Silver Parabolic Bounces and SP-500 Standard Deviation Extremes

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I do not have any positions related to silver, but for the heck of it I decided to explore what happens after a silver parabolic explodes. Certainly, when a parabolic move peaks, price drops like a rock from the sky. Then, at some point, it stops falling and price begins to rebound - heading higher in the direction of the parabolic top. The question I asked myself was, how high will silver rebound before getting knocked to the ground again?
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I decided to use the Fibonacci retracement tool to do my analysis. What follows are my findings using the silver parabolics of 2004, 2006, 2008 and 2011 as my data.
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Following this look at silver I will treat the reader to something new from www.indexindicators.com  I have visited this site many times for many years but not written about it until today.

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The 2004 silver parabolic retraced to the Fibonacci 50% level then fell to well below the 23.6% measurement.
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Click on any chart to ENLARGE
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The 2006 silver parabolic retraced to the Fibonacci 61.8% level then fell to well below the 23.6% measurement.

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The 2008 silver parabolic retraced to the Fibonacci 61.8% level then fell to the 0% level and kept going towards the dark side of the universe. This is what happens in a deflationary period - all assets lose value (even silver and gold).

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The 2011 silver parabolic retraced to the Fibonacci 61.8% level and so far has fallen to close at the 38.2% measurement.
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Using the three previous silver parabolics as our guide I would guess that silver, as it has not made it below the 23.6% yet, is going to do so soon. And if we get into a deflationary spiral (as I personally am nearly certain we will later this fall) silver could, like 2008, reach the 0% level and just keep going south.










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www.indexindicators.com  Great site.

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This first chart looks at the average RSI (5) of the 500 stocks comprising the S&P 500 and calculates, with respect to the same daily data of the past 3 years, the standard deviation level of the current reading.  Translation: how unusually extreme is the current RSI (5)?
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If the standard deviation reading is 0, then the current reading is not extreme at all.  Indeed, the RSI (5) would be considered very average. However, we see that the standard deviation is -3 (green squiggly line). In simple terms, a reading of -3 is way way extreme. Also, notice what seems to happen to price (black squiggly line) when the standard deviation number reaches such an extreme.

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This second chart from www.indexindicators.com is a 2 year look at the percentage of S&P 500 stocks that are below their 200 dma.
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Again we statistically know that we are not only in an unusual market, but also one that is not at all likely to continue as is. Another -3 standard deviation reading here is literally off the chart.

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And finally, this third chart covering the past 2 years considers how far the current S&P price is from its 5 dma and assigns a standard deviation calculation.
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This time the reading is -4 standard deviation below "normal". And again, examine how price responds to these extreme and rare readings.



Gold: Forgot to mention this. The last time gold went up 6 weeks in a row was fall 2007. In the past 4 years the most consecutive weeks gold has been positive is 5.

Last week was week 5. Odds do not favor a week 6, though it could happen, of course.