9/17/2018 – A negative day with the Dow Jones down 92 points (-0.35%) and the Nasdaq down 114 points (-1.43%)

The stock market finds itself at an important, if not difficult, juncture. And while most heavily leveraged bulls see at least a 20% melt up, some bears are calling for an outright crash. No need to guess about what happens next.

If you would like to find out what the stock market will do next, based on our timing and mathematical work, in both price and time, please Click Here. 

Let’s talk about the possibility of a crash scenario today……

The Ingredients Of An “Event”

Yes, the correction will begin as it has in the past, slowly, quietly, and many investors will presume it is simply another “buy the dip” opportunity.

Then suddenly, without reason, the increase in interest rates will trigger a credit-related event. The sell-off will gain traction, sentiment will reverse, and as prices decline the selling will accelerate.

Then a secondary explosion occurs as margin-calls are triggered. Once this occurs, a forced liquidation cycle begins. As assets are sold, prices decline as buyers simply disappear. As prices drop further, more margin calls are triggered requiring further liquidation. The liquidation cycle continues until margin is exhausted.

But the risk to investors is NOT just a market decline of 40-50%.

While such a decline, in and of itself, would devastate the already underfunded 80% of the population that is currently woefully under-prepared for retirement, it would also unleash a host of related collapses throughout the economy as a rush to liquidate holdings accelerates.

The real crisis comes when there is a “run on pensions.” With a large number of pensioners already eligible for their pension, the next decline in the markets will likely spur the “fear” that benefits will be lost entirely. The combined run on the system, which is grossly underfunded, at a time when asset prices are dropping will cause a debacle of mass proportions. It will require a massive government bailout to resolve it.

That’s a scary thought, but we would have to agree with the analysis above. We highly recommend that you read it in full.

Our only addition is this. The stock market often does what the least amount of people expect. At this particular juncture very few people expect a market crash. So much so that I get one of two reactions if, god forbid, I bring up the possibility of a market crash. People’s eyes either glaze over or they outright laugh.

Impossible, they say. 

Yet, it is the stock market’s job to trap (or to Trump) as many people as possible on the wrong side of a trade. And should a crash develop today, god forbid, it would most definitely trap most people on the wrong side. Finally, don’t forget historic record levels of margin debt out there (at 2x 2007 top). Margin Debt Horror Show Gets Even Scarier. So, should the market accelerate down, we might see a drop the likes we have not since the 1987 crash.

Again, if you would like to find out if the crash will develop and/or what the stock market will do next, in both price and time, please Click Here. 

A positive week with the Dow Jones up 238 points (+0.91%) and the Nasdaq up 108 points (+1.36%) 

It appears the stock market continues to be on the “up, up and away” trajectory, but things might not be as simple as they appear to be. If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here

According to MarketWatch, this is the most important chart in the world today…..

What ‘the most important chart in the world’ says about stocks going forward

What the chart demonstrates, Adams wrote in a report, is the clear trend line that the Nasdaq has repeatedly bumped up against, representing “the upper limit to how high the Nasdaq can go” unless it breaks through it in a more definite fashion. Another line, in green on the chart, shows the lower limit to the index.

“This line has stopped the Nasdaq in its tracks several times over the last few years, and the broad market typically doesn’t make it very far without the tech-heavy Nasdaq leading the way,” Adams wrote. “The overhead resistance is also why it may be tough to see significant upside in the near term without the index breaking out above the line.”

I am not sure if I would classify the chart above as the “World’s Most Important”, but it does have quite a bit of significance associated with it.

First, this long-term compressing wedge will terminate on the Nasdaq (and some other indices) over the next few months. Suggesting that an important move is coming.

The last two times the variations of this wedge terminated, in 2011 and 2015, the stock market proceeded to correct. Not significantly, by any measure, but still. We should expect a similar move now as such rising wedges typically have a bearish connotation associated with it.

The biggest question we must answer here is whether or not this will be a simple correction, just as before, or will this be the beginning of a massive bear market that will send shock waves through this galaxy and the next.

We might have an answer to that question. If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here

9/12/2018 – Another mixed day with the Dow Jones up 27 points (+0.11%) and the Nasdaq down 18 points (-0.23%)

If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here

Now, let’s look at some scary charts……

We have argued for some time, based on numerous metrics, that today’s stock market is selling at its highest valuation level in history. Yes, going all the way back to May of 1790. The chart above presents us with yet another confirmation point of the same.

Having said that, you can nail this chart to a bull’s head and they will still argue that today’s market is undervalued and that FAANG stocks represent a wonderful buying opportunity.  Any more scary charts? I am glad you have asked.

In other words, while just TECH stocks were massively overpriced at 2000 top, today it is EVERYTHING BUBBLE. Perhaps that is the reason Warren Buffett is sitting on a massive cash pile while the rest of value investors are chasing “undervalued unicorns”. And if that wasn’t enough, there is this comparison……

We often talk about investor sentiment and how oversold/overbought the market is. And while no indicator is perfect, perhaps nothing tracks actual investor bullish/bearish sentiment better than the actual money, on the margin.

BLINKING RED BUBBLE LIGHT: Stock Market Investor Margin Debt Reaches New High

The world is standing at the edge of the financial abyss while most investors are entirely in the dark.  However, specific indicators suggest the market is one giant RED BLINKING LIGHT.  One of these indicators is the amount of margin debt held by investors.  What is quite surprising about the level of investor margin debt is that it has hit a new record high even though the market has sold off 2,500 points from its peak in February.

It seems as if investors no longer believe in market cycles or fundamentals. Instead, the Wall Street saying that “This time is different” has become permanently ingrained in the market psychology.  For example, it doesn’t seem to matter to the market that Amazon makes no money on its massive online retail business.  The only segment of Amazon’s business that made a decent profit last quarter was from its Cloud hosting services.

We have touched on this subject matter a few days ago. Some Scary Charts To Keep You Up At Night Over The Weekend. At that time we looked at this chart.

It is truly mind boggling to see how long and leveraged everyone is. When the market finally cracks, as it surely will, all of the red on the right hand side will act as jet fuel to the downside.

Now, you don’t have to rely on the charts above to figure out what the stock market will do next. We have the exact answer you are looking for.  If you would like to find out what the stock market will do next, in both price and time, based on our mathematical and timing work, please Click Here.