What do you guys think of this?
Veteran US technical trader Mr Bill McLaren, regarded as a trader's trader by analysts and a Gann trading method guru, has stuck his neck out and predicted the date of the next Wall Street crash.
In an interview with The Australian Financial Review, Mr McLaren said investors should move to protect their share portfolios before the crash, which had an 85 per cent probability of happening on March 16.
His bearish prediction of a 20 per cent fall in the market is based on technical analysis of cycles that have shown up in US stockmarkets in the past four big crashes.
"All the signs are here that we are in for real problems," he said.
"This is the scariest market I have seen and I have been in the markets since 1965. I have been very bullish for quite a while, but what we have seen in the last few weeks has got me worried.
"In January, US mutual funds had the lowest cash levels in 30 years. Those cash levels are what support the market when it starts to fall, so we don't have a lot of support in the market.
"The inflows of cash have been huge. In the first two weeks of February, they have been four or five times normal levels. What we are seeing is a blow-off.
"The markets do go into significant tops, with a huge rush of bullish sentiment."
Mr McLaren, who is licensed by the Australian Securities and Investments Commission as a futures trading adviser, said technical cycles were similar to the patterns that occurred before the market crash in 1973.
At that time, Mr McLaren believed the bull-market hype and went broke. After rebuilding his business, he moved to Australia.
Technical analysis has been a mainstay of many futures businesses and is increasingly being used by day traders to predict future price movements.
"The cycles that brought the high in 1929, the highs in '87, the highs in '73 and the highs in '94 were all the same cycles," he said.
"It's a combination of cycles, and that's what is happening right now. If we get a low around Tuesday or a retest of 1353 on the S&P500 and a rally up to March 1, the market will be in reversal like '87 or like '94.
"We are set up for it because of the technical factors, lack of support in the market.
"Portfolio managers that I know are under huge pressure to get rid of lagging blue-chip stocks and buy shit.
"If you are going to perform, that's what you have to do.
"Everybody is getting in but they have weak hands.
"Because they are getting in now, costs are so high, but they will liquidate if the going gets tough.
"In '87, it was more a problem of portfolio insurance and mechanical factors.
"If this market starts down on March 2 there won't be any support to the market because all the money is going to be in it.
"This current high is a significant loss of momentum on the chart so when you come down from a loss momentum it can be a top.
"Tops also come in by breaking new highs and then falling and not being able to hold the new high.
"That just happened in the S&P and may also have happened in the All Ords.
"Technically, this is called a 'false break'. It proves to all the traders that there is no buying power left.
"Bull markets end with huge amounts of specialisation.
"In '73, it was the 'nifty 50' and now it is the internet. Fewer and fewer groups lead the market in the final stages of a bull campaign.
"The market always looks at its best at the top."
Mr McLaren said the probability of a crash was 80 to 85 per cent, "which is about as good as it gets".
"If the market finds support on Monday or Tuesday, a lower high on March 2, and if that occurs and the market starts down, it's an extremely high probability in the next two weeks," he said.
"The crash will be big. I can give you a date: the low would be around March 16 and it could be below 1100 on the S&P 500."
Mr McLaren issued a warning about the market on October 5, 1987, and again in March 1994.
"It's the first time this cycle has shown itself up as a possibility since 1994," he said.
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