Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is the Next Stocks Bear Market About to Begin?

Stock-Markets / Stocks Bear Market Oct 07, 2013 - 03:31 PM GMT

By: Toby_Connor

Stock-Markets

The stock market is finally starting to show signs that the bull market may be coming to an end. Before I go into the stock market though, I want to discuss the dollar because I think currencies are going to be integrally tied to the topping process.

For the better part of the past five years a lower dollar has generally been positive for the stock market. However, we are now five years into QE and I think we are at the point where it's important that the dollar hold its value. At this point I think the stock market is deathly afraid that the dollar is going to crack under five years of continual debasement. As many of you have probably noticed over the last several weeks stocks have been dropping along with the dollar.


We have some interesting currents at play in the currency markets at the moment. It's been my opinion for some time that the dollar would adjust its yearly cycle low from the spring to later in the fall (this will set up next year's yearly and three year cycle low to occur late in the year. This is also the most likely time frame generally for the currency crisis to occur). I think that process is now in play.

For this to come to fruition the dollar needs to move below the February low sometime in the next two or three weeks. Keep in mind that other than a three year cycle low the yearly cycle low is the most intense sell off of the year and generally does not terminate until it looks like the world is coming to an end (we definitely haven't reached that point yet).

I suspect the government shutdown and debt ceiling debacle are going to intensify the dollar's yearly cycle low this year. This suggests that we are going to see a very aggressive and scary decline in the dollar index over the next 2-3 weeks.


I'm expecting the yearly cycle to bottom either on the debt ceiling resolution, or one day either side of it as the market starts to sniff out a deal. At that point I think we're probably going to see a significant intermediate degree rally as the currency markets breathe a sigh of relief.

However, within 1-2 months I also expect the currency markets to come to their senses and realize that nothing has changed and the dollar is going to continue to be debased, maybe even at a faster rate than before. At that point I think the dollar will roll over again and get busy moving down into next year's three year cycle low which should manifest as a moderately severe currency crisis around this same time next fall.

Now let's look at some of the warning signs in the stock market. To begin with, this is the first time in five years that the advance decline line has failed to follow the market to new highs.


In the next chart I have marked each intermediate cycle low with a blue arrow. You can see that the previous intermediate cycle ran quite long as it was stretched by QE 4 to 33 weeks. This is a full 11 weeks longer than a normal intermediate cycle duration. Often a long cycle like this is followed by a short cycle. Note that the last intermediate cycle had 4 complete daily cycles nested within it. I think there is a very good chance that the current intermediate cycle will only have two.

Considering that the current daily cycle is already on day 25 and due for a bottom somewhere between day 35 and day 40, I think the odds are good stocks will follow the dollar down as it makes its yearly cycle low and complete an intermediate degree decline as we move into the debt ceiling deadline on October 17. Since intermediate declines need to be large enough to create true panic, this suggests that we could be in store for a particularly rough 2-3 weeks, as investors start locking in profits ahead of the uncertainty around the debt ceiling and the government shutdown. This process could spiral out of control if the dollar really starts to crater hard.


The closer we get to that deadline with no resolution the more likely the market is to panic, and I wouldn't even rule out the possibility of some kind of semi-crash as we move into the final days up to the deadline. Wall Street may well let Washington know in no uncertain terms they need to get their act together, and do it fast.

I'm even starting to entertain the idea that this will be the initial top of this five-year bull market, although I do expect the topping process to draw out the better part of a year as the Fed will, without a doubt, increase QE above and beyond its current level in a futile attempt to stave off the bear market.

For a more detailed explanation of what I think is coming, I invite you to try a one week trial to the SMT premium newsletter. There you will be able to reference the current weekend report, as well as the current and historical cycles charts of the stock market, the dollar, gold, oil and much more.

One week trial

    Toby Connor

    Gold Scents  

    GoldScents is a financial blog focused on the analysis of the stock market and the secular gold bull market.   Subscriptions to the premium service includes a daily and weekend market update emailed to subscribers.  If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions,email Toby.

    © 2013 Copyright Toby Connor - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Toby Connor Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in