The Ugly Reality of The US Stock Market
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It doesn't take a great treatise or any "rocket science" to expose the ugly and sordid reality of the true condition of the broad US stock market - all it takes is a few charts and a modest helping of common sense.
The reason why the Dow Jones Industrials Average features so prominently in the mainstream financial press is that it is the principal tool used by wholesale vendors of stock to sucker the ordinary retail investor into buying at market tops. The recent past provides a perfect example. On our 10-year chart for the DJIA we can see how it broke to new highs last year, an event that was accompanied by great fanfare in the media, who have since been trumpeting the glorious achievements of the "bull market" ever since. The problem is that the Dow Jones Industrials is not a true representation of the state of the market as a whole, being made up as it is of a narrow basket of very high cap stocks.
The real stock market is shown much more accurately and faithfully by the relatively neglected S&500 Index, the chart for which tells a very different story. On its 10-year chart we can see that it has definitely not broken out to new highs, and is instead buckling beneath the heavy resistance approaching its 2000 highs, with which it is danger of forming a Double Top. Investors in the US stock markets who nevertheless remain impressed with the gains of the past 4 years, during which time this index has risen from about 800 to 1400 would find it educational and rather sobering to try spending those gains in other countries.
If you factor in the decline of the dollar over the past 4 years, the gains during this period look nowhere near as impressive. This can easily be done by plotting the S&P500 against say the Euro or the Swiss Franc. The 10-year chart of the S&P500 chart plotted against the Euro shown here exposes the ugly and sordid reality that the so-called bull market of the past 4 years is nothing more than an anemic bear market rally, that has taken the form of a bearish Rising Wedge - and some mighty unpleasant stuff is likely to hit the fan once it breaks down from this pattern, which it is now close to doing. Not that the writer wishes to "rain on your parade", just call a spade a spade. You owe it to yourself and those around you to face reality as it really is, and not as some would like you to believe.
We will be looking at the implications of a continuing fall in the broad market for the Precious Metals sector on www.clivemaund.com in the near future.
Clive Maund, Diploma Technical Analysis
Copiapo, Chile, 1 March 2007
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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
