Friend-of-Slope Serge Ferra from ETF-Corner sent me the interesting parallel below. Serge is even more ga-ga about analogs than me, and he knows as well as I do that sometimes these work, sometimes they don't. All the same, the uncanny similarities are always interesting. The chart is of the SPY:
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My Miners Analog Goes Full-On Breathtaking
Past above; present below; the end of the world is at hand. Repent and become a Sloper. Behold, Tim makes all things new.
Analogs (by Springheel Jack)
I was looking yesterday for a reversal of whatever degree at my unconfirmed falling wedge upper trendline on SPX to confirm it, and we got that before it broke up. I'm expecting more upside, and will be watching the 1335 area carefully to see whether an IHS forms there. If it does then the rally will most likely be longer and go higher than I would expect otherwise:
When to Short Miners Again?
The "call" I am probably most proud of – – and the one which has benefitted me the least! – – has been my loud and persistent declaration to short miners. In the face of an army of precious metals kooks and email-sending weirdos convinced that gold was heading to $5,000 per ounce, I stood by my miners bearishness, and it's obviously been screamingly correct.
But with miners on the mend, when do we go in for the kill? After all, my analog holds that the majority of the plunge remains in front of us.
To help answer this question, I present a very simplistic view of the first instance; we have the peak in green, the first drop in blue, and the bounce in magenta. It's the magenta figure we want to know for the present GDX.
2012 Roadmap (by TnRevolution)
Happy Memorial Day Slopers! Before I dive into the Revolution roadmap, I would like to offer my sincere appreciation to the men and women of the U.S. military. Bravery and sacrifice are to be honored, and I thank you for that. With that said, bring our troops home, where they belong.
Now, let's get to the charts. I continue to use GDOW as the best overall view of what is truly going on in the markets. From a fundamental standpoint, I would argue that U.S. markets have been skewed higher as money has fleed other global markets, fearful of currency/sovereign crisises.
GDOW is currently resting on trendline support coming up off the March '09 bottom through the October '11 bottom. A break of this trendline, should lead to a quick impulsive move down. Also, notice the structure of the overall decline since the 2011 top. From February '11 through July '11, the index formed a downward sloping head & shoulders top. It then formed a similar structure from February '12 through April '12, as the move higher off the October bottom topped out. Ideally, what I would like to see is another similar structure develop. Let's take a look how 2012 might play out.
What I'm looking for over the next two weeks is a break of the trendline support, and then a quick move down beneath the October '11 low. This would then be followed by building a right shoulder through June/July '12, backtesting the trendline break as well. A break lower out of this downward sloping head & shoulders structure would have the potential to yield a powerful bearish move, a la 2008. Is this possible? Let's take a look at GDX and the VIX to see what they are saying as well.
As has been well documented on the Slope by our gracious host, the GDX head & shoulders top continues its breakdown. After making an initial impulsive move beneath it's neckline, GDX has enjoyed a bit of a bounce, moving back into overbought territory on the daily stochastic. It is ready to resume it's fall. Looking back at the 2008 GDX analog, I would put us around the beginning of September 2008. From September 2nd through September 11th, GDX fell from 37.19 to 27.86. The move was swift. I believe GDX is signaling the same thing it did in 2008, a deflationary crisis event.
On an aside, for my view on where gold is heading once this flush is finished, I encourage you to read a post TK (and Serge) made last August. Goldy von Moldy.
Lastly, let's take a look at the VIX. After breaking out of its inverse head & shoulders setup, the VIX impulsed higher, and then has since moved back to ease off its overbought levels, backtesting its breakout as well. Ideally, I'm looking for a quick move higher into the low 40's, before running into trendline resistance coming off the August/October '11 highs in the VIX. Notice that the VIX has continued to honor it's uptrendline on the daily MACD. A break beneath this trendline would be a red flag.
