals and their miners).

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