The Dow Industrials just had their worst week since September 2011, losing 678 points from December 5th through December 12th. The S&P 500 has lost 77 points. This comes on the heels of the latest Hindenburg Omen, which was official on December 2nd, 2014, and has had an incredible number of observations within a very short time period, 8 observations out of the past 10 trading days. This is a sign that the stock market is in a very unhealthy state. The large cluster of H.O. observations within such a tight period of time is unprecedented over the past 25 years. Certainly this is not a good sign for stocks.
Stocks completed small megaphone top patterns on December 5th, 2014 that started in mid-2014, and have dropped sharply since. The decline the past week was not unexpected, and is in fulfillment of the warning that markets have been giving through Bearish Divergences in major indicators that we have been tracking versus major stock indices for the past several weeks.
We got new Sell signals in our key short-term trend-finder indicators Wednesday, December 10th, and they remain on Sells this weekend. With these new Sell signals, we now have strong evidence that a significant stock market decline is starting. The downside price targets for the Industrials per the completed small Jaws of Death pattern that occurred the last half of 2014 is 15,800ish. The downside for the S&P 500 from this pattern is 1,825ish, and for the NASDAQ 100 is 3,700ish. Eventual downside price targets are substantially lower than these per the multi-decade Jaws of Death pattern from 1987 that I presented in my book, The Coming Economic Ice Age, and in updates within our daily and weekly newsletters.
There is an open gap at 1,905 in the S&P 500, at 16,401 in the Industrials, and at 3,872 in the NASDAQ 100 that occurred during the parabolic rally from October 15th, 2014. This tells us that prices will drop substantially to these levels during a future decline, probably during the significant decline that is starting now. But as noted above, even lower price targets are in place per the short and long term Jaws of Death patterns.
Our amazing Secondary Trend Indicator, an intermediate-term indicator, remains on a Buy signal Friday, but fell 8 points on Friday's plunge to a measure of zero. Once it moves to negative -5 or lower, it will generate a new Sell signal, and we will have supporting evidence that the multi-decade Jaws of Death Pattern from 1987 could be complete and the start of a Major Bear market in stocks and a serious economic downturn is beginning.
On Friday, December 12th, Blue Chip stocks' Demand Power fell 7 points to 366, while Supply Pressure rose 13 points to 396, telling us Friday's decline was powerful. The imbalance between Demand and Supply tells us that deep pockets intervention was buying the market hard, providing bids where normal market participants were not doing so, to keep prices from fully collapsing. Oil is dropping dramatically, and to a level where the incentive to produce will be jeopardized. Fracking and other wells that were drilled by the majors in the past several years will shut down. Oil has dropped over 40 percent in the half of 2014. This is not lost upon the stock market. Exxon Mobile is down almost 10 percent since late November 2014 and is down 16 percent since July 2014. The impact of declining oil prices on oil exporting nations dependent upon those revenues could be catastrophic, including Russia. This could have serious geopolitical consequences.
U.S. Bonds have been rallying like crazy, and interest rates are falling hard at the long end of the curve, which is precisely what we have been forecasting in our chart annotations for months. Bonds are up a huge 14 points since July 2014. Bonds will soon be higher (long term interest rates lower) than they have been in decades. U.S. Bonds are telling us that the economy is in serious trouble, in Depression era territory, confirming the same message that stock charts are delivering. Big economic trouble is brewing. There will be some amazing opportunities and some very dangerous positions to place money in 2015. We plan to have our Conservative Portfolio and Platinum program investment positions in a place that is safe and opportunistic. Volatility should be extremely high in 2015, very different than what we saw for large chunks of 2014. The world economy is headed for another Great Depression.
Our HUI key short-term trend-finder indicators generated a Buy signal Tuesday, December 8th, as the HUI Purchasing Power Indicator remained on a Buy signal, with the HUI 30 Day Stochastic Indicator moving to a Buy Tuesday, December 8th, suggesting that Mining stocks and precious metals are headed higher.
Gold looks to have finished wave e-down of a double zigzag for wave (2) down. If so, the wave (2) down correction from September 2011 is over and (3) up is starting. I do not expect Gold to take off like a rocket initially, since there was so much psychological damage from the decline the past three years, however I expect Gold to crawl higher for a while, and then once the coming economic crisis is evident to all, and the Fed starts QE-5, Gold will accelerate to the upside. The timing for that high momentum rise could be about a year from now. Between now and then Gold should quietly work its way higher, rising on low momentum, but rising nonetheless.
Gold has finished waves i up and ii down, and within wave iii up has finished wave 1 up on Monday, December 1st, the first of five subwaves for iii up. Corrective wave 2-down also looks complete. Wave 3-up of iii up may have started Monday, December 8th. Same for Silver.
The U.S. Dollar may have finished the final leg of a small Rising Bearish Wedge, and the Euro may have finished the final leg of a small Declining Bullish Wedge telling us that the U.S. Dollar may decline toward at least 84ish while the Euro could rise toward 129ish. This should support our bullish outlook for Gold.
In summary, Stocks are topping, the Dollar is topping, the Euro is bottoming, Oil is bottoming, Gold, Silver and Mining stocks are bottoming, and Bonds are rising with further to rise. Bonds will soon be higher than they have been in decades.
Note: Coming at the end of December, McHugh's Fearless Forecast for All Major Markets in 2015, how we plan to play trends that we see dominating in 2015, why we see those trends, along with investment and trading ideas. I guarantee this report will hold many surprises that are at odds with what the mainstream financial media has been drilling. Tell your friends this is one report they will want to study as the calendar turns.
Dr. McHugh's Book, The Coming Economic Ice Age, Five Critical Steps to Survive and Prosper addresses what part the Hindenburg Omen will play in identifying when the coming economic collapse begins. Dr. McHugh's book, "The Coming Economic Ice Age, Five Steps to Survive and Prosper," is available at amazon.com at http://tinyurl.com/lypv47v
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