Zeev:
Interesting market observations from a Yahoo poster. Seems similar to the turnips except that they have the bottom in the fall instead of August.
From Yahoo
08/04/01 06:20 pm
Msg: 107552 of 107580
I signed up for the $65 Sandspring quarterly today. They have some excellent cycle work.
Their cycle works suggests that:
1)Markets will make a major low between Oct 2001-Feb 2002. The timing will depend on what
happens in the short term. If we rally more now then that sets up for a later bottom. If we break
lower from here then the bottom should comin in Early Oct. The main point is that the markets
will make an equal or lower low to this spring's bottom.
2)Upon bottoming per #1, the markets will embark on a rally lasting into the fall of 2002. The
rally will be a result of fed inflationary forces taking hold and temporarily stalling deflation.
3)That rally will fail in the fall of 2002 and beging another 2 year cycle down to new lows. This
will be a result of the deflation from the excessive corporate and consumer debt being
unwound. The fed inflationary forces will just stall the inevitable until this time.
Their work suggests that the Nazdaq will follow a similar path to the gold chart from 1980 on.
There will be major tradeable rallies but the buy and hold investor will lose money if they stay
invested for the next 10 years.
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Of course there is no way to predict the future but their work certainly makes sense to me. If
you look at long range charts of the S&P especially, it is easy to envision a rally in 2002
resulting in an enormous double top. It is also reasonable to assume that the market will stall
because this DEBT SITUATION makes growth unsustainable, even with an inflationary fed
working to forstall the inevitable.
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For the short term, in my view we are not set up to rally much higher. When this rally fails, it
will set up the Oct-Feb cycle lows. There are several factors which I see as capping the rally
before everyone expects it to stop.
1)The fact that many many investors/analysts etc are calling for a rally up to 2800-3000 on the
Naz. Very few now consider the possibility of lower markets in the next few months. The
market usually does what is least expected.
2)High 70% equity allocation models and Low mutual fund cash reserves mean insufficient
buying power for a major move. The money is already in the market. Few believe this but the
numbers don't lie.
3)Sentiment indicators are not set up correctly for a major rally. Bullishness is still too high.
Put/calls fall off a cliff on any rally. Vix..
Vix is just over 22. Tops, even in bull markets, usually happen when vix dips sub twenty and
are signalled when vix again goes north of 20. We are in a bear market which makes current
levels flash even a louder warning. There is also bullish divergence set up on Vix's chart. Macd
is set up to put in a much higher bottom if and when vix goes sub 20. This will be a major
bullish signal for vix and major bearish signal for the markets.
stockcharts.com[h,a]dfolyimy[dd][pb50!b200][
vc60][iUb10!Le12,26,9!Lc20!Lf]
4)Charts of Oex,Naz, Dow etc show longer range stochastics near overbought. If we continue
to rally, these indexes will be approaching strong overhead resistance with indicators
overbought and SENTIMENT pegged to the floor optimistic. That's not a bullish scenario. It's
more of a maajor selling opp. |
