Two posts ago I observed the bearish rising wedge pattern in Fresnillo the key silver miner.
Well, that pattern has indeed worked out and was indeed bearish!
Please note: This is not investment advice in any way, merely a market observation about a stock that (unfortunately right now!) I do own to a small degree.
Here's a little idea. If this crash thing in the markets continues with strengthening US dollar, then we are in the second leg of the great deleveraging. That would be like 1933, perhaps.
For me,
1. Year 2000 = 1929 = crash of speculative stock market bubble
2. Year 2008 credit crash in USA etc. = 1931 crash in Credit-Anstalt in Austria, then Germany, then UK off the gold standard leaving only USA on godl standard (most prudent creditor nation). Senior currency GB pound debased while new senior currency US dollar remains prudent for a while.
3. Year 2011 = 1933 = crash in the stronger currency Euro area, Germany being somewhat equivalent to USA in the 1930s as more prudent creditor nation. Greece is on the equivalent of the gold standard in 2011 with no printing press, thus credit collapse moves to those weaker Eurozone nations locked into Germanic tight monetary policy, similar to to crash moving to the USA in 1933 because it remained on gold when all around were debasing.
WATCH OUT! 1933 IS ABOUT!
Here is a great chart. This is the chart of the platinum:gold ratio from stockcharts.com. Recently, the ratio has dipped below 1.0, a rare and remarkable thing for recent years.
I have been wondering whether it would be a good idea to swap some gold for platinum but here in the UK there is a prohibitive VAT tax on platinum of 20%, isn't that outrageous? That tax is on most things by the way; oh, the boundless greed of government!
I just listened to a super interview with Rick Rule on King World News, where he gives his always interesting view of the markets. This time he gives some time to platinum.
I decided to pull the $PLAT:$GOLD chart up again on stockcharts during his interview and lo and behold, the ratio is making a double bottom as I write at a ratio of about 0.97!
The first low was in the credit crunch of 2008 and we are right back at that low again, making an almost perfect double bottom. There has been a very slight bounce but it would be fascinating to see whether the ratio makes a double bottom and rallies or is it breaks down on this current Greek and Eurozone credit distress below 0.97 and plunges to a new low.
At any rate, one might therefore think of the gold to platinum ratio (that way around) as acting like a credit spread; this ratio is making a double top, or maybe it is about to break above 1.03 to a new high. Bob Hoye of Institutional Advisors and Howe Street radio talks of the gold:silver ratio acting like a credit sptread. I am gonna ask him if he thinks the gold:platinum ratio is similar.
Here is the gold:platinum ratio chart (the inverse of the one above).
I was looking at the new highs of silver miner Fresnillo thinking, "Great! I own some of this stock and it's going up repeatedly to new highs!" A little later, I read an article on bearish rising wedges and then I thought, "Uh oh!!"
Here is the chart:
Oh well, the chart won't come up on my stupid computer. Look at it here!:
http://stockcharts.com/freecharts/gallery.html?FRES.L
and tell me that it isn't an amazing example of a bearish rising wedge. Now some analysts say that this pattern is usually found in bear markets though here we have new highs with Fresnillo in a bull market instead.
The target might be about 1600 for Fresnillo since the downmove usually wipes out the entire upmove made while the wedge was forming. Note the lowering volume at each of the new highs, typical of the bearish rising wedge formation.
It will be fascinating to see if this wedge pattern works out or if Fresnillo takes off instead.
1. Wedge formed:
2. Breakdown? :
