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Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start

Stock-Markets / Stock Markets 2014 Oct 31, 2014 - 03:14 AM GMT

By: Nadeem_Walayat

Stock-Markets

The stock market has once more confounded the crescendo of bearish market expectations of not even 2 weeks ago when the widespread assumption was that an end of U.S. QE would trigger the long anticipated bear market that had so far failed to materialise for some 5 1/2 years! But were promised that this time would be different, for this time the stock market most definitely had topped and was destined to embark on a severe bear market with figures such as Dow 6k being bandied about, with further assumptions the the bear market would likely would start with a destructive imminent crash.


It should by now be obvious to most that the most vocal of market commentators don't actually trade, for if they did then they would have bankrupted themselves several times over by now, for as I often remind readers 95% of what you will read or hear is by salesmen or journalists, which are people with pseudo experience, such as pseudo economists in the mainstream press who just tend to regurgitate the verbal diarrhoea of ramblings of ivory tower economists. Remember the mainstream press is 80% obsessed with FEAR stories, because FEAR SELLS, relentless but boring 5.5 year stocks bull markets don't, which is why it is near always crash this that or other without any acknowledgement of the fact of where the stock market actually is in terms of its deviation from its high.

So what happened to the stock market ?

We'll if the stock market is in a bear market than it has apparently decided to crash UPWARDS as the following chart illustrates -

The perma bears must be in a state of shock 'This isn't happening' denial. 'It cannot be happening, QE has come to the end, the party is over, so it cannot be happening, no, no, its not happening, give it a week or so, and the crash / bear market will resume, and this bullish nightmare will be over, it's just a trick to get me to go long.'

So QE is apparently now officially over, or so states the Fed, but my view is that QE is NEVER over, it just changes its form, for it is government money printing in ALL its forms that drives the Exponential Inflation Mega-trend. Therefore, whilst today's media noise is about the end of QE3, however, in my consistent view we WILL at some point see QE4! In fact I don't think most market commentators even understand what QE actually is because they just tend to regurgitate fear for fears sake! In a nutshell QE is $1.6 trillion of VISIBLE Fed money printing to buy assets such as stocks and bonds, though mostly bonds, which is not only INFLATIONARY but increases the risks of a HYPERINFLATIONARY Panic event (no sign of yet). And remember all that the Fed has announced is an end to asset purchases and NOT an unwinding of its bloated balance sheet.

Then there is the turning Japanese deflation argument that gets thrown in my direction every once in a while when I mention the Inflation mega-trend to which asset prices are leveraged and oscillate around. But Japan has NOT had deflation, not as the perma-bears understand it, NOT on a per capita basis, what Japan has is a FALLING population! That and the exponential technological trend delivering increase in productivity that is NOT 1930's style deflation and even then Japan has been printing money (inflating) like there is no tomorrow! Therefore those expecting the likes of the US or UK to turn Japanese are delusional, for the US and UK populations continue to increase exponentially EACH YEAR!

Furthermore, the bears keep concluding that two of the developed worlds strongest economies as being weak, always on the brink of economic doom, when the reality for the US and UK is not only that they are growing but they are well ahead of the pack of the likes of the strongest eurozone economies such as Germany! Just look at the facts, strong relative GDP, strong employment growth, consumers spending, amongst some 20 mostly strongly positive economic indicators I track.

And as for rising interest rates, as I keep reminding readers that stocks actually do quite nicely during the early years of RATE hiking cycles! In fact it's rate CUTS that stocks bulls need to worry about for they signal WEAKNESS ahead.

Where the stock market is concerned my last in depth analysis of 3 weeks ago concluded in the following trend expectation, that made it clear that I expected the stock market to once more resolve towards its all time high before year end -

12 Oct 2014 - Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015

Stock Market Forecast Conclusion

My final conclusion is for the Dow to continue its volatile trend lower into Mid November towards 15,350 , probably bottoming out around 15,500. To be followed by a rally to 17,100 by the end of this year, following which I expect a weak January with Dow probably ending the month below 16,500 having traded down to 16,350.

Clearly the stock market is showing relative strength and a DOW NEW ALL TIME HIGH Beckons. So I will take the time to revisit the prospects for stocks before the end of this year so ensure you remain subscribed to my always FREE newsletter to get this and other analysis in your email in box as I will probably take an in-depth look at gold next.

Where stock market investing is concerned my strategy has remained very simple for the duration of this stocks bull market, YES for its 5.5 year DURATION as iterated in several hundred articles since at LEAST April 2009, and that is -

" The Greater the deviation from the stock market high then the Greater the Buying Opportunity Presented".

The bottom line is that a baby talking baba language makes more sense than the bears, its just that FEAR sells and hence why the bears continue to get so much exposure in the media that NEVER tends to match the reality of stocks being in one of the greatest bull markets in history!

Source and Comments: http://www.marketoracle.co.uk/Article47987.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2014 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

ismail65
03 Nov 14, 07:13
Congratulations

Nadeem, gotta hand it to you, you have nailed it yet again, well done (and I have been on board with you). Prechter sent a free one week subscription a month ago with his headline "This is It", and he should have added "yet again", and now he should add "yet again I am wrong"!!!

Anyway, how do you see the GBP now the USD looks to continue to strengthen on the back of what Japan have done.

Cheers and great work, Ismail


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