China’s Stock Market Crash Likely Headed West

U.S. Stocks have declined sharply from the first Hindenburg Omen observation on June 10^th, which was one day after the most recent Bradley model turn date, which was a major turn date. Interestingly, China’s stock market topped on June 12^th, only one day after the official (second observation) Hindenburg Omen. These cycle turn dates have been prescient.

But what is quite interesting is that since that top, China’s Shanghai Composite Index crashed 34 percent. It bounced a bit the past day, but the rally is suspect, as intense government intervention is putting rules and steps in place to artificially prop up the average. This forced effort to bypass free markets will backfire and assures that China’s stock market is headed into the abyss. The rally the past day came with almost 1,400 stocks halted from trading, not allowed on the playing field. China’s stock market gave up all of its gains from the past 8 years in just the past 4 weeks! They sit where they were back in 2007. This crash is not over. We believe China’s stock market is headed below 1,000. Take a good look at the following chart. We believe this is what is coming to U.S., Europe, and most global stock markets later in 2015.

Fed Chair Janet Yellen made clear Friday that she believes the Fed will raise short-term interest rates this year. This rhetoric is interesting, as the IMF is recommending that the Fed not do this. This is the same mistake the Fed made back at the start of the Great Depression, raising short-term interest rates, effectively reducing liquidity at precisely the wrong time. World liquidity is drying up. We believe QE 5 is coming once the US stock market tanks, ballooning an already bloated Fed balance sheet. Precious metals will fly once this happens. If the Fed raises short-term interest rates in September, they will have to reverse course within weeks of that action. If they do not reverse course then, it will just make the coming plunge even worse.

We are now on HIGH ALERT!!!!! Grand Supercycle degree wave {IV}’s decline could start soon. We need to pay close attention and be prepared for a September 2015 event that triggers a stock market crash and economic depression.                                 

An Ascending Broadening Wedge top pattern is completing now in the Industrials, a pattern that started at the end of October 2011. It is an a-b-c-d-e pattern, with wave d-down finished, and the final wave e-up rally finishing.

The Industrials have essentially reached the upper boundary of the Jaws of Death pattern, the top for Grand Supercycle degree wave {III} up. This pattern may be complete, as the Industrials are falling hard from this pattern’s top.

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Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com.  The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only.  Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice.  Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision.  Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment.  Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2015, Main Line Investors, Inc. All Rights Reserved.