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Actually I am not into labels….”Inflation/Deflation/Recession/Double Dip!” These are terms/labels…. NOT INVESTMENT STRATEGIES!!!
I am attempting to “enlarge portfolios, regardless of market direction, using the Power of the Pattern.” With this in mind, the above chart reflects that the CRB Index ran into its Fibonacci 61% retracement level, at the top of a trading channel, at the same time it created a rather large rising wedge at (2). If history is a guide, these patterns suggest softer commodities prices are ahead.
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The chart above was published on dshort and zerohedge recently. This chart highlights how much the current rising wedge looks like the wedge back in 2008. What happened in 2008? The majority of assets declined in value! I look at it as the “Great Escape” (see great escape post).
From a portfolio construction angle, I wouldn’t define risk as…”the 500 index could fall 50%!” I would define risk as…”how many assets do you own that move up/down/correlate the same?” If an investor own 1,000 investments and all 1,000 move up and down together, that would almost be like having all of his/her eggs in one basket!
Don’t overlook what the CRB pattern appears to be suggesting and how it could impact a portfolio as a whole, especially with this situation in the Dollar (see post here) and the Euro (see post here)
THIS DOES NOT MEAN COMMODITIES HAVE TO GO DOWN….patterns just suggest the odds are high they could!
Power of the Pattern did suggest though that the decline was close at hand, BEFORE IT TOOK PLACE, which did give investors a chance a to harvest ahead of time, to max out portfolio values...(see post here)
