Friday, 24 August 2012
Parabolic Exponential Price Structure
Analysis of Parabolic Exponential Price Structure
Attached is a chart on Iron Ore. Its recent performances have raised eye-brows.
In my judgement, it has satisfied its parabolic peak. We all know parabolic movements are never healthy, and they are often pre-signs of nasty storms. As with Iron Ore having made its last wave, commodities had also done so. They are highly likely to have reached their major peaks and going for long term commodities bear market.
This was what used to be the no-brainer statement from Jim Rogers: "If US Economy and World Economies recover, commodities would fly because demand would be up; if US Economy and Western Economies do not recover, they will print money (esp US printing USD) to pay debts and stimulate growth, and these excess monies will jack up commodity prices."
Hence the conclusion is a definite commodities long term bull market. It was very logical and a very hot statement, sucking in every possible money from traders, hedgers, retailers, investment funds, hedge funds and sovereign wealth funds (including Temasek/G.I.C towards Olam). However, is the financial market always a no-brainer? The market unfortunately likes to behave "dumb and brainless", thus having a preference to wipe out the smart and logical ones who are the majority. The minority (real market movers) accumulated shorts on them since 2010-2011 market phase with 2012 market phase as the killing phase (push down with deliberate volume).
The initial phase of commodities distribution has been completed. It is the killing phase that the financial markets have entered into. Otherwise how do the minority and real powerful hands make a killing from the majority who had been brain-washed into optimism in commodities and commodity companies?
From history, in a parabolic move of major index or single commodity, the average parabolic rate is a multiple of 9x (in 10years) on major index or single commodity. 4.5x is a first parabola resistance and 9x is the end of such parabola on average.