Warning: Bear Market Rally Trap Ahead
Stocks around the globe were pummeled again last week.
This is no surprise to our subscribers as our predictive trend analytics
model gave us clear technical evidence that important multi-year highs had
completed back in the middle of 2015.
I continue to remain steadfastly bearish in my outlook for stocks.
Last Friday, January 15, 2016, the SPX broke below its Aug. 24, 2015 low,
which is equivalent to a major sell signal if price closes the month below
that level.
Last week, The Dow Jones Industrial Average slumped 511 points, or 3.1%,
to 15,866, while the S&P 500 slid 64 points, or 3.4%, to 1,856.34, led
by the financials, technology and energy sectors. The Nasdaq Composite tumbled
190 points, or 4.1%, to 4,424.35.
Subscribers and I managed to catch a 33% quick intra-week bounce trading
the SSO ETF and then got out of harm's way as volatility took hold once again.
European stocks were unable to escape the downward trend from other markets,
and the Stoxx Europe 600 index lost 2.8%. The dollar fell to a one-year low
vs. the yen. Gold rose $22.40, or 2.1%, to $1,096.20 an ounce.
The SPX is currently testing major support. This is consistent with a "cycle
low" that arrived over the weekend. Even though we are in a bear market, we
should expect a "Bear Market Rally" sucking every last investor into long positions,
before dropping much lower through previous support areas. This will be a very "short
term bottom" this week.
We are in a long term downtrend now; it is not a "hiccup" as we experienced
back in 2012.
If the stock market is going to stage a rally from here, this is a good time
to start, right when everyone is jumping off the ship and the sentiment is
so extremely negative. Just to give you a feel for the level of panic selling
on Friday, my panic selling indicator which tells us when short term bottoms
are likely to happen as everyone is running for the door, this contrarian indicator
spiked to 50. Now any reading over 3 is panic in the market, and a reading
of 9-18 is typically a multi week low. So you can see how 50 is VERY extreme.
Because we are entering a bear market and institutions will be unloading
shares area record pace going forward, I feel this extreme level of panic selling
(50) is only going to trigger a bounce lasting a week or so, then more distribution
selling will take hold.
A slew of disappointing U.S. data shows that manufacturing and consumer spending
are in trouble. Empire State factory index declined sharply this month to its
lowest level since the recession. Retail sales declined by 0.1% in December
2015 and a report on industrial production compiled showed that activity declined
for the third straight month.
The New Year is not off to good start. In fact, it may be the worst start
ever of a New Year in many world stock indices. Instead off irrational exuberance
that had previously been so evident, investors of world equity markets are
clearly starting to panic.
We all know things are not right. We know it hasn't been okay since the 2008
financial crisis. The effort by the central banks to get over the hump has
fueled an "Asset Bubble" in the stock markets.
This in turn should start to fuel safe haven buying in gold. Gold's day in
the sun is soon approaching. I believe this new year will prove to be a pivotal
year for gold, silver and miners.
The "talking heads" tell us that the stock market is falling because energy
prices are falling. We need higher energy (gasoline) prices. Really? They claim
that energy companies are going out of business and that tens of thousands
of people will lose jobs and unemployment will rise. Really? Didn't the jobs
numbers show hundreds of thousands of people getting new jobs - in fields outside
of energy? Who are you going to believe?
Later this week I will be posting an exciting video show you how to make a
fortune during this pending bear market and exactly how I did this in 2008 - 2012
to become financially free before I turned 30 years of age. Stay tuned and
be sure to opt into my free email list if you want to see this exciting, inspiring
and educational video! Visit: www.GoldAndOilGuy.com
