A few years ago I was introduced to the concept of Fractals – some also call them analogs. The basic idea being that a trading pattern that occurred previously is being replicated again. Three + years ago there was a specific poster on another trading board I frequent who called himself Frac Man and put these comparisons up on occasion. In all candor I can’t remember his success rate in these forecasts.
Fast forward to today – the following chart is Not Mine. It was posted on the Slope of Hope blog by Tim who said it was sent in by a visitor to his site: http://slopeofhope.com/2011/12/the-analog-unfolds-gloriously.html – ( I like Tim’s blog a lot – though he would fall into the perma bear category) This person obviously did a lot of work as they’ve also counted the time periods for each of the moves. Looking the “roadmap” we are at or near point 13 now. You can see what happened at point 13 in 2008.
Obviously the line draw for point 14 now represents his projection for what comes next.
In April 2008 (point 13) the magnitude of global financial crisis was just coming into view. The IMF issued a statement saying mortgage crisis was “the largest financial shock since the Great Depression” and there is now a one-in-four chance of a full-blown global recession over the next 12 months”. In September Lehman Brothers filed for bankruptcy (either point 16 or 18) and the eventual bottom occurring in March 2009. If we see a major Euro bank failure like Santander or Societe Generale – it could be the waterfall catalyst
I’m not making a call that the market will unfold like this in 2012 – only putting it up here as a point of interest. I am looking very closely at January though, and if we see high volume large declines, I’ll revisit this chart.
In full disclosure I’m currently short SP500 via SDS at $19.08
