Fibonacci holds for S&P all-time high -- What's next?

Fibonacci Forecaster

The new all-time high in the SPX is…..1597. Yes, that’s Fibonacci 1597 and it’s not a coincidence it sold on Friday, preserving Mr. Fibonacci’s legacy at least for a day. But there were other signs on a weekly chart.

For instance, above is a long-term chart of the SPX. If we take everything from the bottom to the 2010 high we’ll call it A. Then we take 1.618 of A as measured off the bottom and we get the horizontal line which was taken out slightly in last week’s hoopla. That’s the real story of the week but we have another one that comes really close.

We don’t normally highlight this report on Gold but it’s incredibly noteworthy to see it break down from long term support on Friday. Let’s face it, it’s been asking for it for a long time. During the week we said Silver should perform better and it did until Friday. The true test was coming at the imbalance point which was never taken out. Important to Silver now it’s taken out the 161a line which very significant. These now have the opportunity to shed more price and end up significantly lower. The catalyst somehow was the fact that Cyprus is supposed to finance their bailout by selling huge reserves of Gold. Let’s think about it for a minute. While that may be true, if a seller comes in at ANY COMMODITY and dumps a big load at very important support the same thing is going to happen. This is fresh selling and the only difference here is we’ve identified who the seller is.

What is even more bizarre are the metals selling off without the big push up in the Greenback. We’ve seen over the years that when the currency and precious metal go the same way the higher probability is at least one of them is in a trading range kind of market. It could certainly be the case with the Greenback which is testing the recent flip up in polarity.

But Crude Oil is also declining at a time the Dollar isn’t rallying which is a no confidence vote in the economy. If you want to know what traders think of the economy, the best indicator over the past few years has been the energy complex.

Now on to how current events mix with a little socionomics.

Late Friday night a Huffington Post story (and I’m sure elsewhere but that’s where I saw it) it was announced the first place the Korean Kid is aiming is nukes is Tokyo. Quite frankly, I was shocked. The whole episode is shocking and it goes to show to what lengths a dictator will go to consolidate power. If you study the history of dictators, they all have one move for history. The difference here is most young dictatorships have internal purges. Saddam Hussein tested the loyalty of his military leaders, Hitler had the Night of the Long Knives and Stalin purged his generals to the point he weakened the integrity of the entire Soviet Army. But the Kid is looking to make a bigger splash. That’s just part of the story.

I’ve been following what China has been attempting to do in the North American market and Chinese energy interests have put down roots in Mexico and Canada. In the past 20 years the US and its European allies have taken NATO right up to Russia’s western borders, something Russia constantly complains about. The US has also developed a military presence in those former Soviet Central Asian countries as well as the western Pacific. According to a CNBC story the US plans to have 60% of its military forces in the western Pacific. That’s probably why the Kid is upset.

Next page: The Chinese strategy

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