I have realised that there is something inherently wrong with my last post when I jokingly used the term Warlock. That implies that this market is controlled, which is nonsensical. It was a joke.
It made me reflect one what I do.
The way I deal with events is pattern recognition of repeating cycles. Some repeating cycles are scientifically exact, prediction of eclipses, rotation of the moon, etc. Some are very close to exact Halley's comets return, though this does vary ever so slightly, usually between 75-76 years but in 1910 it was 74.42 years, close but not exact.
Then there are general cycles. I live in Canberra the timing of the first frost varies considerably, but from the very first frost the knowledge that winter is coming is indisputable. If fire was my form of winter heating, it would be time to get in some wood.
That's the way I deal with the markets, pattern recognition. Charting is the main tool that I use for this purpose, it is far from an exact science, but it does rhyme a lot. That's why there is almost always a charting thread on HC for every stock with many chartists interpretations.
I have lived through many boom and bust cycles. Poseiden, oil shale, 1987, dot com and the GFC. Each cycle taught me a number of lessons. The lessons learnt are another tool to be used along side charting. Why should a nickel or oil shale discovery cause a general stockmarket boom? Greed and the FOMO, it's human behaviour. Its the same with the other cycles.
The charts during these booms can certainly tell you that a boom is certainly under way, but are next to useless in telling you how far they are to go before they eventually reach there peak. Looking back historically after the event the charts can make some sense. Wave recognition during the boom is very tenuous. After the boom and crash it all becomes far too obvious. A bit like after looking at the reasons why a horse won the Melbourne cup after the results are posted.
The smartest investment decision I have ever made in my life was in Feb 2008 is where I pulled the pin on all the markets and went to government bonds which were paying 4.5% at the time. I was a couple of years from retirement.
There were a number of influencing factors, with charts just one of these factors, my pending retirement, as was living through several booms and busts. There were other factors that played an import role as well. Missing the GFC resulted in a better pension, lump sum on retirement and protected both our and my mum's investments.
I have been waffling on for far too long. I was going to go into other lessons learned from the booms and bust but decided to take pity on the readers.
Back to PLS. In an early chart post I highlight the comparison between the previous up and down cycle with the up cycle that is currently happening.
Certainly the up cycle currently seems to be repeating several features of the previous upcycle. The 5 TD's surge to peak, including two gaps in just two days is identical. Coincidence?
I am reminder of something.
Waking to the same song by Sonny and Cher in the morning. Similar breakfast conversations. The trending into the waterfilled pot hole again. A crowd dancing to the Pennsylvania polka, again. The fuss being made about a rodent being pulled from a cage, again.
Events on the charts so far have matched, again. On the way up a least and appears to have started a turn.
Many will rightly say "Lies this isn't Groundhog day" but I have seen many of the crash cycles, on the charts, after the booms and boy do they rhyme a lot.
This isn't a crash cycle, its just a normal retracement. Normally they fall into the FIB ranges between 23-38%, some even extend down to the 50% level.
The last PLS cycle did not fit into the normal FIB retracement patterns. It actually set a new lower-low. It didn't make sense at the time during the fall, but afterwards many blamed it (maybe rightly) on the falling spod prices. After the event (so that's why Gold trip won the Melbourne cup at 21/1).
So I for one will be watching to see if; The roads are blocked out of town by snow. The waitress drops the tray in the cafe. The old man dies. The kid falls out of the tree. All leading finally to the slap in the face when trying to score, that puts an end to the repeating day
The last PLS down cycle had a series of charting events, just like recurring events in the movie. Last time all the gaps filled, the lowest when the FIB retracement went to 78% and then beyond. Then onward to set a new lower-low with was a real slap in the face to all holders.
We currently we have three unfilled gaps. I personally would not be surprised if two of these gaps filled. That would require a 38% retracement which is normal. The third gap would require a towards 50% retracement to be filled.
We are only one day into a possible retrace, that's nothing. The SP could continue upwards easily. There a no signposts signalling that 4.81 was the peak of this cycle, It could continue upwards for a while and then turn. If it runs for a while and exceeds the last lower-high of 5.26 then all bets are off and happy days are here again.
Many could say Lies your dreaming. That could possibly be true, but I am conscious of some of the charting possibilities and will be watching for the signals.
Just the way I deal with the markets so that I am not surprised by what plays out.
Even a slap in the face with a SP below $4. As always DYOR
(20min delay)