Fibonacci

WTI Crude dropped its most in almost five months today, losing around 2.5%, beginning its descent after Draghi somewhat disappointed a hungry markets this morning (after better-than-expected claims data). Silver (which recoupled with Gold today) and Copper also started their drops at that point and extended the losses after the ISM Services miss. Gold leaked lower (though not as much as the rest of the commodity complex) even as the USD (which had been following its typical path of strengthening through the EU day session) dropped as an expectant EUR popped on no rate cuts. Stocks started their slide at the same time but broad risk-assets were in general leading equities lower (more carry FX and commodities than Treasuries today). We had a little bounce in stocks into the European close (up to VWAP) but that quickly fell back, lost today's lows, then broke yesterday's lows heading for one-week lows and the S&P 500's 50DMA. AAPL lost its 50DMA and closed there for the first time since earnings. After some noise around the macro data (and Draghi) this morning, Treasuries were extremely flat - trading in a very narrow range all afternoon - as did FX in general but AUD kept leaking lower (down 2% on the week now) and JPY stable on the week. Equities and credit re-converged today and late in the afternoon as ES (the S&P 500 e-mini futures) caught up to the downside of broad risk assets and stabilized in the late day ahead of tomorrow's noisy and meaningless NFP print. ES volume was average as it traded closest to its 50DMA in a week (and dropped the most in 8 days today closing near its lows of the day) and VIX, while off its highs of the day, closed above 17.5% - its highest close in over a week. While stocks are short-term in line with risk-assets, over the medium-term they remain notably expensive (especially to Treasuries since last week).

There continues to be no coverage of silver in the non specialist financial media and little coverage of silver in the specialist financial media. However, both the Financial Times and Bloomberg cover silver today which might be a harbinger of short term weakness. The majority of articles on silver are bearish and most bank analysts remain bearish on silver again in 2012 – as they have been in recent years. Prices will average $37.50/ounce in Q4, according to a survey of 13 analysts by Bloomberg. The lack of coverage of silver and consequent “animal spirits” in the silver market is of course bullish from a contrarian perspective. Analysts look set to get the silver market wrong again as recent rocketing industrial demand for silver, from solar panels to batteries to medical applications and growing investor demand for coins, and small & large bars is “diminishing a supply surplus” according to Nicholas Larkin of Bloomberg.  This has led to silver’s best January gains in 30 years with silver up over 20% from below $28/oz to nearly $34/oz. Barclay's estimates that manufacturers will need a 2.5% increase of the metric tons used last year and investment demand continues to grow due to risks posed by both inflation and systemic risks. Silver supply shortages are something we and other analysts who are bullish on silver have been warning of for some time. This is because the silver market is small versus the gold market and tiny versus equity, bond, currency and derivative markets.  This is why we believe silver should rise to well over its nominal recent and 1980 high of $50/oz in the coming months.

The Fib retracement from the highs to the lows in the cycle is now nearly 61.8 (at 1,228). The retracement from the highs to the lows in the first wave of the Great Depression peaked just below 61.8. Does history repeat itself, or come in tidy little Fibonacci packages? Are today's math Ph.D.'s even aware of retracements, or do they just know how to buy, buy, buy on ever declining volume?1,228 is the magical number on the S&P. We'll find out soon enough.

High-Low range comparison, Fibo time cycles & volume analysis charts of the S&P 500, ES & SPY. A bottom-line market outlook for prop traders, portfolio managers, market makers & individual investors. At day's end, if you are still trying to chase the Jones' performance off March '09 lows, what the hell else is keeping you invested in this Russian roulette equity crap-shoot? Please, please don't "invest" like Buffett, but do heed the gist of his approach to selectivity (shared in 1999), which essentially posits that ...

5 charts of S&P 500 Futures (ES E-mini) ... [1] Kase Bar 3 Point Range ... [2] Kase Bar 8 Point Range ... [3] Daily, 610 Simple Moving Average (SMA) ... [4] Monthly, Simple Moving Averages (SMA) ... [5] Monthly, Exponential Moving Averages (EMA)

In this piece, we compare the relative performance of the 6 primary domestic equity markets, highlight extraordinary Fibonacci cycles on the VIX, illustrate possible dueling Head & Shoulders patterns between the S&P 500 and the VIX and address the current technical profile of the US Dollar

Below is a long-term chart of the S&P represented in terms of ounces of gold. The peak was in 1967, with a June 1980 trough. The August 2000 peak is 200% of the '67-'90 move. The 1967 peak was the long-term 2001-2005 flat level before legging lower. And the March 2009 trough was at the 23.6 retracement of the previous move, indicating a repeat of the same shape seens in 1973. With gold popping at current levels, will the 38.2 level be a ceiling: will the gold price pop be sufficient to hold back stock prices, or like in 1973, merely a temporary resistance as the ratio drops much further?

The Shanghai Composite at a major technical crossroads

The current Fibonacci retracement visualized in both price change and time.