mid-January trendlines

January 17, 2010.

Lately, I’ve mentioned to a lot of folks my confidence that a [renewed] sharp downturn in the prices of commodities, US stocks, and US real estate is imminent (and similar developments in other industrialized nations). While that confidence is informed generally by all of my analysis of the last 7 years evident in my publications (see the link to “up next investments” toward the bottom right of this page), it is particularly consistent with the following:

“By the end of trading today, [that was actually March 2nd, 2009] I have exited all my mid-term positioning for a drop in stocks, which I expect to soon be reversing for a multi-month rally, though there is still a potential decline this week.”

If you don’t know already, that “multi-month rally” carried on all the way into recent weeks (of early 2010) for many US stocks. I’ll show charts of that below.

First, if you did not get that message on March 2nd, 2009, I would be happy to put you in contact with several people who did, perhaps including some you may personally know. I also posted it here in it’s entirety within a day or two of first sending it in a private distribution: http://groups.yahoo.com/group/redpill_info/message/592

I’d like to mention now something that I did not happen to mention in that email, but that I have told many people elsewhere, which is that there were a set of signals that I specifically had in mind BEFORE THIS MULTI-MONTH REBOUND STARTED as to how to identify the completion i.e. maturing i.e. exhaustion  i.e. reversing of that trend which I specifically forecast would be a mere multi-month rebound (for particular reasons I will omit here for brevity).

The primary indicator, specified in advance of the multi-month trend even beginning, of that trend being ABOUT to lose momentum… was that investor confidence levels would EXCEED those of late 2007 (the all-time high in the pricing of most US stocks). That predictable development happened as of August 2009.

What is developing now is, I am confident, the last indicator confirming that the larger trend has already reversed. I am also going to be very specific now as to a few predictable developments, including a “bare minimum” price target.

Again, I trade with a long-term bias AGAINST investor confidence (just as I did from 2007-early 2009). That bias is called by various names such as “contrarian” trading, conservative trading, prudent trading, intelligent trading, and reliably profitable trading.

Note that in 2007, when prices and investor confidence were unusually high, the vast majority of confident investors were UNUSUALLY wrong (expensively so for them) in their over-confidence. By August 2009, without prices returning anywhere close to new highs, investor confidence was even higher than at the prior all-time highs in investor confidence. I propose- as I did in early 2009 when I forecast a new high in confidence based on a relatively minor rebound in prices- that the even greater extremes of investor over-confidence are about to be followed by even greater extremes in an “unusually expensive” development for these unusually over-confident investors- including not just in stock markets, but real estate as well as gold and silver and so on.

So, what I have also noticed lately is not just a trendline pattern or two, but some clear and confirmed breaks of those trendlines in several price charts- plus a pending breakthrough in a price trendline of the DJIA (DOw Jones Industrial Average) of 30 leading US stocks. As that stock index follows the others that have already broken trend (along with the US technology sector, which has been unusually strong in recent months), then the acceleration phase of all of them together (downwards in price) is ripe. The prior lows of March 2009 should be not just exceeded, but far exceeded and very quickly- eventually much faster than the price collapse of the last half of 2008. What is developing now is what I have been calling “the capitulation phase” since 2002 or 2003. The rally of 2002-2007 was an exhaustion phase, with a minor (or “secondary”) exhaustion phase just completing now- potentially.

Above is the DJIA 30, still holding above trendline as of January 17, 2009. Next is an index of 2000 “small” US stocks, which broke the similar trendline months ago, then tested that trendline from the underside, which held. However, so far, this index of 2000 “small cap” US stocks has continued to “float” a bit higher month after month since then.

Next is a chart of the US technology stock sector. It has been stronger than most US stock sectors for over a year. As shown below, it did not even make a new low in March 2009, but merely came close to the low of November 2008. Note that it has breached its trendline, tested it from the underside, and actually has led to the downside in recent weeks.

Here are two additional charts: one of the housing sector of the US stock market, which topped in mid-2005 (and which I noted as a top immediately thereafter, as I had been watching for it to begin fulfilling the forecasts I made in early 2003). Note that it’s 2009 high was in September, though it has still not broken the trendline that touches 4 lows of 2009. Last, the final chart, with perhaps the most interesting captions in it of all of these charts, is a foreign exchange rate (currency price) chart of the British Pound, priced in US Dollars.

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6 Responses to “mid-January trendlines”

  1. Ante Says:

    Can you estimate LOVE and FREEDOM, or fear, anger, greed and slavery, more precisely emotions, thoughts, words, and deeds in that period. We always create our own reality and these financial outputs are, FOR ME, pure reflection…there is correlation between financial and psychological flow and states..

  2. jrfibonacci Says:

    Ante, prices certainly can be viewed as indicators measuring aggregate hope or optimism as well as fear or conservatism- and anger tends to escalate when there is a sense of “exaggerated” optimism, then fear, then blame and a belief in betrayal and so on. Blame (and resulting resentment, as distinct from a momentary anger) are also adaptive in some way, or they would not manifest in biology and language, I propose.

    Note that I already sent you a link, Ante, to socionomics.org, to the best of my knowledge. There is a free video there that explores the idea that pricewaves are waves of trends in “social psychology.”

    However, there is nothing “wrong” with fear just as there is nothing “right” about confidence. Certain systems are destabilizing while others are emerging. Those who are invested in the destabilizing systems and patterns may experience fear, which can impel them to attentiveness, learning, adapting, and innovating.

    The current financial and accounting shift is that debts have been overvalued and currency has been relatively undervalued (relative to debts denominated in currency units as if those debts were identical to currency units, which simply is false). So, what is happening is a natural correction of an occasional excess. However, the excess of recent decades is unusually extreme, potentially threatening to the survival of the species. I do not say that with any worry or paranoia, but merely acknowledgment and peace.

    Now is a period for humanity to either self-organize into a “quantum leap” in consciousness, language, and social organization… or not. There is great opportunity and also great urgency yet underneath it all a great peace.

    Planets come and go. Species come and go- like the entire biological category of dinosaurs. Life is a privilege, not a burden. Even though our species may perish, it is not a failure for an old man of 85 years of age to die before he reaches 100. Failure does not exist except in language.

  3. jaguar Says:

    you mean the economy is like this J.r?

  4. jrfibonacci Says:

    Jaguar: uh, sure but, well, not really. The expansive and inclusive tendency on recent trends- like the political unification of Europe (and of “the world”)- is subject to reversal, like toward regionalism, decentralization, tribalism, divisiveness, isolationism, and possibly belligerence etc.

    That is also dis-integration or decomposition/deterioration of various structures of centralism, though the “counter-trend” of decentralizing also “flows” with a contrary force of centralizing. It’s like centripetal force and centrifugal- one tending concentrate to a center and one tending to expand. That is, it’s like breathing. However, this type of contraction is more like coughing, sneezing or even choking for air.

    Consider that human language and consciousness still rest on foundation that are hundreds of years behind the other technological advances, say of newtonian physics as well as quantum physics. As language transforms, so does human behavior and patterns and structures of other forms of behavior besides language (which I think of as a behavior).

    Some of the naive (idiotic?) tendencies that are evident in modern economic systems- such as the desperate greed of the western debtor cultures so eager to go deeper into debt without intelligent, rational consideration of the larger process- is precisely the tendency that “must” be exhausted for people to begin to take the leap into seeing beyond their own political borders and walls of their household. You do not have water without the water from clouds and so on. It’s all the same water. You don’t have gasoline without an intricate and “impossible” network of people and technology bringing it to your nearby gas station. Our complacency and dismissal of the rest of humanity and the rest of life is in many ways appalling, yet also predictable. What is happening is the perfect development to bring a crisis of such enormous implications that human culture on the whole will be permanently and fundamentally stimulated into a new organizing of patterns of language, perception, and action.

    The intelligence, I propose, must rise from the individual level up through samll communities, networks and “tribes.” Then, humanity can unify practically, but it won’t look like just an expansion of current international politics. It will actually be a radically new system, rather than just an expansion and integration of prior systems. We are on the verge of a global culture, but it could be decades before “the soil is prepared” – or even longer than that, plus there is no guarantee that we humans will not kill ourselves off before then. Such a crisis or dilemma is precisely the unifying issue that would not inspire but actually FORCE us to acknowledge the presence of the rest of humanity and earthlings in our midst. We still act- individually- like each of us is the only one here.

    We have not gotten yet that there may actually only be one of us. When language transforms and prior patterns of language disintegrate, like a certain language going extinct, the it is possible for mathematics to unite the world.

    Verbal language won’t do it. Mathematics can.

    By the way, I just “made that up” now, but consider that it is obvious and I simply just happened to notice it now and it’s nothing special at all- but mathematics actually is a unifying force because it is the same for everyone, though how we represent the numeric characters can vary from culture to culture- but there is no confusion in mathematics about “my mathematics is better than yours.” We know it’s the exact same one, just that we can use roman numerals or arabic numerals, base ten or binary and so on. But as a code, the code itself is just a tool. It is the “pure” code which is much newer- think about it- than any other major field within human language.

    People do not get into wars about how my way of measuring the circumference of a circle is better than yours. The nerdification of humanity is at hand, and consider that you know intuitively whether what I am saying is obvious or preposterous.

    It’s is quite apt for me to notice this and make this pronouncement on one of the driest and most mathematical of my blog entries/threads ever. You just can’t argue with the mathematics- well, you could, Jaguar, but that would be quite rude! 😉

  5. jrfibonacci Says:

    Note that a preliminary break of the trendline in US stocks (the Dow Jones Industrial Average 30) appears to have begun. Gains for the last two days for the positions I was already in approached 5% each day (or nearly 10% total, as in nearly a $1,000 gain on $10k of assets or a $10k gain on $100k of assets, etc).

    1/21: + 4.75% ~

    faz +7.73%
    typ +3.34%
    dto +3.25%
    zsl +4.77%
    (estimated)

    1/20: + 4.75% ~

    faz +0.25%
    typ +3.73%
    dto +5.10%
    zsl +9.97%
    (official data)

  6. jrfibonacci Says:

    1/22 was the best day so far (up 7% overall for the day). So, combining the last 3 days, that is a 16.5% gain in 3 days).

    Symbol Return Today (1/22)
    FAZ 9.05%
    DTO 4.21%
    ZSL 3.64%
    TYP 11.25%

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