The 2cs has now run a virtually identical sequence to the one of July/August 2007. This time 2cs was 62 at the high and 197 today. In 2007 it was 67 at the high and 198 at the low of the first shock wave of that bull market. Keep in mind that 117 was the score at the low of October 2014. I think shocks like that point much lower in due course.
This reprint from 2009 demonstrates what follows in mid course and at the end of severe bear market crashes. This isn't a prediction, just history of a few examples.
The two year daily chart shows an interesting adventure today. The Dow Jones 30 stock average opened way down at 15563, slumped to a low of 15120, rallied to 16360, and closed at 15876.
A standard Fibonacci division of the range from the May high of 18353 to today's low of 15120 shows that the high of today came within a whisker of 61.8% off the top of the chart, and the close was almost exactly 73.6% off the top. Remarkably the close was almost exactly the same price as the October 2014 low!
There are hints in this chart action and elsewhere that the Dow will see lower prices before long. But of course, anything is possible.
The VIX ETF I alluded to in my last blog post is UVXY. It is leveraged 2x the inverse of short term VIX futures. Strictly speaking, "Black Swans" are unanticipated. The crash-like behavior of stocks markets was anticipated by many, but not the instantaneous velocity of the decline. I took a two day gain of 58% on UVXY! I had entered the trade with the Scottish method sell signal on SPX.
I have followed VIX daily since its price data became readily available in 2006-2007. VIX (VXO actually) is used as part of the 2CS Sentimeter, so I feel comfortable with VIX and have a healthy respect for its quirky, and jerky, movements. So I took the profits on all my UVXY at 38.50, but left in place the DXD (leveraged inverse DOW 30) and SPXU (leveraged inverse SPX).
The 2CS itself (five day VXO * five day CBOE P/C ratio) was 118 on Friday's close. 110-120 is the range where most 5-8% declines end, but most of the five day total was contributed by August 19-21, so 2CS is probably going higher in the next two days. So I suspect SPX is going down on Monday or Tuesday. I'll try to put up a chart showing 2CS values at important high and low SPX points later today.
The Scottish trade entry system is set up for a reversal signal for SPX, but it was set up for one on Friday and didn't give a reversal signal. So we just have to see what the open and first one-half to one hour show us. Anything can happen on an open. The simplest thing for a reversal would be opening up (NYSE session) and the open being the low of the day.
Gold had a good week but I'm not convinced the low is yet in. If gold can stay above 1155 it has a shot at 1180-90. I Expect the US dollar to reverse upwards and gold to make a retest of the low, or lower before the end of the year. For the record, I have not sold any of my long term gold or silver, and I may add if we make new lows.
EDV, the ETF containing only thirty year US Treasury stripped bonds and coupons has made a good run, and I took profits on 25% of my holding on Friday. As long as economies nearly everywhere look deflationary, I think EDV has a shot at its all-time high near 140 eventually. That would mean about 2 1/4% on the thirty year Treasury bond.
It's short and sweet. For more detail read these others below.
Read brooks by Gary Shilling and Roger Bootle, and read Marc Faber's recent interviews. All available with a decent search engine or Amazon. Despite the major pullback in 30 year Treasury strips earlier this year, I hung in there and added more. My three largest positions are those bonds, gold, and cash. For "Black Swan" tail risk coverage I've been buying some of the leveraged VIX ETFs on weakness. I also have some dopey Hussman HSGFX. May the Lord have mercy on him and his followers!
I was short hedged gold and gold stocks for a good while but have covered near 1180 gold and am nibbling at silver. The shiny gold and sparkling silver was never touched.