The Rhymes of HistoryThere is a perception that worldmarkets will repeat conditions of the 1970's. Coupled with a longvaluation wave that necessitates investment in commodities forreasonable returns this appears to be an eminent supposition.
With this in mind one is tempted toguess where in spiritual terms one is in relation to time during thebull market in commodities in the 1970's. And perhaps aninterpretation of the following statistics will throw some light onthis .
Consider the following occurrencesduring the 1970's:
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The last high the S&P 500 made before its EMA(50) declined below the EMA(200) was in May 1969 at 105. From May 1969 to June 1970 the S&P declined from 105 to 72 for a loss of 31%. This occurred over a period of approximately 12 months.
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From June 1972 to December 1972 the S&P rose from 72 to 120 for a gain of 66%. This occurred over a period of 30 months. During this period the EMA(50) also recrossed the EMA(200).
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From December 1972 to September 1974 the S&P then declined from 120 to 65 for a loss of 46%. This occurred over a period of 21 months, and once again the EMA(50) went below the EMA(200).
And from the year 2000 the followingoccurred
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The last high the S&P made before its EMA(50) went below the EMA(200) was 1521 in August of 2000. From August 2000 to September 2002 the S&P went from 1521 to 828 for a loss of 46%. This occurred over a period of 24 months which was twice the first period mentioned above.
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From September 2002 to September 2007 the EMA(50) recrossed the EMA(200) and the S&P went from 828 to 1558 for a gain of 88%. This occurred over a period of 60 months which was once again twice the period of the second period mentioned above.
And in September 2007 the last high theS&P made before its EMA(50) went below the EMA(200) was 1558. Theconjecture is that since the two periods from 2000 to 2007 mirroredthe the first two periods form 1969 to 1972, but in the presentinstant only twice as long, that the S&P is now set-up for amajor decline twice the period from December 1972 to September 1974.This means a period of 42 months as beginning in September 2007 andending in March 2011.
Since the last decline from 1972 to1974 was worse than the decline from 1969 to 1970, it is reasonableto assume that this coming decline will be worse than the 46% lossfrom 2000 to 2002.
An estimate is 64% if one adds theaverage difference between the gain/loss of the first two mirroredperiods.
Hence the S&P is headed at or near560 by March 2011.
With these conjectures and with thatfact that gold did particularly well from 1972 to 1974, one canassume that gold is currently at the beginning of a major blow-off.
As to MFL its share price held steadyfrom 2001-2002 and even rose. So a similar performance is expectedduring this downleg.
As to the rest of the Juniors one canassume that the elites will keep their value and rise will the restis headed for troubled times. (70% of all stocks decline in a bearmarket)
A major sell-off is coming, with anattendant covering of all short positions by Hedge Funds. They willthen go long the Juniors with an attendant spectacular rise instockprices.
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