Thursday, January 20, 2011

ZH: "Biggest Market Sell Off In Months Coincides With Largest Domestic Equity Inflow In Years"

When the masses buy in, it's time for the smart money to sell. Notice what happened last time mutual funds had inflows.

11 comments:

getyourselfconnected said...

Shocker!!!!!

whydibuy said...

WOW, the definition of a sell off is sure getting stretched here.

I think the dow is down all of 40 points from its two year highs.

Pretty thin for a clarion call to the bomb bunker, lol. Bears are getting desperate. ANY down move is now a S-E-L-L-O-F-F !!!!!!!!!

Jmperry said...

CP,

Good call on silver so far. I find it very telling that the price is falling despite all the hysteria about a silver shortage. Imagine what will happen once sentiment wanes...

Jmperry said...

In case you haven't seen it already, you may be interested in this post from Value Investors Club. It's quite long, but worth reading:

****

I believe the timing is wrong to open a position in silver especially relative to gold as silver has once again gone parabolic.



A list of all the times silver has gone parabolic in the last 30 years



-In early 1987, silver shot up to 5.5 to 11 in 2 months before falling back to 7 2 months later (on it's way back to 5).



-In 1993, silver went from 3.6 to 5.4 in 5 months before falling to 4 in 2 months. This however was the one semi exception in that silver then quickly resumed its rise and hit a new high of 5.6 for almost a year before only declining back to 4.6.



-In 1997, silver went from 4.2 to 7.4 in 7 months before falling back to 5 in 4 months.



-In 2003, silver when from 5 to 8 in 6 months before dropping back to 5.50 in a month.



-In 2006, silver went from 9 to 14.5 in 4 months before falling back to 10 in a month.



-Finally from September 2007 to March 2008 silver went from 12 to 21 before dropping back to 10 later in the year (arguably this move was more in line with the rest of commodities and not the same sharp reversal).



This of course doesn't include the mother of all parabolic spikes when silver went from 5 to 10 in the first half of 1979 and then went from 10 to ~40 in the second half of the year before dropping back from 37 to 12 in 3 months.



The conclusion is anytime you get a multi-month parabolic rise in silver in the last 30 years which I define as a 50-100% rise in under 6 months, it has proceeded to make a ~75% retrenchment in roughly half the time. This has been true in bull and bear markets and has had no exceptions once the short term rise exceeds 50%. The difference has predictably been that after the reversal it continued farther down in the bear market where it has recovered in the current bull one. Silver could fall dramatically and remain in a "bull market".

Eric said...

I don't think those past Ag retracements were against the backdrop of sovereign debt concerns that exist now.

Not that I know what will happen to the price of Ag, or Au for that matter.

Eric said...

Re the equity inflow, people have been well-conditioned to buy the dips, as that strategy has worked very well for almost two years now.

Not that I know if it will continue to work or not.

But it's not unreasonable to think that it will...until it doesn't.

Eric said...

And I agree, I would not call this a "sell off". Options expiration is often a complicating factor.

What happens next week will be interesting.

whydibuy said...

Oh, OK, Eric.
NEXT week the market crashes. OK, I got it. I'll mark it down on my calendar.

Eric said...

I'll mark it down on my calendar.

Yeah, OK -- you go get a crayon and do that.

CP said...

Yes, silver has really been tanking. I wonder how many angry comments I would get if I did another post about it?

whydibuy said...

I did. I used the "wed won" to signify the color of the market to come.