Markets Have Gone “Thelma And Louise”

March 23, 2018

The movie “Thelma and Louise” was released in 1991. One theme it discussed was “crossing over” or going beyond the point of no return. The consequences were tragic.

Markets occasionally experience “Thelma and Louise” (T&L) moments when they “cross over” into a new phase. The results are usually traumatic. Now is a good time to call Miles Franklin to convert over-valued digital assets into real silver bullion.

Thelma (Geena Davis): “… something’s like crossed over in me and I can’t go back…”

“Thelma and Louise” moments or T&L moments occur in markets when:

  1. Market prices have moved rapidly higher and almost vertically. Such vertical or parabolic moves are unsustainable, but the degree and timing of the correction or crash is unpredictable.

  2. Technical indicators such as the RSI (relative strength) are very high and turn downward.

  3. Market prices fall below a rising support line.

Consider T&L moments in history:

The DOW in 1973

Gold in 1980

The DOW in 1987

The NIKKEI 225 in 1990

The NASDAQ 100 in 2000

Crude Oil in 2008

The S&P 500 Index in 2008

Present day Possibilities:

The DOW in 2018

Netflix in 2018

Amazon stock in 2018

XIV in 2018 (confirmed)

The above markets from 1973 – 2008 went vertical, were strongly “over-bought” and eventually broke support lines. Usually they crashed.

No guarantees exist and markets do not crash or correct every time, but consider the similarities to stock markets in early 2018.

From “Thelma and Louise”

Max: “You know, the one thing I can’t figure out are these girls real smart or real real lucky?”

Hal: “Don’t matter. Brains’ll only get you so far and luck always runs out.”

The market parallel: Astute trading will create success, and luck helps, but an exit strategy is always necessary.

Read: Bill Holter: “Something Is Definitely Changing

Examine the graphs of these T&L moments from history. Note where over-bought prices fell through the green support lines – marked with red ovals.

The DOW in 1973 – a drop of 46%.

Gold in 1980 – an initial drop of 66%.

The DOW in 1987 – a rapid drop of 41%.

The NIKKEI 225 in 1990 – an initial drop of 63%.

The NASDAQ 100 in 2000 – a drop of 84%.

Crude Oil in 2008 – a rapid drop of 76%.

The S&P 500 in 2008 – a drop of 57%

The DOW in 2018. A 50% retracement of the January 2016 to January 2018 rally would be 5,583 points, or a drop of 21%. That and more could occur. Good support exists around 17,500 and 13,000.

The XIV is an inverse volatility ETN based on the VIX volatility index. It declined 96% in a month. Nearly 90% of that drop occurred in three days.

Netflix in 2018: A 50% retracement from the February 2016 low would be a drop of $113, or 36%. A larger drop is possible.

Amazon in 2018. A 50% retracement from the February 2016 low would be a drop of $560, or 35%.

From Graham Summers:

Globally the world has added over $60 trillion in debt since 2007… and all of this was based on interest rates that were close to or even below ZERO.

Central Banks cannot and will not risk blowing up this debt bomb. So they are going to be forced to “pull the plug” on liquidity and “let stocks go.”

Put simply, if the choice is:

1)   Let stocks drop and deal with complaints from Wall Street… or …

2)   Let the bond bubble blow up, destabilizing the entire financial system and rendering most governments insolvent…

Central Banks are going to opt for #1 Every. Single. Time.”

REPEAT:

From “Thelma and Louise”

Max: “You know, the one thing I can’t figure out are these girls real smart or real real lucky?”

Hal: “Don’t matter. Brains’ll only get you so far and luck always runs out.”

The market parallel: Astute trading will create success, and luck helps, BUT AN EXIT STRATEGY IS ALWAYS NECESSARY.

SUMMARY:

“Thelma and Louise” moments have occurred many times in the past 45 years. Each over-bought market rose vertically to an unsustainable level and then deeply corrected or crashed. The average loss for the above T&L moments 1973 – 2008 from high to low was about 62%.

It’s too early to confirm a T&L moment for the 2018 DOW, Netflix and Amazon. However, Bitcoin (not shown) and XIV have crashed from their speculative blow-off prices and have confirmed their T&L moments.

Little harm will result from advance preparation for possible or inevitable T&L moments in stocks, bonds and currencies in 2018.

In the opinion of many, silver is one of the most undervalued investments today. It is an excellent alternative to over-valued stocks.

From Jim Willie:

“ … silver is the most under-valued hard asset in existence, with the highest potential for price appreciation on the globe. To begin with, central banks own no silver, but do own huge tracts of gold. Industry has huge demand for silver, but a trifling amount for gold demand. The investment demand is another key factor in favor of silver…”

Call Miles Franklin or Why Not Gold to exchange over-valued digital and paper currency units for real and lasting silver wealth.

Gary Christenson

Gary ChristensonGary Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy and central banking.

Gold is using for heat dissipation in some cars.