Red Alert For Second Stock Market Crash Down-Wave
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We are now at an excellent juncture to short the broad stock market (or buy bear ETFs and Puts). As we know, we did just that before the dramatic plunge early last week, and are now “sitting pretty”. Now is the time to add to positions, or if you haven’t any and are looking for the right shorting opportunity, this is it.
To see just why now is an excellent time to enter short positions or build on existing short positions (inverse ETFs / Puts) we will now look at the latest 1-year chart for the S&P500 index. All those who bought in the large rectangular pattern drawn on the chart, labeled the “Mug Pen” are like sheep huddled in a corral waiting to be fleeced. Even after the sharp rally late last week they are nursing significant losses, and if they get the chance to “get out even” or nearly so, they are going to take it. What is likely to happen is that they will almost get the chance, but not quite, because the market will turn down again soon, or immediately, and they will have to make a run for it if they want to avoid a severe fleecing. This means that as soon as the market starts to drop away again, they will stampede to unload stocks while they still can at reasonable prices, exacerbating the rate of decline. This is a big reason that another severe down-leg is expected.
On the 3-month chart for the Dow Jones Industrials we can see recent action in detail, and how the market may right now be topping after the technical rebound last week, with a potential “Evening Doji Star” reversal forming on the chart, that will be confirmed by a drop on Monday (August 31st).
The seriousness of the situation is made clear by the long-term 10-year chart for the S&P500 index on which we can see that a long overdue cyclical bear market has been signaled by last week’s plunge, which involved a clear breakdown from a large bearish Rising Wedge. What we are seeing now is a final back-test of the “round number” resistance at 2000, formerly support that failed, before we enter a brutal self-feeding downtrend that is likely to be steep. This looks like the last opportunity to get out, or go short at good prices. Those who follow Wall St’s advice to “buy selectively” will learn to their dismay that the market doesn’t discriminate much when it comes to the damage it inflicts during a severe bear market phase – pretty much everything will be hit and hard.
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Courtesy of http://www.clivemaund.com
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Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.
Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.
The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.
Visit Clive at his website: CliveMaund.com
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