May

25

 I remember myself as an over-worked youth, coached to death by the Soviet-era sports establishment. My classmates were summoned to agri-camps to gather potatoes in fields all summer long, while I was spared that draft on a special committee decree: to gather the likes of Gary Kasparov and myself every summer to a moderate Black Sea resort - where we were forced to discover new chess and checker ideas all day long, in-between coveted swimming breaks. Daytime brainstorming would spill into nighttime discoveries. Like a composer jumping straight from his bed to his workstation before he forever loses the chef-d'œuvre he dreamed up, we would share the novelties that came to mind overnight - over breakfast oats!

To this day, visions often hit me overnight: now, more to do with various chart developments. Root of this process may be random - and sometimes one can't be sure about the trigger. This time I know: it was our own John Tierney's note "Prices for commodities should no longer be expected to revert to "historical means.", which made perfect sense to me at first read… Until my mind was pinched overnight: this week's steady upward march in Gold, while everything seemed to be lining up neutral-to-bearish… Where did I see that exact daily chart pattern before? Bingo: the SP little march up toward its secondary top by October 5, 1987… But wait: that short-squeeze reversed on a dime, to nearly halve the price of stocks inside the two historic weeks that followed!

Caveat emptor: "chart-analogue analysis" is so multi-flawed. Different contracts, different leverage, different margins, different environment, different politics, different news, different seasons, different correlations, different dynamics: even I myself think this discovery is totally irrelevant. Does speculator psychology change, nonetheless? How many will run out and buy penny July puts (make it Silver for greater speculation) after Memorial Day? Barely a week after Goldman's upgrade of commodities!


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3 Comments so far

  1. Joel Friedland on May 26, 2011 1:44 pm

    I agree.

  2. brad allen on May 26, 2011 8:31 pm

    Hi Anatoly,
    Just wanted to say I’m a big fan of your posts…we have a similar trading outlook and your posts are like looking at my own thinking from a fresh angle. Just so you know, the gold/87 crash chart similarities were pointed out about a week ago on a barchart.com gold chart article. I will be following the correlation but unfortunately the idea is already out there! http://www.traderplanet.com/commentaries/view/93967-chart_presentation_the_gold_crash_scenario

  3. Tom on June 13, 2011 2:13 am

    Perhaps we rally a little in silver to get the rest of the public on board? This looks like a low ($35.80 area) until the $39-40 area.

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