Financial Sense Blog

In the previous Danielcode articles I introduced you to the theory and origins of this concept and highlighted its historic accuracy over differing periods from 10 year trends to 4-hour charts. As the proof of the pudding is always in the eating, I bring you today actual trades and results from our members' charts.

At the risk of beating the proverbial dead horse, I start a fresh new year with another reminder for those within shouting distance of retirement: keep your eyes on the prize! There are many risks lurking that can negatively affect your hopes and dreams for an idyllic retirement.

On December 23 the Telegraph (UK) published an article by Ambrose Evans-Pritchard with the headline, “Crisis may make 1929 look like a ‘walk in the park.’ The article begins, “Twenty billion dollars here, $20 billion there…. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meager or fleeting effects.”

Although it always seems this way, it sure feels as if we’re entering 2008 with some of the most pressing issues for the financial markets and real economy we’ve faced in quite some time. Very important fundamental issues that for now remain very unresolved.

Let’s say the US economy goes into a deeper than expected slide and gets slammed with a nasty recession, S&P 500 profits shrivel up, and banks get hit with hundreds of billions in losses from sub-prime debt.

The markets sold off in early morning trading after the Institute for Supply Management (ISM) released their manufacturing report. The index fell 3.1 points in December to 47.7, putting it below the expansionary threshold of 50.0 for the first time since January of last year. December’s decline also marked the sixth consecutive decline in the overall manufacturing index, something that hasn’t happened since late 2000 into 2001 just prior to the last recession.

The real international struggle is between nations and governments. It is not between cabals or cliques or capitalist enterprises. It is not even between ideologies. When we read of a looming financial crisis, credit contraction or the falling dollar, we are reading about things that will affect nations.

"You can't say that" they cried. "What are you smoking" and "What about the Fibs" followed close behind and quite rightly. If my statement is true it provides a significant challenge for investors, hedgers and traders alike to consider so I must be able to adduce solid evidence to support my claim.

A previous WrapUp on October 10th looked at a potential rebound for refinery stocks based upon historical price relationships between crude oil prices and refinery margins, 3-2-1 crack spread.