DJI/GOLD to drop longterm?
Updated
It may not be that simple...
Now that inflation is in the headlines, I decided to "follow the herd" and post an idea regarding it.
To compare the current financial market with the market 100 years ago, one may analyze the pairs DJI/CURRCIR, or DJI/ GOLD .
From the chart is trivial to realize that DJI/ GOLD historically moves inside the blue channel.
Historically the following occurred in this specific order.
A. The ratio increases from the bottom of the channel (without a significant change of course) to the top of the channel.
B. RSI maximizes and then breaks it's increasing trendline.
C. Near the RSI trendline break , price breaks it's trendline.
D. Then a retest of the price trendline occurs. Only then the drop is significant.
E. Price reaches the bottom of the channel.
F. After a while, the middle of the channel is tested with a significant reaction to the downside. (In 1976 it caused the ratio to stop growing and the price went below the channel)
G. The price now increases from the bottom of the channel, and the cycle repeats...
Right now we are are in a make-or-break moment.
We haven't reached the top of the channel and already the RSI trendline is violated to the downside and RSI indecisively fluctuates a little above the 50 mark. Shortly after the attempt passing the channel axis, a rejection occured. The price trendline is violated to the downside. It seems a second trendline exists now and looks intact.
On the chart there are 3 very distinct cycles, which peaked in 1929, 1966 and 1999. The cycle lasts about 35 years. I find it very interesting that it is that consistent.
Maybe the 35 year cycle is not that consistent and we are in an abrupt stop. And in the years following having DJI/ GOLD drop significantly. And it makes sense for a drop in stocks and gold exploding. We are talking about food shortages, water shortages and war. This is not a recipe for success for stocks. Most companies need a calm climate to grow.
Or maybe in the end, even though we talk about inflation , money losing it's value and the economy being in the brink of collapse, we will grow until 2030 and then we collapse. After all, recessions happen when noone expects them to. We are also above the 1M, 3M Ichimoku clouds.
Who knows what will happen? I certainly don't know what will happen. My gut feeling is "way down we go". It may be a controlled demolition of the stock market, but I don't think we have much room to grow for now in absolute terms.
Now that inflation is in the headlines, I decided to "follow the herd" and post an idea regarding it.
To compare the current financial market with the market 100 years ago, one may analyze the pairs DJI/CURRCIR, or DJI/ GOLD .
From the chart is trivial to realize that DJI/ GOLD historically moves inside the blue channel.
Historically the following occurred in this specific order.
A. The ratio increases from the bottom of the channel (without a significant change of course) to the top of the channel.
B. RSI maximizes and then breaks it's increasing trendline.
C. Near the RSI trendline break , price breaks it's trendline.
D. Then a retest of the price trendline occurs. Only then the drop is significant.
E. Price reaches the bottom of the channel.
F. After a while, the middle of the channel is tested with a significant reaction to the downside. (In 1976 it caused the ratio to stop growing and the price went below the channel)
G. The price now increases from the bottom of the channel, and the cycle repeats...
Right now we are are in a make-or-break moment.
We haven't reached the top of the channel and already the RSI trendline is violated to the downside and RSI indecisively fluctuates a little above the 50 mark. Shortly after the attempt passing the channel axis, a rejection occured. The price trendline is violated to the downside. It seems a second trendline exists now and looks intact.
On the chart there are 3 very distinct cycles, which peaked in 1929, 1966 and 1999. The cycle lasts about 35 years. I find it very interesting that it is that consistent.
Maybe the 35 year cycle is not that consistent and we are in an abrupt stop. And in the years following having DJI/ GOLD drop significantly. And it makes sense for a drop in stocks and gold exploding. We are talking about food shortages, water shortages and war. This is not a recipe for success for stocks. Most companies need a calm climate to grow.
Or maybe in the end, even though we talk about inflation , money losing it's value and the economy being in the brink of collapse, we will grow until 2030 and then we collapse. After all, recessions happen when noone expects them to. We are also above the 1M, 3M Ichimoku clouds.
Who knows what will happen? I certainly don't know what will happen. My gut feeling is "way down we go". It may be a controlled demolition of the stock market, but I don't think we have much room to grow for now in absolute terms.
Note
To update my very first idea:SPX/GOLD is dropping, for many years to come...
Stochastic RSI is probably moving downwards, and a significant resistance of the 1.272 retracement held strong. Down we go!
Note
Update:Pattern taken from November 2000
Note
Ah... the nostalgia of one of my first ideas...Now this chart clears it out.
Gold and Production Cost are SWORN ENEMIES to DJI.
(As spy_master mentioned, DBC*GOLD is a very reasonable calculation of inflation. To analyze old data, the only "cousin" we have for DBC is PPIACO. This chart basically calculates how high SPX has gone / can go compared to inflation)
Isn't it interesting that in this chart, the 2008 recession is not apparent? It is part of the "Great 2000 Recession" which lasted more than 10 years.
Note
The SPX chart shows something interesting...There is a lot above us...
Note
That tiny bounce in the middle, is the 2006 "bubble".Note
NASDAQ:I'm lovin' it!
-MCD
Note
Back in 1980, SPX dropped to it's 2.0 retracement, compared to GOLD*PPIACONow we could very well reach the same. A 60% drop from today's price looks guaranteed...
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