As economic expectations continue to deteriorate the "Industrial Metal With A PhD In Economics" is certainly showing itself to be on that page. It has deteriorated in pretty much a straight line since May of this year with a high to low move of close to 25%.
The low posted this week at $391.57 is an almost perfect 76.4% pullback of the whole October 2023 to May 2024 rally.
76.4% retracements have always been my favourite Fibonacci pullback level, and we have seen them with abundance across markets this year. Sometimes they have been big turning pivot points and sometimes they have created a pause before breaking and moving back to the lows.
Which is it this time? While I would not pre-empt the break, I do have a firm bias that we will break lower. Why?
Firstly, because I remain convinced that we are heading into a Global slowdown with the US the next "shoe to drop"
Secondly, because of the longer-term chart below.
The longer-term chart looks remarkably similar to what we saw back in 2006-2008 and then 2011 (this time 2021-2022 and then 2024.)
This overlay suggests that at a minimum we should see a break below this $392 area and fall further to the 2023 low and trend line support around $352.
In reality, if a slowdown is really coming then we may ultimately see a move all the way down towards multi-decade support around $240-250
In 2008 that happened pretty quickly -By December 2008- Coincidentally also starting with a turn in May that year that also saw it 25% lower into August.... Or more correctly that fall was 24.6% which is EXACTLY the fall we have so far seen from May to August this year (24.6%), whereas after the 2011 peak the move was more gradual.
In particular in 2008 the acceleration point was Sept-Oct, a timeframe which I have been very focused on when looking at the equity overlay of 2000 and the bond market overlay of 2007.
So, my bias is that we may indeed head towards that $250 level and it may happen sooner rather than later.
