HIGH ALERT Continues!! The Stock Market Is In A Dangerous Place Right Now

On September 20^th, we posted a warning article to our subscribers.

“HIGH ALERT!!!  The stock market sits at a very precarious place this weekend. There are important and rare technical indicators that are contemporaneously telling us that a major stock market top is close at hand and a powerful and damaging stock market decline is not far from starting.”

Since we published that warning, the Industrials have plunged from their all time top on Friday, September 19^th, so far falling 806 points. Since that warning, the S&P 500 has fallen 113 points, and the NASADQ Composite has fallen 334 points. Since then, the Semiconductor Index has crashed. This all came the day after we got a confirmed Hindenburg Omen.

The stock market just had its worst week since May 2012. The Industrials are now at a loss for the year 2014. We have been showing a multi-decade Jaws of Death stock market pattern for several years now, warning that when it finishes, a massive Bear market and economic collapse will begin and last for many years. I even wrote a book about this pattern’s clear warning, The Coming Economic Ice Age, available at amazon.com . It is very possible that the time has come when this pattern is finished and the next Bear market and economic collapse has begun. We are now on high alert.

Bids are hard to come by right now, and our analytic work suggests that the secret Plunge Protection Team activity is providing at least half the bids in the stock market right now. Prices keep falling, but the descent is slowed by PPT buying, providing a safety net under the stock market. However, this market continues to look heavy, and there are limits to what the PPT can buy. At several points over the next seven years, we expect the stock market to experience crashes. Some will be minor, some huge. At this phase of the new Bear market, many advisors are labeling this decline from September 19^th as a buying opportunity. That sentiment will change down the road.

When I study the stock market’s price wave labeling and pattern this weekend, I am hard pressed to see a completed three wave or five wave decline from September 19^th. In fact, in the charts on pages 36, 37, 39 and 41 in this weekend’s report to subscribers, stocks are looking for a wave three decline in five degrees of trend - now. Since wave threes are the most dramatic, this means the stock market right now is in imminent danger of a mini-crash. It will be interesting to see if the PPT is all over this risk, and comes in Monday morning, guns blazing, with heavy buying to try and prevent what charts suggest is likely this week. The powerful end of day sell-off Friday, October 10th, 2014, had the feel of a wave three move. The Industrials closed below their 200 day moving average Friday. The S&P 500 came within a whisker of its 200 day moving average, less than one point, which many consider key support.

Both the S&P 500 and NDX have dropped decisively below the bottom boundary of Rising Bearish Wedge termination top patterns from October 2013, which is very Bearish. Downside price targets are provided by these patterns, their beginning. Those levels are substantially below current price levels, 14,750 for the Industrials, 1,665 for the S&P 500, and 2,800 for the NDX. These downside price targets do not have to be reached during this first decline into the possible November 20^th, 2014 bottom. It may take a year to get there, with several up and down stair-step moves to reach those downside levels. Those are not the ultimate downside price targets for this huge Grand Supercycle degree wave {IV} move. The Jaws of Death pattern suggests 70 percent or more of the stock market’s value could eventually be lost as this economic collapse proceeds to its conclusion many years from now.

To keep things in big picture perspective, I show a long-term chart for the Industrials with wave labelings from 1900 through 2014 on page 30 in this weekend’s report to subscribers. The Grand Supercycle Bull Market from 1718 has encompassed the entire rise in prices over the last century shown on this chart. That is ending now. Incredible moment in history. If we look at what is happening in the world right now, we can see that there are major paradigm shifts occurring, world shaking events perhaps in their infancy. The ISIS abomination is reminiscent of the rise of the Nazis in the late 1920s and 1930s. The Nazis seemed to come out of nowhere. The world sat back and watched, not wanting to get involved, while the Nazis annexed nations and slaughtered innocents until it became essential to stop them. Same thing is occurring now with ISIS. They are making progress toward a takeover of two countries, Iraq and Syria. Turkey could be targeted next. Iran is close to having nukes. It does not take a rocket scientist to see that the Middle East is about to explode. It could eventually result in a war with Israel, as the Islamic militants set their sights on Israel, and draw in all the nations of the world. This would result in economic collapse worldwide, the fulfillment of the Jaws of Death pattern we have been monitoring. We are watching the seeding of World War III. As my book noted, major wars have accompanied each Jaws of Death pattern we saw over the past century. There will be a war with this multi-decade Jaws of Death pattern, the largest such pattern by far, and perhaps the largest war mankind has ever seen. We will need God to intervene to stop the coming insanity.

On Friday, Demand Power fell 4 points, while Supply Pressure rose 8 points telling us that the decline was strong, and that deep pockets stepped into the unbalanced orders, made the market, and kept a collapse from occurring. The damage was bad enough in spite of the deep pockets intervention. Is the bottom near? Not at these levels. Maybe for a short bounce, but probably not yet at these levels. We say that this weekend because none of the key indicators we watch suggest that selling capitulation has occurred and a significant bottom has arrived. Oversold New Lows, an oversold 10 day average Advance/Decline Line Indicator, and other measures typically seen at selling capitulation are not present at this time. Therefore, patterns aside, more downside is likely. If we want a sliver of a silver lining, we are starting to see some small Bullish divergences in some of our indicators, which means that once they mature in size, a bottom will arrive. That may be a few weeks away. The rally that they forecast will likely start from much lower price levels and be a corrective bounce, not a new Bull market run.

Techs and Trannies got hammered Friday, October 10^th. Volume was high again. Batten down the hatches.

The stock market remains on a confirmed and official Hindenburg Omen from Friday, September 19^th.  This comes at the precise same time that a rare and important and dangerous Bearish divergence is occurring between the NYSE cumulative Advance/Decline Line and stocks, and also is coming at the same time the long developing multi-decade extremely dangerous Bearish Jaws of Death pattern looks complete. It also comes when the Fed will now be pulling liquidity out of the market. This confluence is very dangerous, and it is arriving at the seasonally worst time of the year for stocks, the September into October timeframe.

Gold: We show an interesting big picture long term chart of Gold since 1965 through 2014 on page 52 in this weekend’s report to subscribers. Take a look at it. We can really see that Gold is destined to go higher. The fundamentals are established for higher Gold prices over the long run. The HUI Advance/Decline Line Indicator is starting to show a small Bullish Divergence (see chart on page 21), so while more downside is possible in Gold and Mining Stocks, a bottom is in sight. There are several short-term possible paths for Gold at this time. With Gold’s Daily Full Stochastics now deep oversold, it is possible Gold is putting in the bottom for wave c-down of e-down, completing (2) down, the three year primary trend correction from September 2011.

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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

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 2014, Main Line Investors, Inc. All Rights Reserved.