Fibonacci Financial

Posts Tagged ‘Bear Market’

Dear Reader,

The Markets have been in a Holding Pattern since late last year.

That’s about to change DRAMATICALLY.

The Stock Market as exemplified by the Dow Jones Industrial Average  (aka: the D.J.I.A.) has been stuck in a trading range roughly between 10,000- and 11,000+.

For the last year the D.J.I.A. trading range market has been forming a potentially OMINOUS Head and Shoulders Top.  This is just a potential until the neck line is broken decisively!

Remember Summer School over a year ago when we first reviewed the Head and Shoulders Formation? If you need a refresher course,

Go here : http://www.fibonaccifinancial.com/financialwarroom/if-bonzo-is-buying-then-you-should-be-selling/

When this neck line in the D.J.I.A. is broken decisively,

I believe we will be entering  a very dangerous period of HYPER-DEFLATION.

The Federal Government’s Plunge Protection Team ( aka the PPT) have been very busy!  With the X-Ray vision provided by the COT (Commitment Of Traders) reports we can see that each time the D.J.I.A. is in danger of breaking down, the PPT  jumps in with tones of money and buys the market. If they loose this game (which I suspect they will a la King Canute) the breaking of the neck line will be even more ominous and meaningful. If all the Fed’s horses (fiat money) and all the Fed’s men (Ivy League Whiz Kids – full of hubris) can support the market – there’s a hard rain coming…..

This has real potential of making the Great Depression of the 1930s look like a dress rehearsal. For some interesting insight into the potential magnitude of this HyperDeflation buy The Great Wave by David Hackett Fisher and read the last chapter. (FYI David is not an economist but he is a Pulitzer Prize winning author/historian).

Go here to Amazon.com and buy it!

http://www.amazon.com/Great-Wave-Revolutions-Rhythm-History/dp/019512121X/ref=sr_1_1?s=books&ie=UTF8&qid=1283634769&sr=1-1

To sum up – It’s time to WAKE UP again. Go to Safety! Don’t wait till the D.J.I.A. breaks the Neck Line at approx. 9500

You may still have a couple of months (till after the election), a couple of weeks or only a couple of days !

DON’T WAIT –  ACT NOW !

Have You Missed My Posts ?

If you have missed my posts while I was on Sabbatical and want me to post more often again

- Please drop me a line.

Are Your Assets Allocated Properly ?

And REMEMBER

There are a wide variety of ways to protect your assets and profit from this tidal change ranging from the very conservative to the highly speculative.

BUT you need active guidance – Contact Us at Fibonacci Financial.

Do not get the idea that you can trade or make investment decisions from my blog entries.  These are EDUCATIONAL and an introduction to my services and DO NOT constitute investment advice.

When Markets Correct Primary Trend Moves They Can Be Very Complex and Confusing.

What Should I Do With My Stocks and 401K Now ?

Where are we right now in the US Stock Market ?

What should our investment attitude be?

Point 1. The US Stock Markets entered a primary bear market in late 2007.

Point 2. In terms of Price Earnings Ratios, Dividends, Q-Ratios and other measures of value, the US Stock Markets were historically overvalued in 2001 and 2007.  This Bear Market decline will most likely not end until the US Stock Market is at historic lows in these measures of valuation.  The US Stock Markets will have to fall a lot more before that happens.

Therefore our current presumption is that the Bear Market is NOT over!

The current wave of talking head commentary regarding the beginnings of a new bull market are very likely wrong and will suck a lot of unwary investors back into the markets before this rally is over.

Its just a fact of life, Market corrections are usually very messy and unpredictable.  This rally in a Bear Market will be both frustrating and confusing.  Here are a couple of possible scenarios:

Scenario 1.  Consolidation.  The stock market will Consolidate (messy sideways action) here and then run up to a bear market rally top.  Action, sit tight and sell any remaining stocks at the end of the rally. Then….

SELL, SELL, SELL ! at the Top of The Rally

Scenario 2. Deep correction There will be a dramatic drop in stocks that scares the Heck out of everyone and makes it appear as though the rally is over BUT the stock market doesn’t break down to new lows.  Then the market frustrates the bears and rallies up to between 9,000 and 10,000 on the Dow Jones Industrial Average.  Then….

SELL, SELL, SELL ! at the Top of the Rally

Scenario 3.  WE ARE WRONG and the markets break down with one of the Dow Indexes breaking to a new low BUT the other Dow Index doesn’t confirm thereby setting the market up for a Dow Theory Buy Signal when both indexes then better their May highs.  IF this low probability event takes place, I will BUY, BUY, BUY

If any of this is confusing PLEASE drop me a comment and I will provide additional explanations and resources.

What Are All Those XXXX’s and OOOO’s on the Charts?

Several readers have indicated that they are not familiar with the point and figure charts that I use for illustration purposes in the blog.  John Murphy (world class technical analyst) provides an excellent overview of Point and Figure charting on his web site StockCharts.com.  If anyone is interested in why I use these “old fashioned” P and F charts drop a comment requesting additional information.

The next leg down in this Bear Market (after this rally is over) could be absolutely devastating. So, IF you still have a substantial portion of you investments in Stock, you must be ready to liquidate those positions at the end of this rally.  If this is the case please contact me so I can provide timely advice and guidance.

Do not get the idea that you can trade or make investment decisions from my blog entries.  These are an introduction to my services and do not constitute investment advice.

Beware

The current Bail Out Bubble Rally will probably end in the Jaws of the BEAR !

So Dear Readers, Stay alert when the Dow breaches the 9000 level.