January 17, 2010.
Lately, I’ve mentioned to a lot of folks my confidence that a [renewed] sharp downturn in the prices of commodities, US stocks, and US real estate is imminent (and similar developments in other industrialized nations). While that confidence is informed generally by all of my analysis of the last 7 years evident in my publications (see the link to “up next investments” toward the bottom right of this page), it is particularly consistent with the following:
“By the end of trading today, [that was actually March 2nd, 2009] I have exited all my mid-term positioning for a drop in stocks, which I expect to soon be reversing for a multi-month rally, though there is still a potential decline this week.”
If you don’t know already, that “multi-month rally” carried on all the way into recent weeks (of early 2010) for many US stocks. I’ll show charts of that below.
First, if you did not get that message on March 2nd, 2009, I would be happy to put you in contact with several people who did, perhaps including some you may personally know. I also posted it here in it’s entirety within a day or two of first sending it in a private distribution: http://groups.yahoo.com/group/redpill_info/message/592
I’d like to mention now something that I did not happen to mention in that email, but that I have told many people elsewhere, which is that there were a set of signals that I specifically had in mind BEFORE THIS MULTI-MONTH REBOUND STARTED as to how to identify the completion i.e. maturing i.e. exhaustion i.e. reversing of that trend which I specifically forecast would be a mere multi-month rebound (for particular reasons I will omit here for brevity).
The primary indicator, specified in advance of the multi-month trend even beginning, of that trend being ABOUT to lose momentum… was that investor confidence levels would EXCEED those of late 2007 (the all-time high in the pricing of most US stocks). That predictable development happened as of August 2009.
What is developing now is, I am confident, the last indicator confirming that the larger trend has already reversed. I am also going to be very specific now as to a few predictable developments, including a “bare minimum” price target.
Again, I trade with a long-term bias AGAINST investor confidence (just as I did from 2007-early 2009). That bias is called by various names such as “contrarian” trading, conservative trading, prudent trading, intelligent trading, and reliably profitable trading.
Note that in 2007, when prices and investor confidence were unusually high, the vast majority of confident investors were UNUSUALLY wrong (expensively so for them) in their over-confidence. By August 2009, without prices returning anywhere close to new highs, investor confidence was even higher than at the prior all-time highs in investor confidence. I propose- as I did in early 2009 when I forecast a new high in confidence based on a relatively minor rebound in prices- that the even greater extremes of investor over-confidence are about to be followed by even greater extremes in an “unusually expensive” development for these unusually over-confident investors- including not just in stock markets, but real estate as well as gold and silver and so on.
So, what I have also noticed lately is not just a trendline pattern or two, but some clear and confirmed breaks of those trendlines in several price charts- plus a pending breakthrough in a price trendline of the DJIA (DOw Jones Industrial Average) of 30 leading US stocks. As that stock index follows the others that have already broken trend (along with the US technology sector, which has been unusually strong in recent months), then the acceleration phase of all of them together (downwards in price) is ripe. The prior lows of March 2009 should be not just exceeded, but far exceeded and very quickly- eventually much faster than the price collapse of the last half of 2008. What is developing now is what I have been calling “the capitulation phase” since 2002 or 2003. The rally of 2002-2007 was an exhaustion phase, with a minor (or “secondary”) exhaustion phase just completing now- potentially.
Above is the DJIA 30, still holding above trendline as of January 17, 2009. Next is an index of 2000 “small” US stocks, which broke the similar trendline months ago, then tested that trendline from the underside, which held. However, so far, this index of 2000 “small cap” US stocks has continued to “float” a bit higher month after month since then.
Next is a chart of the US technology stock sector. It has been stronger than most US stock sectors for over a year. As shown below, it did not even make a new low in March 2009, but merely came close to the low of November 2008. Note that it has breached its trendline, tested it from the underside, and actually has led to the downside in recent weeks.
Here are two additional charts: one of the housing sector of the US stock market, which topped in mid-2005 (and which I noted as a top immediately thereafter, as I had been watching for it to begin fulfilling the forecasts I made in early 2003). Note that it’s 2009 high was in September, though it has still not broken the trendline that touches 4 lows of 2009. Last, the final chart, with perhaps the most interesting captions in it of all of these charts, is a foreign exchange rate (currency price) chart of the British Pound, priced in US Dollars.
- Trendlines and Timing Point to a January Top (wallstreetpit.com)
- Investors Make the Trend their Friend as Timetotrade Launch Trend Line Alerts (prweb.com)
- Turning Points (January 2012, first issue) (dowlliott.wordpress.com)
- Turning Points (November 2011, first issue) (dowlliott.wordpress.com)
- Emerging Market ETFs: The Case for Reflation (thestreet.com)
- Apple Breaks Below Support – More Pain to Come? (forbes.com)
- A History of Stock Market Bottoms (singularity2050.com)
- The Big Picture (December 2011 issue) (dowlliott.wordpress.com)
- Bond Market Trade Idea and 4 Charts for TLT Traders | BondMoves.com (bondmoves.com)
- Turing Points (January 2012, third issue) (dowlliott.wordpress.com)
- Commodities on the ‘Edge of Gory’ (marketwatch.com)
- Investopedia: Oil Service Stocks Perking Up (wire.kapitall.com)
- Trade Ideas with 6 Charts for TLT and TNX Traders | BondMoves.com (bondmoves.com)
- Trendlines and Timing Point to a January Top (yelnick.typepad.com)