A recent insightful and timely article by internationally known analyst Graham Summers galvanized my attention. Graham’s focus was using Weekly Charts to demonstrate the accurate forecasts of Bear Markets in the US. His stock sell signal is based upon the Death Cross definition where the 50-week moving average falls below the 100-week moving average. Summers’s astute analysis speaks for itself:
My analysis below is in total support of Summers’ prophetic thesis that “…this Death Cross formation has only hit TWICE before. Both times were when major bubbles burst and stocks Crashed.”
Today’s Death Crosses Formed Across The Board Are US Stock Market Sell Signals
Here following are charts of the seven major US Stock Market Indices, showing the 2008 and current Dreaded Death Crosses…the former heralding the protracted Bear Market 2007-2008 period when the bubble burst as stocks relentlessly crashed -50%. The locations of the two Death Crosses are noted by the yellow arrows However, everyone must be aware that nothing in life nor the markets are certain…except DEATH & TAXES. Nonetheless, those who are ignorant of financial history are doomed again to suffer its dreadful and costly consequences.
Russell 2000 Index
Wilshire 5000 Index
Dow Jones Transportation Index
NYSE Index
NASDAQ Composite Index (As of 05/20/16 Death Cross still not consummated…but soon will be)
Stocks Forecast For Currently Developing Bear Market
We make the assumption that US Stocks will be hammered down an average of the two previous Bear Markets (2000-2001 and 2007-2008)…subsequent to their Death Cross sell signals. During those periods, the S&P 500 fell about –44% in the first bear market…and approximately –54% in the second. Therefore subsequent to the most recent Death Cross, one might see the S&P 500 Index decline to about 1200 by early 2017…which would be a Fibonacci 0.61.8% Retracement.
BUT THERE’S MORE…
During the Stocks Bear Markets of 2000-2002 and 2007-2008, the US dollar steadily rose in value vis-à-vis most other major currencies. Consequently, the price of gold slowing slipped lower. During the two aforementioned Bear Stock Markets, the US$ rose an average of about +18%. Consequently, applying this increase to current conditions projects the USD Index rising to about 120 in the next several months…and perhaps even higher going forward.
To be sure if history is testament, gold again might (temporarily) move lower…reflecting a stronger greenback. Indubitably, this will be the last opportunity for investors to take positions in the shiny yellow at reasonable prices.