The Dow has just made a 99-year record
On Friday, the Dow crashed to a new low of 30,650 and we have had now eight successive weekly losses in the Dow and is a record series of declines that has been matched only once in stock market history. And that was exactly 99 years ago in 1923 when the Dow was already well into the extended Stock Market Crash that was associated with the Great Depression.
The Dow has crashed for eight weeks in a row to Friday’s low of 30,650 – for a total loss of 6,000 pts (16%) off the January 4 ATH. Members of my VIP Traders Club have been following the twists and turns off this high to great advantage. As I stated in January, that high was very likely the final top to the decades-long Great Asset Mania that has gripped investors which I believe has culminated at the NFT (Non Fungible Tokens) phenomenon where real money is paid for imaginary assets. Such behaviour will later be seen as extremely foolish as was buying those tulips at vastly inflated guilders.
But the difference this time is that the current losing streak is occurring near the start of the coming Great(er) Depression that will dwarf the former slump in severity.
So with the MSM now fully on board the gloom and doom story, is the market nicely poised for one of its regular sharp rallies? Remember, observing the tone of the MSM financial headlines is one of my most reliable contrary indicators. Basically, financial journalists rarely stray from the opinion of the herd and will often issue their gloomiest posts when all fundamentals look decidedly bleak and all agree stocks are headed lower.
And lo and behold, I see this very bold and striking headline today: “The stock market crash has only just begun” That is about as definitive a conclusion as you will see in the MSM. This guy has jumped off the fence -a most unusual event.
And that is one reason why I am expecting a decent bounce ahead. The other reason is that in the above article, he states:” The carnage in the stock market does not show any signs of letting up any time soon.”
Also, all of the oscillators I follow have headed for the basement and only a small degree of buying should encourage short covering and send the index up several hundred points at the very least. A favourable news story would do it.
But I have yet to see signs of real panic. Most US investors say they are bearish, but they still hold shares and believe they will regain their mojo once the Fed comes to the rescue.
Make no mistake, the headline above is correct – the crash has only just begun, but we will see many sharp relief rallies in the meantime that will shake the confidence of the bears and may even panic them out altogether, just before the next leg down begins.
Yes, riding a savage bear market can be an emotionally-intense experience (on a par with riding a huge bull market). Only those with nerves of steel can hang on to short positions as they see the sharp rallies quickly erode their hard-won ‘profits’. Most of us have a pain threshold – some will be weak, some strong and some in the middle.
That means that as serious traders/investors, we must decide which tactics we will employ to navigate the twists and turns – or indeed to stand pat.
Those with a very high pain threshold will tend to stand pat while those with a low threshold will get out of positions quickly on a bounce. As with everything in life, there are advantages and disadvantages to both approaches. There is not a ‘one size fits all’ policy here.
If your aim is to maximise your running profits and minimise your individual losses on each trade, then you will decide to trade in and out around the market swings. This is a most difficult task. If you believe the indexes are due a decent pull-back, you will lighten up your short positions as you anticipate a relief rally will likely carry beyond your pain threshold.
But what if it doesn’t pull back and the market keeps falling? Then you have a very difficult decision – do you simply jump back into an oversold market that will likely annoyingly rebound soon after your new entry, or do you wait for the next rebound that may occur much lower down (and kick yourself for getting out too soon)?
Such are some of the dilemmas in trading. And there are no easy solutions. But there is one Golden Rule to apply in solid bear markets. Always keep a core short position working if it was taken up near the highs.
For instance, we first shorted into the bear market in early January at the 36,400 region and despite the huge March rally phase to 35,500, has now dropped to 31,00 for a massive gain of 5,400 points. In early April the gain was only 900 points and many shorts had abandoned ship after seeing their huge gains to the February 24 low of 4,000 points almost wiped out.
Only those few with nerves of steel withstood that loss of potential profit. Most would benefit from a hybrid approach that I advocate for VIP Traders Club members.
HUGE PROFIT OPPORTUNITIES LIE DIRECTLY AHEAD – WILL YOU TAKE THEM?
Huge profits await nimble and canny traders in the upcoming major bear trend in shares. But navigating the inevitable sharp swings will require expertise. Even in a strong trend, it is possible to lose money even if your overall view is correct! As in most of life, timing is (almost) everything.
Come join us as a member of the VIP Traders Club as we navigate the treacherous waters of the major markets. You will receive my daily Trade Alerts Monday-Friday where I cover most of the main markets from stock indexes to currencies to metals and commodities. We have taken major profits during the bull runs and now waiting for the next opportunities.
Is price inflation nearing a top?
Now that the MSM is fixated on ever-rising inflation, w must ask if the market will once again defy the expectations of the herd and begin a process of easing. Of course, most pundits rely on the official data for their prognostications that is compiled and released days and weeks after markets have made their moves.
If, for example, energy prices start falling now, most will not acknowledge any easing of inflationary pressures for some time – possibly just when oil prices may have hit a new low and are poised to resume their strong advance that would make those pundits look pretty foolish.
The same would apply to food prices (these are hugging major headlines daily). What if the Russians decide to release some of the captured Ukrainian grain to their ‘friends’ such as the hard-hit India that has recently stopped their Wheat exports due to very hit weather issues? Wheat prices would likely start tumbling if that word got out.
Here is NatGas showing the major high set in back in March and the to-and-fro action since but along a good tramline pair.
The major trend is certainly up (higher lows and higher highs) but is nearing the major upper tramline resistance. If it can push higher this week, the key level is at 115 (currently 110). But a sjapr break here would send it towards my lower tramline in the 100 region. And a clear break of that tramline would likely set up a major leg lower with the 88 level as likely target.
Of course, this market is being buffeted by the political machinations of events between Russia and the EU (of whom Germany is a leading customer). There is massive pressure on Germany as the leading EU economy to divest its reliance on Russian gas and is seen to be kicking and screaming away from Russia – but what are their alternatives? As usual in politics, there will be an almighty fudge.
Now, Natural Gas is ‘green’
And taking of almighty fudges, I couldn’t stop myself spluttering into my coffee when I read last week that the EU has now classified Natural Gas as being officially ‘green’ in its desperate attempts to square the impossible circle of keeping the lights on and saving the planet at the same time.
Oh, the irony! Natural Gas is made up of 80% – 90% methane, CH4, an elementary hydrocarbon and is said by the eco zealots to be the most potent greenhouse gas out there. This is the one gas that they should be waging war on rather than on CO2 (a far weaker greenhouse gas but an essential (free) plant fertilizer).
The madness rolls on – and is one reason why I believe the coming economic crash will kill all illusions of the CO2-obsessed eco warriors. The declining global economies will reduce demand for energy, will lower CO2 emissions naturally and that will recede from being Enemy Number One to its rightful place as a necessary ingredient to increasing crop yields in a world where food scarcity is looming.
Commercial greenhouse owners full know the benefits of a high CO2 atmosphere – they pump it into their units and receive much higher yields in return. Have not the eco warriors noted that? Of course not – the movement is entirely political and quasi-religious.
In fact, the mis-guided attempts to save the planet by cutting CO2 emissions is actually the complete opposite strategy the world needs to feed its people. It is a complete economic disaster in the making and a perfect symbol of the decline in all government systems in force today. We have reached the end of the cul de sac called Easy Street with free money for all and now on the path towards a more austere world.