Plunger

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PLUNGER'S FLUSH SERIES

The Three Phases of a Bear Market… The Big Picture

Phase III- Annihilation in the Precious Metals Markets… ”Are You Serious ?”

Precious Metals Bear Phase III – Dead Ahead- Part 1

.Phase III – Apocalypse Now (Part II)

The saga continues

Precious Metals Bear Market-Phase III(Part III) .. More Strategy

(More Plunger - and his WINNING Calls - the saga continues)

July 23, 2015

Gold Bear Market- Phase III Update

The Strategy (pt 3) - Update from Nov, 2014

http://goldtadise.com/?p=348867

Over 2 years ago I presented my first analysis of this precious metals bear market. After extensive study of the characteristics of past bear markets , I forecast a brutal bear market that would undergo three psychological stages. The third stage would be a wrenching decline that would ultimately reach levels so shocking that it would cause the destruction of the gold investment class. My analysis, which was dubbed Plunger's Flush , was met not just with skepticism but outright derision. I believe I know how Galileo felt . Two years hence , this analysis has proven it's self . We have now entered into phase III of a bear market, where held at bay for four years the bear will now have its way with the Precious Metals. He will now perform his function of clearing out the accumulated malinvestment built up in the preceding 10 year bull market. At the time I presented my first analysis it was not polite to use the word “Bear Market” as consensus belief still regarded the bull to be active. The market was considered to be in a pullback in an ongoing bull market. Therefore my forecast of a crushing decline was met with universal skepticism and ridicule. Investor sentiment was not prepared to accept the reality that the sun had set on the bull market and a full course bear market lay ahead. My forecast was derived from my study of the process of development of bull and bear markets. I see little understanding of this area among the analysts who populate the gold market sector. Instead fervent believers of the gold narrative seem to dominate the landscape.

As a review, I recommend reading my academic study on major bear markets since these principles apply to our current bear market in the precious metals.

http://goldtadise.com/?p=342366

Also, if you have not read my pieces defining the phases of a bear market I recommend viewing them here:

http://goldtadise.com/?p=342331 http://goldtadise.com/?p=342347

Recent market developments provide full vindication of the bearish forecasts made over the past 2 years. I will now provide an update on the progress of this precious metals bear market and describe the model I use. Below is a big picture view of the past four years and how I have interpreted it.

sc-1405

The above chart depicts the major events which define this bear market. It has been classified into three psychological phases which are defined by the price action. After the phase I distribution top was completed in December 2011 the market entered into a prolonged phase II decline lasting another 2.5 years. Phase II developed in classic form, as once it completed the back test of the neck line of the phase I H&S it entered into a long slide. This slide ended with a sharp bear market rally (BMR) in the summer of 2012. This rally served to reinvigorate the bullish crowd and keep them believing that the bull market was still on and it had all been a corrective move. After the BMR exhausted itself the market entered into a prolonged phase II decline into the spring of 2013. I recall investor psychology at this time as being stressed, yet still optimistic that the bull would resume, the prevailing term used to describe it was “ its a correction”. This all ended with the Goldman raid on the gold market in April 2013. The 19 month slide had eroded investor sentiment to the point that they were now primed for a collective change of perception. With the crash, bullish hopes were now abandoned and it was recognized as a bear market. The classic point of recognition (POR) had arrived. The bear market process places the POR squarely in phase II….Always.

sc-1408

What occurs after the POR is a period of prolonged consolidation. A deceptive tug of war between bulls and bears ensues made up of several BMRs which serve to ultimately exhaust the bulls. Once this process runs its course, the market is now cleared to exit phase II and stocks can now fall of their own weight. This process of bull exhaustion took 18 months when it finally completed its post POR diamond consolidation in October 2014 and entered phase III. The 18 month diamond formation lasted such a long time likely because stubborn gold bulls refused to give up the dream of a bull market, instead expending their energy chasing apparent bear market bottoms. It is interesting to note that the ursa bear of 1932 and the Nikkei bear of 1991 both ended their post POR consolidations with a diamond formation.

After the diamond formation breakdown of October 2014 the market was now in phase III. By definition when a market breaks down out of its post POR consolidation it then enters phase III. Normally, a downward impulse drives the price to its ultimate bottom and the bear is then over. This bear however, was peculiar because instead of an immediate downward impulse the index chose to go into nesting mode for the next 7 months. During this interval it build out a deceptive H&S pattern just beneath the phase II diamond consolidation pattern. I suspect this was again caused by die hard gold bulls still clinging to hope that a bottom was being formed. Their error was not understanding that all phases of a bear market had not yet completed. In fact, phase III was just getting started and now the end game process is just kicking off. With the June break of the nesting H&S neckline, the phase III downward impulse has finally begun. We are now in the dreaded annihilation phase which I have described in previous essays. The annihilation comes from the markets “no one gets out alive” liquidation.

sc-1409

Over the past four years the bear has been restrained by stubborn bulls. Those bulls are now exhausted and the bear will now have his way with this market. The blind capital of the great unwashed will now be devoured. The bear will end when the worse that can happen has been discounted by the price structure. The junior and mid-tiers have long been destroyed, now the bear will focus on the big cap stocks, where the liquidity remains. Bulls will sell their good stocks held for a rainy day, because it's raining. It has been rather tragic watching the majority of PM analysts lead there followers to slaughter, because it has been unnecessary. What the majority of investors have not grasped is that a bear market is a process. A process that must progress through various stages of price action and investor psychology. This is what I have attempted to describe over the past two years.

There are several principles at play here. Once a declining market encounters a POR, you know a bear market is active and it's not just a correction. All calls for a bottom are now invalid until the market enters into an identifiable phase III. Bull signals are now only valid in a phase III. Once in phase III, the market will undergo a cathartic selling event and volume will then begin to recede on subsequent declines. Prior to this any attempt at a bottom will fail and prove to be false until this process completes. So now we wait and observe the bear do his destructive work. We will watch the language of the market to identify its ultimate bottom. Serious money is made identifying the probability of a bear market low, not by buying apparent bear market bottoms.

The bear has not yet finished his work, the ultimate bottom will prove to be so shocking that it will devastate a generation of old school gold bulls. But, it will allow the foundation for the next bull market in the precious metals. This will be my final essay devoted to the great precious metals bear market. We have fought the good fight, we have survived four years of decline, we have properly identified the trends and market phases. We have been wise enough to know when to step aside. We have arrived near the bottom with both emotional and physical capital intact. We will be there to deploy at the bottom. It is time for us to focus on the upcoming epic bull market that will soon unfold in the usual deceptive manner . Join me and other like minded PM Traders at Rambus Chartology for the ride.

Plunger

Latest Plunger Posts

Last rebuilt on: Tue Oct 20 09:47:01 2015 PST

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Talk about ugly bear flags-XLF - Sep 22, 2015

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Shorting - Sep 10, 2015

Gold Ready and Primed - Sep 09, 2015

More on the Big Picture in PM s - Sep 03, 2015

Secondary Reactions - Sep 01, 2015

Amazing guesswork - Aug 26, 2015

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BIG PICTURE ANALYSIS - Aug 24, 2015

Gold Bounce : Real Deal or No Deal ? - Aug 11, 2015

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HUI POSSIBILITY - Aug 06, 2015

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Plunger Checking in - Jul 27, 2015

Gold Bear Market -Phase III Update - Jul 23, 2015

Now its Oil's Turn - Jul 23, 2015

Phase III wash out- My perspective as to where we are. - Jul 21, 2015

Phase III just getting some traction. (but due for a short term short squeeze) - Jul 21, 2015

Gold Market Phase III now in the annihilation stage - Jul 20, 2015

PM Bear market- Filter out the noise and it looks very simple actually - Jun 25, 2015

Phase III PM Bear Methodically Working its way through the Sector - Jun 09, 2015

Silver Perspective - May 22, 2015

One Last Rally Before the Plunge - Apr 19, 2015

Uranium Bull..Building under the Radars - Apr 04, 2015

Trouble Ahead ? Thinking Big Picture - Mar 31, 2015

Oil Today = Gold 2012 ? - Mar 22, 2015

Phase III Here and Now - Mar 10, 2015

Phase III Action Accelerating - Mar 09, 2015

The Implosion of the Darlings - Mar 06, 2015

PM Stocks and Indices...Where The Hell are We ? - Mar 05, 2015

Phase III Update...the GDXJ:GDX Ratio - Feb 18, 2015

RUSL...A Study in Weekly Stochastics and the Plunger Indicators - Feb 12, 2015

Some pretty convincing Chartology - Feb 08, 2015

Bear Market Rally (BMR) or New Bull ? - Jan 22, 2015

BMR (Bear Market Rally ) Update - Jan 17, 2015

Staying Objective on the Mining Shares ... - Dec 13, 2014

Phase III's First violent short squeeze (VSS) - RIP - Nov 29, 2014

Step Sum Update ..Mark Lundeen - Nov 09, 2014

Precious Metals Bear Market- Phase III ( Part III) ..The Strategy - Nov 02, 2014

Factoid Nite - Oct 30, 2014

The Three Phases of a Bear Market...The Big Picture - Oct 29, 2014

Phase III - Apocalypse Now (Part II) - Oct 29, 2014

Silver Summit Field Report - Oct 25, 2014

Precious Metals Stocks - Oct 07, 2014

Precious Metals Bear Phase III - Dead Ahead- Part 1 - Sep 28, 2014

Phase III update - Sep 17, 2014

Anyone calling this bull market action? - Sep 10, 2014

IWM Short - Sep 09, 2014

Phase III looming? - Sep 02, 2014

Sliver Leaders Mauled Today - Aug 14, 2014

Intermarket Analysis..What the market is Trying to Tell us - Aug 14, 2014

Some Phase III updates - Aug 02, 2014

Norvast,illusion-- Here is a rec - Jul 27, 2014

Would you short this? Update - Jul 27, 2014

Would you short this stock? Don't look at the name just the chart - Jul 26, 2014

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