Saturday, July 14, 2012

PREMONITION!

The broad market averages are now revealing overwhelming evidence that a significant top is upon us. And in the coming weeks, I fully expect the world to witness a dramatic downturn that sends prices into an abyss.

Get ready Folks, as this upcoming event will be a force not to reckon with, and for those who deny such could suffer major losses in their investment portfolio.

You might recall in my last post, "Are we to Blame Nixon," I specifically warned readers to stay away from an imminent short covering rally that would emerge, but not to give credence to its illusion of a renewed uptrend.

Unlike most short covering rallies, this one has been all but convincing. It fell short of fullfilling the reek of euphoria in the marketplace, and barely neutralized the negative senitment that engendered during the previous decline in May.

The market is now on the verge of resuming its bearish downward momentum, and the reacceleration of this current decline will categorically be one of much greater magnitude. Stocks will undergo an aggressive sell-off that generates fear and anxiety among investors of every description. This liquidation process will lead to capitulation, where neither buyers nor sellers desire to participate in the marketplace.

My best guess is that this momentary spark in equities will soon fizzle out and stocks find their breaking point sometime between now and the next 10-12 trading sessions. This scenario should materialize in a crawling-like descent, much like the one last week, followed by a 3-5 day mass exodus.

S&P 500- Daily Chart




15 comments:

  1. Darah,

    Do you also see gold and commodities in general also headed down if this plays out as you suggest.

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  2. The intermediate trend for gold is clearly bearish, and I forsee it going to 1350, possibly lower. At the moment the metal is trading within a triangle. These patterns are tricky because they can break in either direction. If gold can generate a bullish resolution, then i see it going to 1650, or even as high as 1680. If prices break lower, then first watch for 1500. Then roughly the 1440. The chart that is posted on "Are we to Blame Nixon" is a great reference point as it reveals a break of the longer term trendline dating back to 2008.

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  3. Darah

    thanks..the only thing that might throw a monkey wrench into your forecast is the dollar..its possible with the swing high on Friday the dollar could be headed down and that would favor gold and stocks going higher i would guess

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  4. The advance is limited at this point for stocks, but the rally can still continue for a few more days. All in all, the least path of resistance is definitely much lower.

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  5. Also take in mind TLT, it has inverse characteristics to SPX. Stumbled upon your blog today, very nice :)

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  6. back to the drawing board...banksters in control again for now :-(

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  7. The market is very unhealthy in terms of breadth and volume. It does not signify that prices have the staying power at these levels. The least path of resistance is clearly lower. Tops take time to form, and this time will be no diffferent.

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  8. Full backtest here. Bankers have skewed technicals for a few years now...this will be the ultimate if we break above. Anyone shorting into FOMC gets what they deserve, given the lessons of recent history. Monday is truly make or break for bears.

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  9. The technicals always find a way to fulfill the fundamentals. An as it stands, the market is currently driven by particular news events. In no way shape or form would the FOMC meeting change the intermediate outlook for stocks.

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  10. The characteristics of this three day event has more qualities of a short-covering rally, not the beginnings of an uptrend.It won't be until the market actually rolls over that people become convinced of the bearish implications. The question is, do you find stocks of value at these elevated levels? And would buying here be of great opportunity? Remember, meanigful rallies only come from fear and panic, and we just don't have that scenario.

    This overly bullish sentiment should caution most investors, but time and time again it will suck those in who favor the conventional wisdom.

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  11. What prompted the short covering? OBV doesn't confirm the move, which is good for bears. Interventionism always wins, so until that's eliminated, it's always dangerous to be a bear.

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  12. If history tells us anything, each time the Fed acted was only after a big drop in stocks. This time will be no different.

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  13. REUTERS — 10:31 AM ET 07/30/12
    FRANKFURT/PARIS (Reuters) - ''The European Central Bank is thinking the unthinkable to save the euro, including resuming its controversial bond-buying program and possibly even pursuing quantitative easing - in effect printing money.''

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