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All The Stock Charts Spell: B-E-A-R M-A-R-K-E-T

Founder & Chief Editor of Gold Eagle
December 16, 2015

In recent weeks there have been truckloads of rhetoric suggesting and wishing US stocks will continue to rise…or may  soon fall.  Needless to say, this is perplexing and confusing to the average investor, who is understandably indecisive of what to do….SELL, BUY MORE or GO SHORT.  Consequently, the following analysis will use 6 charts rather than ambiguous verbiage to paint a realistically clear picture of the state of stock markets…and where they are probably heading.

Irrefutable Signs That A Bear Market In Stocks Is On The Horizon

There are a couple of Technical Indicators that clearly herald a topping in Wall Street stocks (i.e. DOW Index).  One is the DOW/US$ Ratio and the other is the US Treasuries/DOW Ratio

The DOW/US$ Ratio and US Treasuries/DOW Ratio simultaneously forecasted the Bear Markets of 2000-2002 and 2007-2008, when the DOW Index fell -38% in 33 months (2000-2002) and plummeted -54% in 18 months (2007-2008), respectively. 

Well again recently both Technical Indicators are giving SELL SIGNALS FOR STOCKS.

DOW/US$ Ratio Chart –

US Treasuries/DOW Ratio –

A time proven axiom in Wall Street is to dump stock and buy US Treasuries when stocks are way over-valued relative to perennial safe haven T-Bonds.  The chart below proves the wisdom of this prudent investor axiom.

It is vitally imperative to notice that the T-Bond/DOW Ratio is again bottoming in the basement. Obviously, a BIG BEAR MARKET in stocks looms on the horizon…and indeed it has already begun…and will pick up lethal momentum in 2016…when complacent and ignorant investors will be left holding the bag.

The Pinnacle of Irrational Exuberance

The S&P500 is presently experiencing for the third time in the last hundred years, the highest returns for a 6-year period. Since 1907 this only occurred twice before: in 1929 and 1999. These extraordinary phenomenal returns have been fueled not by fundamentals, but rather by the US Federal Reserve, which has been trying to keep the economy afloat.

And history is testament that these periods of irrational exuberance and artificially generated levitations were almost immediately followed by CRASHING STOCK MARKETS. In the 1929-1932 Bear Market stocks crashed measured by the DOW Index.  During the 2007-2008 Bear Market stocks crashed measured by the S&P500 Index. 

Utilities Index Often Heralds A Crash In The Stock Market

Utilities Index gave birth to the stock market crashes of 2001 and 2007.  And don’t look now, because Utilities have again signaled the beginning of yet another stock market crash, where the bears will literally run amok in 2016.

Likewise, The Transportation Index Often Heralds A Crash In The Stock Market

The Trannies led Wall Street stock down in the bear markets of 2000-2002 and 2007-2008.  And look alert as the Trannies are again signaling a new bear market in stocks.

NYSE Margin Debt At An All-Time High Shouting BEAR MARKET

NYSE Margin Debt and the S&P500 demonstrate the profoundly over-leveraged condition of the market. Margin debt in real terms is now 20% greater than it was at the peak of the DOTcom bubble!

2016 Stock Market Outlook

Ambiguous rhetoric aside, the above six charts don’t lie or distort the truth. Clearly, the writing is on the Wall (i.e. Wall Street stocks are indubitably heading for a BEAR MARKET…because GREED AND COMPLACENCY will soon morph into FEAR AND ANGST.

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Founder of Gold-Eagle in January 1997.  Vronsky has over 42 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a financial analyst with White Weld. Vronsky speaks three languages with indifference: English, Spanish and Brazilian Portuguese.  His education includes a degree in Petroleum Engineering from the University of Oklahoma, a Liberal Arts degree from Hartnell College and a MBA in International Business Administration from UCLA – qualifying as Phi Beta Kappa and Tau Beta Pi for high scholastic achievements.  Vronsky believes gold and silver will be recognized as legal tender in all 50 US states and many countries worldwide.  You may reach I. M Vronsky at: [email protected] and/or [email protected]

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