Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
British Government Publishes UK, Scotland DevoMax Smith Report Suicide Note - 28th Nov 14
The Price Of Oil Exposes The True State Of The Economy - 27th Nov 14
Brazilian Bovespa Stock Market Technical Analysis - 27th Nov 14
Gold Price Would Soar on Possible Swiss Yes Vote - 27th Nov 14
Crude Oil Asset Bubble Trouble - 27th Nov 14
Thanksgiving and Puritan Geopolitics in the Americas - 27th Nov 14
The Dow Jones Stocks Index - Beautiful Tree in the Desert - 27th Nov 14
The Digital World, The Opiate of The People - 27th Nov 14
Harry Dent's Simple Strategy for Surviving Withdrawals from Markets on Crack - 27th Nov 14
Socialist France Just Cannot Compete Against Google Freedom - 27th Nov 14
A Short Tale About the Grand Manipulation of Crude Oil Prices - 26th Nov 14
China Secret Gold Buying ... How Could It Happen? - 26th Nov 14
Gold Price Spikes to $1,467.50/oz on Computer Glitch? - 26th Nov 14
Gold - So Bad It's Good: Surviving 2014 - 26th Nov 14
TrueShopping.co.uk Real Customer Experience Review - Online Shopping Lessons - 26th Nov 14
Is There A New Global Consensus About Cheating Investors To Reboot Employment? - 26th Nov 14
EUR/USD – Currency Bulls Don’t Give Up - 26th Nov 14
Swiss Gold Referendum A Golden Opportunity for Switzerland - 25th Nov 14
Silver: What COT Analysis Tells Us - 25th Nov 14
Stock Market Big, Bold and Ugly - 25th Nov 14
U.S. Dollar Near Top? Gold and Silver Trading, Platinum Breakout Invalidation - 25th Nov 14
Buy Fear - Easily Pick Up Profits on Stock Market Dips - 25th Nov 14
The Islamic State Reshapes the Middle East - 25th Nov 14
Gold Price Forecast 2015 - 25th Nov 14
The Swiss Referendum On Gold: What’s Missing From The Debate - 25th Nov 14
Clash of Generations - Why Millennials Still Live at Home; Not Jobs, Student Debt, or Housing - 25th Nov 14
Stock Market Reminiscent of Pompeii - 25th Nov 14
Once Upon A Time There Were Philosopher Kings - 24th Nov 14
The 2014 Crude Oil Price Crash Explained - 24th Nov 14
China Stock Investing - Follow the Money! - 24th Nov 14
122 Tonnes of Gold Secretly Repatriated to Netherlands - 24th Nov 14
What Causes the U.S. Dollar to Move? - 24th Nov 14
Stock Market Indexes New Highs - Will Uptrend Extend Even Further? - 24th Nov 14
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

Stock Market Melt-up 2014 - Is It 1929 All Over Again?

Stock-Markets / Stock Markets 2014 Dec 16, 2013 - 06:08 PM GMT

By: Clif_Droke

Stock-Markets

A growing number of market technicians, some of them highly respected, are forecasting a sharp correction in the January-February time frame. In light of a number of recent inquiries I've had regarding this possibility, let's examine this topic.

Tom DeMark is one of Wall Street's most esteemed technical analysts. He recently uncovered an analog between the current stock market and the run-up to the 1929 top. Tom McClellan published a chart comparing the two markets in a recent article. The theory behind price pattern analogs is that "similar market conditions can produce similar patterns" as McClellan put it.


One problem with comparing stock market patterns from different periods is that the underlying conditions behind the patterns are often dissimilar. For instance, the run-up to the 1929 high was fueled by widespread speculation from the general public. Today the public is a virtual non-participant in the market's run-up to new highs. Also, as McClellan himself points out, the Federal Reserve consistently raised the benchmark interest rate several times leading up to the 1929 crash. Today, of course, the Fed funds rate is hovering near zero percent.

Effective Federal Funds Rate

Technicians like DeMark and McClellan who foresee a market top in mid-January base their prediction not just on various technical disciplines, but on a more mundane set of reasons. For instance, next month is when the current congressional agreement on the debt ceiling comes up again for discussion, which in turn could cause investors to reassess their enthusiasm. Concerns over health insurance policies and the implementation of the Affordable Care Act could be another investor concern around mid-January. This is what the technicians who argue in favor of a January top believe at any rate.

Another consideration for the projected mid-January top is found in the following words of McClellan: "The Fed is not likely to yank away the punchbowl at its Dec. 17-18, 2013 meeting, just a week before Christmas, but the Jan. 28-29, 2014 meeting is a greater possibility for finding out that the markets may have to start to quit the QE addiction. And the FOMC's March 18-19 meeting fits right about where the Black Thursday crash of 1929 fits into this analog."

My assessment of the mid-January top scenario is decidedly different from that of the above mentioned technicians. There are several key short- and intermediate-term cycle peaks scheduled for January, culminating with a Feb. 21 cycle cluster on the Kress cycle calendar. This makes it possible a sharp correction beginning in January and lasting into later February, but without a specific catalyst a crash is exceedingly hard to predict.

Certainly the market's internal momentum is deteriorating, but that alone isn't sufficient to expect a major crash. In order to have a sharp sell-off like the one DeMark, McClellan, et al predict we'd likely need to see a major worry - probably news-related - take center stage early next year.

Another consideration for a significant market decline in 2014 is the "melt-up" scenario discussed by economist Ed Yardeni and others. Should the stock market continue its advance unabated into Q1 2014, conditions may well be ripe for a major top by the end of the next quarter. The weekly configuration of Kress cycles would support this, not to mention the coming final "hard down" phase of the longer-term yearly cycles scheduled to bottom in late 2014.

SPX Weekly

The only other ingredient necessary is greater public participation in the stock market. Michael Sincere of MarketWatch.com touched on this in a recent column. He asks where are the "intoxicated investors, a buying frenzy, over-the-top speculation, and a get-rich-quick mentality?" He rightly points out that these are necessary accompaniments to a market bubble.

A continued rally to new highs, however, will likely solve this "problem" by forcing sidelined investors into becoming market participants for fear of missing the proverbial "only game in town." Thus as we're about to enter 2014 the stage may be set for a final melt-up stage to set up a crash later in the year.

Kress Cycles

Cycle analysis is essential to successful long-term financial planning. While stock selection begins with fundamental analysis and technical analysis is crucial for short-term market timing, cycles provide the context for the market's intermediate- and longer-term trends.

While cycles are important, having the right set of cycles is absolutely critical to an investor's success. They can make all the difference between a winning year and a losing one. One of the best cycle methods for capturing stock market turning points is the set of weekly and yearly rhythms known as the Kress cycles. This series of weekly cycles has been used with excellent long-term results for over 20 years after having been perfected by the late Samuel J. Kress.

In my latest book "Kress Cycles," the third and final installment in the series, I explain the weekly cycles which are paramount to understanding Kress cycle methodology. Never before have the weekly cycles been revealed which Mr. Kress himself used to great effect in trading the SPX and OEX. If you have ever wanted to learn the Kress cycles in their entirety, now is your chance. The book is now available for sale at:

http://www.clifdroke.com/books/kresscycles.html

Order today to receive your autographed copy along with a free booklet on the best strategies for momentum trading. Also receive a FREE 1-month trial subscription to the Momentum Strategies Report newsletter.

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2014 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

Free Report - Financial Markets 2014