A Mad Monk's Vision for 1997
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My fellow traders, investors, speculators and gamblers, beware of the year 1997. I see trouble ahead because of the following 9 observations:
1. Year-ended-with-a-Seven Mystic
Since 1887, there has been 7 down years and 4 up years for the years ended with a "7". The odds clearly favors a down year for 1997.
2. Post-Election Syndrome
After the inaugural ball, the piper must be paid for the sins of these high-strung politicians. Clinton's one-sided victory by a landslide is obvious (How do I know? The techbnical picture of the market tells me so. IN ADVANCE! Clinton HAS to win by a landslide to set the tone for the bear's growl). The odds favors a 20% to 30% decline from the December/January high.
3. Technical Deterioration
Pick up any chart book and you'll find distributions (IPO, PPO, SPO, splits) everywhere. With hundreds of billions of dollars already pouring into the market, the best move it can muster is a side-way pattern, masking an invisible crash of the smaller cap issues. This inflow of dollars will slow or even dry up. So watch out. The odds ALWAYS favors a down market following technical deterioration.
4. "5" to "8" Window
Years ended with a "5" or "8" are historically great bullish years. Technically, bull markets are usually launched from a flat base or a deep trough, almost never from a high plateau. Since 1996 is more than half gone and is unlikely to crash due to political backdrops, the odds favors 1997 to be a year with a flat base or deep trough which has immense bearish implications.
5. Bullish Mass Psychology
The balooning of the mutual fund ownership spaeks loud and clear that the public is unprecedently bullish. The last time the mass fell in love with mutual fund was in early 1970's and you knew what happened in 1974: in the abyss of that bear market, "mutual fun" became pornographic and losers discarded them like used condoms. What's more, most current fund managers are new to the business and have never experienced a bear market before. So, be prepared for these amateurs to get panic and dump stocks at the very bottom of the bear's lair from where they should be BUYING.
6. Nifty-Fifties Syndrome
During the last correction, more and more players took the defensive posture and shifted their assets to a handful of blue chip stocks (nifty-fifties). This is another parallel of the early 1970s that market followers should not ignore. At the 1974 bottom, when the nifty-fifties finally succumbed to the bear claws, the average stock lost an astounding 70%! Only a handful of contrarians or tea-leaf readers were fortunate enough to have bear claws for breakfast.
7. No-where-to-hide Complex
As of today, large cap blue chips are safe havens for the big boys. However, in 1997 when the blue chips turn weak due to their technical weights (distribution), there are simply no places to hide. Watch out for these blue chip stocks to break important price supports one after another very similar to that of the 1974.
More to come....stay tuned |
