The Mob

It seems to be human nature to hear what one wants to hear and most advisors, so-called “analysts”, newsletter writers and commentators seem to feed people the popular line.  Why? Because they are people, too and they are also influenced by popular opinion, linear thinking and the here and now.  It’s just human nature to have prejudices, think in a linear fashion and gravitate toward an opinion that supports one’s own thinking.  But, such practices are not  objective and tend to lead toward mob behavior.  Herding, if you will, which is exactly what creates the various cycles in the stock market, commodities and even the economy.      

As an example of this, I first began warning my subscribers of the 9-year cycle top in gold back in 2011 as the top was being made.  I gave very specific statistical, cyclical and structural reasons in my research letter as the top was made as well as the developments that followed.  Yet, those that wanted to have a bullish view on gold maintained that view and ignored the warnings.  As it turns out, the non-emotional based statistical, cyclical and structural reasons I gave have once again proven valid.   More recently, gold has moved into cycle lows of various degrees, but that is not the entire story with gold.  Yet, once again, those who want to be bullish are espousing that the recent cycle low is of more importance than the non-emotional and non-biased statics, cycles and structural-based research suggests.   As a result, the cycle continues.  

I also remember at the 2000 top I wrote an article, which was published in Technical Analysis of Stocks and Commodities Magazine.  In that article I explained that based on the statistical DNA Markers that were in place, the market was set up to decline below the 1998 low and that the decline into that low was ideally due in late 2002.  When this article was released, I was laughed at.  Well, the statistical DNA Markers proved correct.  The market fell some 39% from the 2000 high and in the process the 1998 low was undercut by 203 points.   Point being, the linear herd thinking that was so popular when the market was sitting at near all time highs, when this article was released, was proven wrong, while the emotionless statistical and technical based analysis proved correct. 

The same was also true as the market moved into the 2007 high.   All throughout the continued advance into the 2007 top I explained in detail in my research letters and in general terms in various internet based articles and interviews that we were seeing an extended/stretched 4-year cycle.  I further explained that the more the cycle stretched the worse the decline into the next low would be.  Yet, once again, few listened.  In fact, I received e-mails during that time telling me that I was an “idiot” because the 4-year cycle had “obviously” bottomed in July 2006 and that we had a “new all clear advance” into the next 4-year cycle top.  This was comical to me.  Everyone and their dog had all of a sudden become a cycles technician simply because they could count to 4.  But, based on my statistical DNA Markers, which are based on the DJIA going back to 1896, I knew better and again I stated this over and over in articles, interviews and in detail in my research letters.  Yet, the linear herd thinking of the public proved to be to their demise and once again, the emotionless statistical and technical based analysis proved correct.

Then, once again as we moved into the 2009 low the bearish linear thinking had taken root.   But, I told subscribers as the March 2009 low was being made, that a low of a higher degree was occurring, that it would result in a counter-trend rally within the context of a longer-term secular bear market and that the longer it lasted the more dangerous it would become.  By dangerous, I explained that the longer the rally lasted the more convincing it would become.  Sure enough, the current linear herd thinking of the public is that the market will continue up for ever and ever, that the bottom is in, that this is a new bull market, that the “Fed” has the market backstopped and the concept of this being a counter-trend bear market rally has become taboo.   Not only has the public bought into these notions, but most “analysts” and newsletter writers have capitulated and hypothesized why this time is different.  Why? Because just as I told my subscribers from the beginning, the longer this rally lasts the more convincing it will become and this does not exclude the vast majority of the so-called “analysts” who operate without the benefit of a sound statistical based and disciplined method. Therefore, they too, are ultimately guilty of linear herd thinking.  But, there is also another dimension to this, as well, in that it is also much much easier to sell the public what they want to hear and what appears to be obvious, which again, is all based on linear thinking.   I have observed this phenomena at every extended move.  This occurred in housing in 2005, at which time I posted articles on various internet sites warning of the top, which again was simply based on the cyclical/statistical DNA Markers.   The same was also true in 2008 at the top in commodities.  In fact, I actually made that call public in an interview at cyclesman.net with John Grant and on other financial sites.   

My point in all of this is that most people tend to believe what they can see and they extrapolate what they can see into the future.  They then falsely conclude that the prevailing trend will continue.  Think about something.  Do you remember any mainstream commentator on any news channel warning you of the 2000 top in equities?  What about the 2007 top?   What about the top in housing?  Or hey, what about the top in commodities in 2008?  Absolutely not.  Rather, we heard all the reasons that the economy was fine.  Why this time was different.   We heard all about the Fed and how they had every thing under control.  Remember the “Greenspan put?” We heard Greenspan telling us that housing was not in a bubble and we had the mainstream calling for $200 oil.  All the while, the herd flocked to believe what the rest of the herd was being fed.  However, I have without a doubt, made these calls as they are all in print in either articles, my research letters and/or were aired in interviews.  These calls were all made based on my work with Dow theory, my quantitative cyclical research and the associated DNA Markers that I have discovered.  When I say DNA Marker, I’m simply referring to a set of common denominators that have occurred at previous market tops and bottoms.  More details of these DNA Markers are disclosed in my research letters.    

Now, I said all of that to say this.  I realize that based on the duration of the advance out of the 2009 low, few can now grasp the concept of this advance being a counter-trend advance within the context of a longer-term secular bear market.  Yet, fact is, there were counter-trend bear market rallies during the 1966 to 1974 secular bear market, that carried the Industrials and the Transports to new highs.  In fact, the Industrials moved to an all time new high in early ‘73 right before the 43 plus percent collapse into the 1974 new bear market low began.  I have included a chart of the Industrials and the Transports below showing these occurrences below. 

At present, the Dow theory bullish primary trend change that last occurred back in January remains intact.    But, as I have said ever since the rally out of the 2009 low began, this is nonetheless what the statistical based and emotionless research says and I will not change my opinion until that data dictates such change.   At the same time, this same research has also told me that this rally would, nonetheless, continue higher until the proper setup in the form of my statistical based DNA Markers are seen.  Once this occurs, I don’t care what anyone says or does, I have 117 years of market history that tells me the inevitable will occur.  So, while the linear herd thinking of the public and the “lets tell them what they want to hear” mainstream commentators and “analysts” continue to lead the sheeple once again to the slaughter, I’m telling you that this is still a financial disaster in the making.  I’m telling you that based on historical market values since 1896, the 2009 low was not the bear market low.  I’m telling you that based on Dow theory phasing, the 2009 low was not the bear market low.  I’m telling you that based on the historical relationships between bull and bear markets, going back to 1896,  the 2009 low was not the bear market low.   I’m also telling you that I have identified statistical based common denominators, which I refer to as DNA Markers, and which have occurred at every major top since 1896.  Just as was the case with the 2000 and 2007 tops, the commodity top in 2008, the 2011 top in gold and the housing top in 2005, to mention a few and in spite of the one-sided linear thinking, once the proper setup is in place with the appearance of my check list of DNA Markers, the Phase II decline into the longer-term secular bear market will occur and there is nothing the Fed or anyone else will be able to do to stop the inevitable.  If you would like to know more about this research and follow the developments of these very important DNA Markers, as it all unfolds, that research is available at Cycles News & Views as the developments occur. 

I periodically do free audio market commentary that is available at www.cyclesman.net so please begin joining me there.  In the Cycles News & Views research letters I give detailed analysis of the current situation from cyclical and Dow theory perspectives as well as a look at the currently applicable statistics and the DNA Markers.  A subscription includes access to the monthly issues of Cycles News & Views, which includes Dow theory, a very detailed statistical-based analysis covering not only the stock market, but the dollar, bonds, gold, and oil, along with short-term updates 3 times a week.