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Secret Structure Of The Upcoming Dow Decline

Dow Jones Long Term Chart

 

The chart above represents the Dow Jones between 1986 and today. It is clear from the chart that the bear market started at the 2000 top of 11,800 and continues on today even though we have already set two higher tops. Typically the bear/bull markets alternate in a 17 year cycles, so we have another 3-4 years to go before this bear market is over.

However, that is a side point to my main point. What I want you to observe is the structure of the declines between 2000-2003 and 2007-2009. The decline we had in early 2000’s was a more orderly decline with lots of ups and downs, plenty of time (2.5 years) and not to much directional energy. The move in 2007 was quite different. It was directional, it was short (1.5 years), it was high energy and it was violent.    

What’s the point of all of this? First, my work clearly indicates that we are about to start a 2-3 year bear market. All of my technical, fundamental and mathematical work confirm that fact. 

So, what kind of a move should we expect? 

My mathematical work shows that the bear market over the next 2-3 years will be almost identical to the 2000-2003 move. A lot of volatility, overall downtrend, but not too much downside energy. That is not to say that the market will not go low, it is to say that the move over the next few years will not be a violent one. I hope this helps. 

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The Secret Of The Dow Chart

BusinessWeek Writes: Hedge Fund Chart Guru Tom DeMark Sees Dark Days Ahead

DOW JONES -invest with alex 

“The market’s going to have one more rally, then once we get above that high, I think it’s going to be more treacherous,” DeMark says. “I think it’s all preordained right now.” He feels this is probably irrespective of how and when the crippling impasse in Washington is resolved. “If you look at the new highs and new lows on the [New York Stock Exchange],” he says, “every time we made a higher high, there were fewer stocks in the index participating in that high. It’s getting narrower.” And once that happens, you typically get a collapse. The opposite looks to be true for gold, which he expects is making its low right now and should start to move up dramatically.

Read The Rest Of The Article Here

I tend to agree with Mr. DeMark to a certain extent as my own work confirms parts of his analysis. There is no doubt in my mind that we are approaching a major top here in most financial markets. Now, it is just the matter of hard work to pin point it. As I accelerate my timing work over the next few months I should have an exact answer for you by the end of the year.

With that said, there are only two possibilities here (based on my work).

1. The market has already topped. Triple tops are notoriously dangerous and tend to mark the end of a bull market. We have already set 3 tops and as I have suggested before the market finds itself in an exciting spot. We either confirm a bear market here by breaking down below recent lows over the next 4 weeks or….

2. The market will top out in March of 2014. This type of a scenario resembles Mr. DeMark’s forecast above.

Either way, we are approaching the end of a bull leg and you should begin thinking about reallocating your capital in order to avoid losses during the bear market.

Will we experience 1929 type of a decline as Tom suggest? My work doesn’t show that. It shows a slow yet volatile decline into the 8000-9000 range on the DOW over the next 2-3 years. 

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Stock Market Update: October 10, 2013

daily chart Oct 10, 2013

 

Summary: Continue to maintain a LONG/HOLD position.

So far, the stock market is acting just as anticipated. In my earlier post Little Known Way To Profit From The US Government Shutdown Default Scare I have suggested that traders should set themselves up for a fast moving rally that is surely to come due to some sort of a government shutdown deal. Today we got that rally. 

With all of the major indexes up over 2%, a large portion of this move is now complete. As I have mentioned before, the market left a lot of gaps on the way down that it must close if we are to anticipate a prolonged bear market decline. If the government shutdown resolution materializes over the next few days I would expect the market to continue going up into the DOW 15500 range. Then pause and possibly reverse itself for good. 

The long term picture remains exciting. While I continue to maintain a LONG HOLD position for the time being, I believe the market is in final stages of setting itself up for beginning of a 2-3 year bear market. We are still waiting for a confirmations here, but things are looking good. Once the market tops here (assuming it won’t go over 15,700) we should start the bear leg. Triple tops are notorious for ending bull markets. 

A little secret for you here. Multiple tops are caused by various cycles hitting at different times. Each top means that the cycle has already reversed itself and is not pointing down. Once the major trend shifts it will be a powerful move down. 

For now we wait while maintaining our long position. 

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What Everyone Ought To Know About The Future

CNN Money Writes: Fed minutes: Decision not to taper was a ‘close call’

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Federal Reserve officials were torn on whether to continue their stimulus program at their last meeting in September, according to minutes released Wednesday.

At that meeting, the Fed surprised investors and economists, who were largely expecting the central bank to start reducing its $85 billion in monthly bond purchases — a gradual wind-down process that has come to be known as “tapering”.

The decision not to taper, was a ‘relatively close call’ for several members of the Fed’s policymaking committee, the minutes said.

What tipped the scale?

Read The Rest Of The Article Here

This is the most important news no one is talking about. Forget the Government shutdown.  That situation will resolve itself shortly. The subject matter above is much, much, MUCH MORE important.

As I have mentioned before the only thing that is keeping the US Economy afloat is QE buying of Bonds to the tune of $85 Billion per month. That is the only thing keeping interest rates down and the economy humming along. Even thought the velocity of monthly QE impact is getting weaker and should dissipate itself soon either way, removing or tapering this stimulus will have immediate negative consequences on the US Economy and the financial markets.

Basically, the interest rates will shoot up, the economy will slow down drastically and shift into the recessionary environment.  The stock market, the real estate market, car sales and the rest of the economy will decline substantially.

We are beginning to see cracks at the FED in terms of QE decision making process. That is significant because it is the first clear indication that at least some at the FED are ready to start tapering. Eventually they will. When they do all of the above will happen.

Please be aware that the stock market is a future discounting mechanism and as such will decline long before the FED announces anything. That is why looking for first cracks is so incredibly important. You have been warned.

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Timed Value. What Is Time?

I am incredibly excited to announce that I have decided to write and publish my first investment book over the next few months.  The topic of the book will be….. 

TIMED VALUE

hands_clock

It will concentrate on the investment style that I have developed over the last 15 years. As far as I know I am the first one to use this investment style and the title associated with it. 

The book will talk about timeless principles of Value Investing, how it works, what to look for and various issues associated with it. 

The book will then shift to mathematical work that I have developed over the last decade that does a great job with timing the market and individual stocks. Most importantly it asks the question “What Is Time” as it pertains to the stock market and dives deep into the subject. 

The book will then go on to tie together Value Investing with My Timing work in order to show you how to maximize returns while minimizing risk. Most importantly, I will write the majority of the book on this blog with various chapters or sections being published on the daily basis.

It is my hope that you can join me on this adventure and exploration of what I believe to me incredibly unique work unavailable anywhere else.  

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Stock Market Update, October 3rd, 2013

daily chart Oct 3, 2013 

Summary: Continue to maintain a LONG position.

With the US Government shut down, threats of the first ever default and politicians pointing fingers at each other, it has been quite a boring week for the stock market with the Dow down about 250 points (so far) for the week and about 700 points over the last 3 trading weeks.

Let’s attribute that to normal market fluctuations. However, things are starting to get interesting. It is possible that the fundamental and the technical factors are indeed lining up for the confirmation I have been seeking for so long. Please allow me to explain.

The market has opened up a bunch of gap downs over the last 3 weeks. Some of them being as high as 15,600. That means the market will have to go back up in order to close them. As I have mentioned before, I believe the government shut down should be short lived. There are already signs that Republicans are starting to capitulate. If that happens I would expect a short term relief rally that should push stocks higher to close all the gaps.

That COULD be our point of inflection. If the market reverses itself at that point and continues lower by breaking recent lows, I would most likely welcome you to the beginning of the bear market I have been predicting. For now, we continue to wait for our confirmations.

As such and for the time being I continue to maintain my “HOLD” position for the DOW if you are long.  

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Jesus Confirms, No Market Crash This Year

World Report Writes: Ignore the Pundits Predicting a Market Crash

 

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There are many reasons to be concerned about the market these days. Among them are the government shutdown, the recent run-up of the market and the fear that stocks are currently overvalued.

The problems of trying to time the market are many. Short-term movements are random and unpredictable. Prices change rapidly, making it difficult to predict them with any certainty. Missing a relatively few of the best trading days by “sitting on the sidelines” can have a seriously adverse impact on your returns.

Read The Rest Of The Article Here

I oftentimes use the terms “Collapse” of the US Economy and the stock market too loosely here.  This little note is to correct that. I agree with the first premise of the article that you should ignore anyone who is predicting a market crash at this point in time.

My work doesn’t show that activity. It shows a prolonged 2-3 year decline into the 2016 bottom.  Not a huge drop over a short period of time, but a lot of volatility, up and downs,  with a general trend pointing down. Basically, we have to get into the 8,000-9,000 territory on the DOW over the next few years.

However, I do not agree with the premise that the market cannot be timed. It very well can be.  My mathematical work clearly proves that. It is the authors close mindedness that leads him to that unfortunate conclusion.  Yet, instead of arguing the point I will show you how the market can be timed over the next few months. Keep coming back. 

P.S.  After a short discussion with my office mate Jesus M. he has confirmed that there won’t be a crash either.  

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Why Happy Fingers Bernanke Can’t Sleep At Night

BusinessWeek Writes: Slow Job Growth Suggests Fed Was Right to Delay Taper

 bernanke meme

The private sector added 166,000 jobs in September,  fewer than most economists predicted, according to the ADP Research Institute’s monthly tally. ADP (ADP) also revised August’s jobs number down to 159,000 from 176,000.

The September number’s not bad—it’s right in line with the 2013 monthly average of 167,000. But it’s certainly not evidence of a labor market that’s picking up steam.

“The ADP report suggests the Fed was right to delay the tapering of its monthly asset purchases last month,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note this morning.

Read The Rest Of The Article

Here is the bottom line. Happy fingers Bernanke will keep playing with his keyboard as he continues to print $85 Billion of QE per month. That is not even a question. I do not believe they will tapper anytime soon if at all. This is not the real issue here.

The really scary issue is that the QE is having very little impact on the overall economy.  The velocity of the QE money has slowed down so much that it is almost a non issue. 

Imagine a car engine that is stuck on 2000 rpm no matter how much gas or even jet fuel you supply the engine with. No matter what you add to the tank, the engine can’t go over 2000 rpm. What’s worse, after a while it start to sputter and eventually dies.  

You have that picture in mind? Well, that is an accurate representation of the US Economy.  EQ is no longer having an impact. As such, they can’t even consider stopping it now. 

Yet, the worst is yet to come. The economy is now starting to sputter even with QE. When that accelerates the downshift and the subsequent stock market and economic declines will be severe. 

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Obama Is Freaking Out, Should You?

Obama to Wall Street: This time be worried

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Wall Street needs to be genuinely worried about what is going on in Washington, President Barack Obama told CNBC in a White House interview Wednesday.

While gridlock in D.C. is nothing new, “this time I think Wall Street should be concerned,” Obama said.

“When you have a situation in which a faction is willing to default on U.S. obligations, then we are in trouble,” Obama said

“I am exasperated with the idea that unless I say that 20 million people, ‘you can’t have health insurance, they will not reopen the government.’ That is irresponsible,” he said.

“It is important for [Wall Street] to recognize that this is going to have a profound impact on our economy and their bottom lines, their employees and their shareholders,” Obama said.

Read The Rest Of The Article Here

By now it is clear that President Obama will not negotiate with the Republicans, nor should he. Whether you agree or disagree with the new healthcare law, it was passed, signed and confirmed by the supreme court.  It’s called democracy.

Now, President Obama is basically freaking out about the stock market and the impact of the shutdown on the overall US Economy. Should he be and more importantly should you be?

As of right now my answer is NO. Here is why….

  1. The existing shutdown is inconsequential. The debt ceiling is a much more important one and that one is coming up on Oct 17/22.  Yet, one way or another, the US will not default.
  2. As of right now the stock market is not even concerned about this issue.  
  3. There is just way too much drama. The politicians and the media love it.  
  4. When it is all said and done, there are very powerful financial interest in the US who control the politicians. If they want to maintain the US Economy and say enough, all Republican issues will disappear overnight.

In conclusion,  as of right now this is an entertaining issue that I believe will resolve itself within a short period of time. The stock market thinks so and so do I. 

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Why The Stock Market Doesn’t Give A Flying F*$# About The Shutdown

Daily chart Oct1

 

After an official US Government Shutdown on Monday night, most Americans braced themselves for a stock market bloodbath on Tuesday. Instead, the market surged higher with the DOW +0.4%, S&P +0.8% and NASDAQ +1.23%. 

Why? 

As I have told you many times before, the market doesn’t follow the news. It is a leading indicator, not a reactionary one. It could care less because it is a future predicting machine and it is predicting the following things.

  1. The US Government showdown will not last very long and even if it does, it is a non event. 
  2. The US will not default on its debt, which is a more significant issue here. 

Can it be wrong? Sure and many times it is, but that is not the point here. The point that I am trying to make is that news and events do not have an impact on the overall market. The market is a much more complex discounting and future predicting mechanism that sees weeks, months and sometimes years into the future. 

As such, many people have the tendency to label the stock market as random and volatile. It is not. It is simply doing exactly what it is supposed to do. It is predicting the future and in the majority of the cases it is many steps ahead of today’s news cycle.

Now, I know that for many of you it doesn’t make any sense. That is why I invite you to read TIMED VALUE in order to gain further understanding. 

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