Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Is a Major Stock Market Top Forming?

Stock-Markets / Stock Markets 2015 Nov 17, 2015 - 03:09 PM GMT

By: Harry_Dent

Stock-Markets I warned in early October that stocks looked like they were setting up for another sharp crash into the height of the “crash season” in mid-October.

Instead, we got rate cuts in China, rumblings of stronger QE in Europe, and a continued rally at home.

In other words – central banks delayed the inevitable. Again.

So let’s look at where the markets are today…


In the revised paperback version of The Demographic Cliff back in the summer, I gave two scenarios for an impending peak in stocks. The chart gave leeway for a potential new high, which is why you see two large “5’s” at the top there:

In both scenarios, we would see a break of the narrow and bubbly channel that had been rising since late 2011.

We got that.

The question was… how high would they bounce after that initial breakthrough?

The first scenario was the S&P 500 would fall toward 1,800 and then have a two-wave rally back toward 2,000.

That still looked likely at the beginning of October... back when oil and China’s Shanghai Composite Index were trading in a narrow range. That suggested another short crash to follow.

Clearly that wasn’t the case. The S&P 500 breached 2,100 and came to within a percent of its peak.

So, scenario two took the cake… wherein the large cap markets would make slight news highs, or at least come close to retesting those highs. The Nasdaq 100 actually did make a very slight new high last week before pulling back.

If the markets outside of that index fail to make new highs – folks, that’s a bearish signal if I ever saw one.

But even if they do make slight new highs… that would very likely set up a number of major divergences as Adam has been pointing out.

Damned if we do, damned if we don’t.

Either way, it doesn’t look good.

And we’re already seeing such divergences. Over 50% of S&P 500 stocks are trading below their 200-day moving average. Investors have grown very selective, favoring only the largest stocks.

And for the Dow Industrials to make a new high without Dow Transports or Utilities – that’s another divergence! A major one, at that.

Then there’s the advance/decline line – showing how many stocks are rising versus those that are falling. And guess what? Another divergence there! This rally has been very selective to large-cap stocks. To point, the Russell 2000 which lists small-cap stocks is 8% off its high. And it’s increasingly doubtful it’ll make a new one even if the S&P finally does.

Here’s the bigger picture…

It looks like a major top is forming.

Rodney just wrote yesterday about the business cycle of mergers, acquisitions, and borrowing that appears to be peaking…

At our Irrational Economic Summit in Vancouver I presented on a series of what looked like major tops forming consecutively in the major world markets…

Junk or high yield bonds peaked in November of 2013. We warned about it right on the day of the top.

Dow Transports clearly peaked in November 2014, with Dow Utilities two months later in January. (Transports especially are very unlikely to make a new high in the coming months.)

Then in April we saw the DAX peak in Germany and the FTSE in England – down 24% and 19% at their worst, respectively, and new highs look very doubtful there as well.

Then the Shanghai peaked in June – which we also called the day of – and has been down as much as 45%.

“But Harry, that index is up over 20% from its recent low.”

It’s still down almost 30%!

And the only reason it’s popped up is because China’s government has poured hundreds of billions of their currency into propping it up!

Trust me ­– that bubble is still in burst mode and has almost zero chance of making a new high!

Finally the Nasdaq peaked in late July. Again, the Nasdaq 100 has been the only index to make a slight new high, but not enough to change the course of the future.

Adam has been warning of at least of a short-term pullback, and that is happening. So keep alert to Adam’s comments in the coming days and weeks.

It’s likely we see a slight new high in the S&P 500 – around 2,135 if not higher ­– by late this month, and possibly a slight new high in the Dow.

But even if that were the case… there would be divergences galore. And that would signal even more strongly a major long-term top – and a 2008-like crash, only stronger in 2016.

If only the largest cap U.S. markets are able to make slight new highs…

At this point, that would be very bearish.

The odds are that the Fed will raise rates a quarter point in December, and that could be bad for stocks and bonds.

I think something will go wrong in the world by then instead.

Stay more defensive in passive portfolios. If you’re in stocks, use a service like Rodney’s which mimics the way he’s been making money for 14 years. But while Wall Street analysts are cheering on a Santa Claus rally across the broad market… I wouldn’t get your hopes up.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- 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.

Harry Dent Archive

© 2005-2019 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

6 Critical Money Making Rules