Pendulum Experiment No.2: Another Success! Let’s Push It Again!

Aibek Burabayev - INO.com Contributor - Metals


This is the summary of the second experiment that I started in the middle of 2016 where we put the ultimate loser – the stock index of struggling Japanese economy against the top gaining favorite metal – silver.

Chart 1. Voting results July 2016: The Majority Bet Against The Success Of Experiment!

INO.com Poll Silver vs. Nikkei

Above is the result of the voting for these totally different instruments from 6 months ago. This time, congratulations are only to me as an experimenter as I voted for the Nikkei (every time I vote for experiment success, not for an individual instrument) and to another single person (total two votes for the Nikkei), who went against the majority. If you are reading this post please write your name in the comment, let the community meet you.

I think, this time, the majority was ultra-biased and bet on silver. I am afraid to imagine what would be the voting results if gold was the among bets 🙂 Previously, the votes split almost even with a minimal advantage in favor of palladium.

Chart 2. Nikkei Vs. Silver: The Worst Performing Japanese Stock Index Defeated The Top Gaining Metal

Chart 2. Nikkei Vs. Silver
Chart courtesy of tradingview.com

I think we witnessed the maximum divergence at 22% between these two instruments when I posted a snapshot of the experiment last October. But the final outcome is just astonishing! The Nikkei hit above the +20% handle while the silver also hit the 20% mark but with a minus sign. It is easy to calculate that the divergence peaked above the 40% mark. It means that for the past half year those who sold the silver and bought the Nikkei could book more than 40% of the trade in 6 months.

This is the second straight success of an experiment! I think it was lucky to choose that very period of 6 months for an experiment during which the Pendulum Effect of the market has enough time to take action. And another amazing regularity, which is clearly seen on the chart: the maximum divergence of instruments at the end of an experiment.

Let’s push the Pendulum again to have more records for more reliability.

Chart 3. Comparative Histogram Half Year Futures Performance (January 3rd, 2017)

Chart 3. Comparative Histogram Half Year Futures Performance (January 3rd, 2017)
Chart courtesy of finviz.com

It looks like the Nikkei is the futures’ superstar for the past half year as it beat not only silver, but all the rest of the futures and topped the ranking. It transformed from the “complete non-entity” into a “superhero” just in 6 months amid the Bank of Japan’s asset purchases.

Silver finished 3rd from the end of the list and showed the worst performance among metals in the second half of 2016.

It is ridiculous, but we should put them against each other again in a new Pendulum experiment. Please vote at the end of the post for one of these instruments to show me your preference.
I already posted the fresh silver chart last month and this time I will update the Nikkei chart which was posted last October.

Chart 4. Nikkei Weekly: Magic 78.6%

Chart 4. Nikkei Weekly w/Fibonacci
Chart courtesy of tradingview.com

The Nikkei index is in the giant range set by the 2015 top at ¥20953 and the 2016 bottom at ¥14864. This instrument is very good for positioning as it moves actively like a shark, which needs to move steadily to breathe and stay alive.

Last October we witnessed a breakup of the resistance (black), after that we can see that the price continued higher in the direction of the break. Price rocketed ¥17k to ¥19k level, but then it stalled ahead of 78.6% Fibonacci retracement level set at ¥19650 mark. The index has lost more than a half thousand already after reversal. This setback can start another drop down to the broken resistance at least or even lower to the range’s bottom highlighted in-dash red horizontal line. The break above the 78.6% Fibonacci level opens the way to the previous top at ¥20953.The risk/reward ratio favors short entry as resistance is closer than the support.

What do you think will happen in the middle of 2017?

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Intelligent trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Pendulum Experiment No.2 Snapshot: The Majority Is Wrong So Far!

Aibek Burabayev - INO.com Contributor - Metals


At the start of July, I reviewed the result of the first Pendulum experiment where the loser metal Palladium could beat the supercharged Japanese Nikkei stock index. The same day at the end of the post I proposed to push the Pendulum again. This time we entered into competition the faded Nikkei index versus the matchless metal silver. Below is the graph of the bets you placed.

Chart 1. Nikkei Vs. Silver: Voting Results:

INO.com Poll

This vote clearly shows the biases of the readers as in the second experiment like in a first one the odds were in favor of the metal, at the first time it was palladium and this time it was silver. Only one person added to my voice in favor of the Nikkei as I am acting as an experimenter and chose the success of the Pendulum effect betting on the stock index to break the shutout.

Well, you will be surprised looking at the chart below as the majority’s bet is wrong so far. Continue reading "Pendulum Experiment No.2 Snapshot: The Majority Is Wrong So Far!"

Silver Is In Fashion But Not For Investors

Aibek Burabayev - INO.com Contributor - Metals


This week I have prepared a Silver macro data analysis with diagrams and added a technical outlook for "dessert".

Supply and Demand

Silver Supply and Demand

Chart: Aibek Burabayev; Data source: GFMS, Thomson Reuters / The Silver institute

Back in 2005, both supply and demand for Silver were below 1 billion ounces (Boz) and were well balanced with a small deficit of 7.3 million ounces (Moz). Since then they have risen with different speed and in 2014 both broke up that level. As seen on the chart above, the supply of Silver is quite stable with a narrow 889-1073 Moz range in past 10 years. 2010 (growth in mining and scrap supply) and 2014 (10 year record mining production) are the highest years of supply. Continue reading "Silver Is In Fashion But Not For Investors"

Gold And Silver Monthly: Monumental

Aibek Burabayev - INO.com Contributor - Metals


Comparison of Dollar Counterparts

4H Dollar Chart
Chart courtesy of Tradingview.com

In the above monthly comparison chart, I put in all of the main Dollar rivals and the Dollar index itself, which is shown inverse (100 was divided into DXY). As we can clearly see, all instruments fell dramatically last summer and didn't stop in the autumn of 2014. The black rectangle shows the area where Gold started decoupling with the rest of the Dollar counterparts. It was last September when Gold stopped falling. EURUSD is the most precise copy of the Dollar Index. Crude oil had slightly different behavior last month with less downside momentum. Therefore, all trade setups for more than half a year couldn't be accurate if they were based on pure Dollar dynamics. Gold stalled in the past waiting for a clear and powerful signal to break out of current the sideways action. The main question is, Continue reading "Gold And Silver Monthly: Monumental"

Gold And Silver: Just K.I.S.S!

Aibek Burabayev - INO.com Contributor - Metals


Old friends and new guests, thank you very much for the comments and discussions regarding my post last week. One thing was clear… you prefer classic trend line charts! I will try to keep it short and simple from now and on. I will keep Elliott Wave for more liquid and crowd trending markets, like stocks and indices, where they work better.

Gold


Chart courtesy of Tradingview.com

Last week Gold was very tricky compared to the other Dollar rivals. For example, the Euro and Crude oil are creeping up, while Gold did the opposite and squeezed out buyers. Yesterday, sellers couldn't escape either and got stopped out.

The price touched the downside for the second time and Gold shaped the Descending Triangle pattern which is highlighted in red. A breakout happened today above $1200. It means that we will watch the continuation of an uptrend (highlighted in blue). The target is calculated as a sum of the breakout and the height of the Triangle, which is located at $1246 area. Continue reading "Gold And Silver: Just K.I.S.S!"