The Dow Jones (IA) / Gold Ratio and the U.S. 30-year Treasury Bonds / Russell2000 Index Ratio are coinciding at key levels. Both ratios are at historic turning points, foreshadowing their respective Phase Transitions! (and as such, indicating highly volatile, multi-standard deviation moves in the global equity indexes.) The title chart is an extended (120 years) view of the ongoing DJIA / Gold analysis, this time applying the same metric as used in the earlier US 30-year Treasuries / Russell2000 Ratio analysis;
... For easy comparisons.
U.S. Market Capitalization / U.S. GDP now having exceeded 2.75 while the Historic Norm (not the low) remains 0.78 - i.e. ~70% below current levels(!!) -, it is rather self-evident that these phase transitions are likely to result in major (equity) market declines, and on a global scale. U.S. Margin Debt / U.S. GDP has also surpassed all previous, historic records (by a very wide margin!), not only in nominal measures but also in relative terms! I.e. Once this trap door opens (forced liquidations??... The most likely, least resistance path, catalyst) an initial 20%-25% decline in the SP500 would be well within the minimum expected.
This is the analog version and close-up of the main chart - DJIA/XAU; ... as it currently stands on the Weekly. - A major SHORT!
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Was Graham right, back then - and ever since?...
"Making money in the stock market was now the easiest thing in the world. It was only necessary to buy ‘good’ stocks, regardless of price, and then to let nature take her upward course. The results of such a doctrine could not fail to be tragic.” - Graham & Dodd, 1934
Blue Chip Performance: 1973-1974
Du Pont -58.4%
Eastman Kodak -62.1%
Exxon -46.9%
Ford Motor -64.8%
General Electric -60.5%
General Motors -71.2%
Goodyear -63.0%
IBM -58.8%
McDonalds -72.4%
Mobil -59.8%
Motorola -54.3%
PepsiCo -67.0%
Philip Morris -50.3%
Polaroid -90.2%
Sears -66.2%
Sony -80.9%
Westinghouse -83.1%
... Just one of the many period examples, since then (1934).
Great analysis, I think we are in a bubble but the Fed will keep stepping in to protect the big institutions, so not sure if we will see a freefall crash. And crashes are notoriously difficult to predict. I shorted the market at 31000, thinking a crash was imminent and now hit my SLs! And only have a small position open as a short. Hope you're right!
Nemo_Confidat
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@mnukmn, If you liked it, did you mark it as such("Like"? ;-) With US Market Cap+Margin Deb) / 2x GDP at a +300% premium, would you want to be long here? - And if "No", then what's the opposite of "long"? ... ;-) (As a side note; I doubt that the Fed.'s balance sheet is a match for those earlier mentioned numbers.- I.e. $45-$70 Trillion, dependent on who is counting.)
shahzaib70
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Ita really helpful
Nemo_Confidat
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@shahzaib70,Hopefully it helps to keep things in perspective. (as to the size and prospects of this current bubble.)
youaresmart99
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Great Analysis! Keep it up. Thank you for sharing.
Thanks for sharing.
Do you have any specific targets for gold and silver?
What do you think about pm miners?
Nemo_Confidat
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@Ymir1, You're welcome.
Silver; Short Target: $19.60;
Gold: I do not trade the miners outright but currently, I also do not see any reason to own any of them (neutral).