What Is Going On With The Stock Market?

May 19, 2019

It has been a wild ride for the Stock Market over the past several weeks. Is the next major decline starting? Or is this just Twitter indigestion?

Let’s look at the big picture for the Industrials, which is similar for the S&P 500. Above we see that from the Cycle degree wave IV low in 1986, through now, that the Dow Industrials have traced out a magnificent textbook Megaphone top pattern we dub the “Jaws of Death.” It has the appearance of a Shark with its mouth wide open ready to devour its prey.

After three plus decades of development, 33 years, this pattern is almost complete. It will conclude Grand Supercycle degree wave {III} up, a multi century Bull market that started around the time the United States of America was founded.

The stock market is wrapping up this huge pattern with a smaller version of a Megaphone top pattern from 2017, which we show below. It needs one more rally leg to the top of this relatively small (but still large in the context of short-term moves) Megaphone top to reach its upper boundary line, its finish point.

Back to the fist chart above, I first noticed this multi-decade Jaws of Death Megaphone pattern back in 2013 and wrote a book about it, The Coming Economic Ice Age. Nothing has changed except because the pattern is so huge, its completion is coming seven years after I wrote the book. I knew the pattern was not complete when I wrote about it, but wanted to warn about the ominous message it had for the markets and economy. It now looks like this pattern will finish later in 2019, and will be followed by the kickoff to the next Great Depression and Bear Market, Grand Supercycle degree wave {IV} down.

The next four charts show similar examples of this pattern that appeared over the past century, all of which led to powerful stock market declines. However, what is concerning is that the above pattern is so much larger than these other examples, that the resultant decline will likely be proportionally larger as well.  

Confirming the Dangerous warning from the multi-decade Jaws of Death pattern, is a simultaneous multi-decade massive Rising Bearish Wedge pattern. This pattern is finishing here in 2019.

This Rising Bearish pattern is Cycle degree wave V-up, which will complete Supercycle degree (V) up and Grand Supercycle degree wave {III} up. Both the Megaphone Jaws of Death and the simultaneous Rising Bearish Wedge pattern have the same downside price target, 4,000, with lower potential.

As for this Rising Bearish Wedge, it means the rally from December 24th, 2018 is part of the final subwave (E ) up to complete this ominous Bearish Wedge. If so, a market collapse will follow, perhaps starting later in 2019 or early 2020.

In looking at what we can expect from the stock market until the top arrives, above we see that Stocks are inside a three-wave rally leg from December 24th, 2018. We just saw the top of subwave A-up

of (E ) up at the end of April 2019, and B-down is now underway. Below are two more close-ups to get a tighter look.

We are watching for subwave c-down of B-down, which may be starting now. If so, stocks should decline over the coming week or two, completing B-down. Then C-up will follow to complete the Megaphone Topping pattern from 2017, which, ergo, will complete the Magaphone Top pattern from 1986, and the Rising Bearish Wedge pattern from 1986.

War could accompany the coming Bear market, as in my book, The Coming Economic Ice Age, we correlate with past economic recessions and depressions. History will repeat itself.

Of course, this coming decline will have a positive impact on Gold, Silver and Mining stocks. Quantitative Easing will return as the Fed attempts to print us out of trouble, which will be good for precious metals. Given the size of the coming Bear market, the Fed’s efforts will be facing quite a headwind.

At McHugh’s www.technicalindicatorindex.com we have developed several proprietary indicators that help us identify when the next significant move is starting for Mining stocks, and in which direction the move will develop. We publish these indicators in every Daily Newsletter to subscribers.

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The term “carat” comes from “carob seed,” which was standard for weighing small quantities in the Middle East.

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