FIBONACCI FORECASTER WEEKLY REVIEW AND PREVIEW
The theme of the week turned out to be terrorism. I suppose the best thing that can be said is the billions invested in local police forces turned out to be a wise investment. The most refreshing individual in all of this was the uncle. According to Uncle Ruslan, incredibly candid, his nephews were a couple of “losers.” Well, that’s true, but not exactly. I caught a Daily News article on Friday morning that reported the older brother was once an amateur Golden Gloves boxing champion, which most of you know about by now.
That was shocking to say the least. So the profile that the terrorist was a desperate radicalized loser was not exactly true. We don’t know what happened in the intervening years. Life has not been easy since the financial crisis. But if Uncle Ruslan was right about one thing, the acts of these two cowards well may bring shame down on the entire Chechen ethnicity. I certainly hope that doesn’t happen, but unless the proper message gets out there, Americans may come to believe the Chechen people don’t like us much. What these two characters accomplished this week brings the idea of terror down to a basic level. American city life is becoming more like that in Israel. For years, the Israeli people have had to deal with the possibility of a bomb going off just about anywhere. Boston proved it can happen here as well.
We had a great calculation for gold this week after the carnage. This is serious technical damage to the precious metals. Here’s the big takeaway. In various forums I mentioned the probability Silver would one day end up at 2200. I first mentioned it about a year ago. It didn’t make it until this week. What does that tell you? You can do your Fibonacci work and see the target, it will get to the target but in most cases it will require the patience of a saint to get there. Just because on the individual chart you might be trading you could see a deeper target. You have to consider market conditions and likelihood it can get there on whatever sequence you happen to be looking at. If you are trading a 5 minute chart and see a distant target you have to consider how sitting through various countertrend moves will affect your overall consistency and profitability. In the case of Silver, unless you were a long term bear, it was just not worth it to sit there and wait. These trades are to be taken one step at a time. Nevertheless, we’ve always seen this kind of potential, especially when each rally bounce failed time and again. In other words, every time the precious metals came to the cusp of breakthrough it failed. Every bounce left gold bugs extremely disappointed. None of you should be surprised precious metals finally fell through the cracks.
But the week ended with an interesting calculation for the precious metals. Gold found a low on 4/16 after being down 414 trading days so that’s really close. That could lead to a shift in the whole risk on trade. What is manifesting is a reversal in China. The Fibonacci legs are close, not perfect. Nothing else really checks out so I’ll look for a move to the gap down on March 28, we are almost there. We saw this before where we get a really serious sequence of short covering only to see it evaporate. We are probably close to a low because since it dropped below the 38% retracement the selling conviction never really kicked in. I think sellers are getting frustrated. So the best thing China has going for it is the possibly low in Gold. For those of you who are new we like to take one important calculation and leverage wherever we can.
Finally, this equity correction has us on an unusual winding road. I thought we would’ve turned a corner this week but then Friday hit and the VIX dropped again. Folks, we aren’t seeing a bottom with the VIX at 15. It’s not happening. We gave back about half the territory for the week. The more we get days like Friday, the longer this is going to be prolonged and let’s just say we have turned a corner. It does appear the high is confirming and that means the fear level is going to have to get thick enough to cut it with a knife in order for it to end. I’m not going to say it has to feel like it’s going down forever because we didn’t get that last year on both corrections but in a bull market fear levels have to rise to a very uncomfortable point on a given day for the market to really turn up. Real bear corrections do need that one day where it feels like we’ll never recover. We are far from that.
So Europe has lower potential but not much lower. We might have an interesting ‘tell’ in the FTSE. We are interested in Europe mostly because they’ve been leading to the upside since December and to the downside since March. If there is one chart in the world which might give us leverage on everything else I think it’s the FTSE because of its potential to form a triangle. There’s no doubt we are correcting and this is the correction we’ve been looking for. However, they don’t make bears the way they used to and for now I can’t rule out a consolidation that could still take these charts higher. If the FTSE recovers odds are the rest of the equity markets won’t go lower even if they don’t confirm new highs.
Getting to our market, the SPX has put in a good high for the time being right at Fibonacci 1597 which we first announced a week ago but confirmed as the week unfolded. There are several other calculations as well. But here’s what I’m seeing. I compare the readings and symmetry to other important tops and bottoms. This is one is okay. If it wants, it can do some damage. But I really doubt what we have here has what it takes to be a long term top. The readings are just not good enough. So this week could be better but overall I think we are going to end up with that winding complex road. Bears may not be what they used to be, but on the other hand we don’t see sustained buying pressure either.