The “Power of the Pattern” reflected below that markets around the world had created bearish patterns back in May, reflecting a two-thirds chance they would all move lower (see post here)
From a portfolio construction standpoint…Risk can be viewed as “how far can something fall” or “how many of my assets move in the same direction!”
A large degree of risk was at hand in May due to… bearish patterns were at hand and the majority of markets highly correlating.
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Below is an update to the above 6-pack, reflecting that everyone of these key markets are lower in price 6 months later…
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The above 6-pack reflects that Global resistance is at hand in each of these markets at (1), at lower levels. These lower prices are results of the very large rising wedge breakdowns from May.
The “Power of the Pattern” suggested in May to lower exposure to risk assets around the world and until resistance is taken out to the upside, portfolios should be under-weighted towards the risk side.
I have enormous respect for Nature which is represented in the power of the pattern. It does have its limits though and we may now be testing those limits with an historic discontinuity or inflection point.
The discontinuity is the rebasing of CHF to a Euro peg, similar to what China did with its Yuan/Dollar peg. CHF/Gold was the old algorithm of hard currency and the Swiss saw the practical limits to that arrangement in FX and junked it, similar to what the USA did with silver coinage in 1964.
We could be in the glide-path to a terminal phase of a price revolution as documented in Fischer’s excellent “The Great Wave”, reviewed at
http://www.amazon.com/Great-Wave-Revolutions-Rhythm-History/dp/019512121X
Fischer points to four Great Waves of price revolution in recorded history, all brought to conclusion by the end of a great inflation coinciding with rapid expansion of human population. Sounds like the last thirty years’ demographic news?
If the arithmetically convergent Fibonacci series of Nature is being overtaken by the “limitless” exponential manufacture of fiat currency inflation, then this time the Eiffel Tower pattern may be truly different. The Eiffel Tower is itself a discontinuity of new iron construction overturning the previous limits to vertical constructions seen in old-school stone obelisks and brick cathedral spires.
None of those enduring projects were made out of printed paper.
Steve…
Comments don’t get much better than this one! Thanks for sharing.
Helps me for sure, I always thought people/countries could borrow themselves out of debt. 😉
Chris
The powers that be are doing everything they can to prevent, or delay the bitter medicine required to cleanse the bile from the global system. They can’t cure a bottomless pit by digging deeper! As my last partner on Wall St said: “you can’t make chicken salad out of chicken manure.”