Notes on the Slide Show. Feel free to hit pause and read the notes, but on the Charts (Which Are Your Friends) of the Dow Jones Industrial Average and the Nasdaq Composite, pay careful attention to the PARABOLIC uptrends. Once the rate of price gain could no longer maintain its acceleration, the trend became nearly vertical. When an accelerating trend line is broken, Markets can be pronounced “dead”. The other chart, care of the “Universal Cycle Theory Newsletter”, overlays 4 crashes that MADE history with price patterns of 5 anticipated crashes that will MAKE history. Universal Cycle Theory can be found at www.uct-news.com/ and it’s editor Steven Puetz (pronounced Pitts) is probably the foremost authority on Crashes.
Studying Stock Market Crashes is not an everyday topic. They happen quite rarely. A severe market decline over an extended period may never be referred to as a “Crash”. The unique characteristic that qualifies a downward move as a “Crash” is the amount of the decline exceeding 10% in a day or so.
By that definition, this has only occurred 3 times in US Stock markets, twice in October, 1929 and once in October, 1987. Sharp, swift declines that have met that definition have occurred in other markets, such as to the Nikkei in Japan in 1990. If you’ve been reading our posts such as “Stock Markets Remain on Crash Alert: New Highs in Nasdaq are a Fake-NOT a Break Out” (http://markonomics101.com/2018/03/13/stock-markets-remain-on-crash-alert-new-highs-in-nasdaq-are-a-fake-out-not-a-break-out/) or the one from March 6th, titled “Dow Jones Industrial Average Remains in Crash Pattern” (http://markonomics101.com/2018/03/06/dow-jones-industrial-average-remains-in-crash-pattern/), you’re keenly aware of the level of concern that Markonomics101 has of lightning striking again.
Back in August 15, 2010, in a blog known as “Marko’s Take”, I wrote a number of pieces detailing the various collective wisdom as it pertained to Stock Market Crashes, most notably a piece called “Hindenburg Omen All Over the Financial Press” (http://markonomics101.com/?p=1253 ) The conditions, or so I wrote, were ripe for a Stock Market Crash, but that scenario never materialized. In fact, you would have been much better off by buying with both hands and feet and realizing a gain of some 250%, than running for cover. Humble Pie does not taste good.
So, we’re in the re-incarnation called Markonomics 101, doing the same thing we did nearly 8 years ago. Isn’t insanity defined as doing the same thing and expecting different results? (I HATE that saying, but, yes it is.)
But while I AM doing the same thing among the same conditions, and expecting different results, there is another condition that no one considered 8 years ago and had they, the Crash Scenario would have been removed for that missing ingredient alone. One very critical criteria was missing then, but is a lit up like neon sign, today. The US Stock Markets, both the Dow Jones Industrial Average and the Nasdaq Composite were still recovering from a “Waterfall Decline” in late 2008-early 2009. But today, both of the Major Stock Markets have just ended the longest and sharpest advances ever seen. The last segment of the advance was PARABOLIC for entire last 12 months before their respective peaks. That type of ever accelerating rise is drawn on the graphs of the two Major US Stock Markets as part of the slideshow above..
The Dow’s rise began in early 2009 at about 6,500, and ended when it hit its peak 9 years later at 26,500 or so, for a gain of more than 300%, While the Nasdaq Composite, in those same 9 years rose from 1250 to 7500 for a gain of 500%.
So, what are those conditions that are setups for a Crash? Authority Steven Puetz, whose website (http://www.uct-news.com/) and newsletter deploy a type of analysis called the “Universal Cycle Theory” is anticipating a CRASH on or about March 21..
According to Puetz, there is about 6 weeks between prior peak and subsequent crash. To quote him “The chart illustrates two types of crashes, with all crashes aligned to the eclipse cycle, with a gray background, highlighting a typical 6 week topping process and with point 0 aligned to a full moon.” The full moon of January 31 closely coincided with the all time high of the Dow Jones Industrial Average and near all time high of the Nasdaq Composite, both of which peaked on January 28. If that was the true demarcation point from which the countdown to Doomsday should have begun, then the projected CRASH date would be on or around March 21.
The pattern of prior Crashes are strikingly similar. Even though the Nasdaq made a slightly higher high last week, it is not without precedent that some markets peak after others. We’ll cover that topic in a subsequent post.
As we’re fond of saying, “Take money off the table, before the table takes money off of you”.