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Sunday, September 11, 2011

Down Market Ahead in Charts

This week, I am refocusing on the one market indicator that has been accurate in the last 20+ years indicator for market rising and declines.  Even when wrong, it is wrong for very short period of time, and does not result in significant market earnings miss.  As video explains, you can wait for a 1% gap in the line cross to help rule out false positives.  The line decline is so steep however, I think when they do cross, we will likely cross a 1-2% difference quite quickly.  As I posted on July 17th, I expect this to happen in September.

If you haven't done so, I strongly encourage you to watch the video at the end of this post, and reflect on the chart below.   This market indicator should be respected as an emotional-less, fact driven indicator.  You can see my own mistake of disregarding this old indicator, and it did hurt my own accounts.

If we experience a year long bear market, chances are, everything will do poorly, including natural resource related investments.  At the tail end of this however, I suspect resource stocks will bounce back with a viscous vengeance.   I will keep my core position in gold miners purchased back in 2008, as well as AVL and other ETF's like REE, as longer term plays.   GLD (Gold) or Silver prices may do well, but could have a severe correction at any moment and carries significant risk.

Using the last two major 20/50 SMA line crossing, we can see the market declined about 35-37%.  Assuming a 35% decline from the current market value, it would target S&P 500 of 780.   Once the lines do cross, I'll re-adjust for a final target for market bottom in the years ahead.

I am of the belief that this next decline may actually be the final leg down in the years ahead, it will depend on the government reactions and currency war progression.  A related read I highly recommend is An Imminent Downturn: Whom Will Our Leaders Defend? 

As always, seek a professional investor, I am not one, just an arm chair observer.
NOTE: The indicator hasn't yet crossed, but a cross does look imminent, I will post when it does cross.
UPDATE: For latest chart, click here

Good luck!

From WebSufinMurfs FinancialBlog2

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