Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelertoing Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Two Scenarios for the Stock Market

Stock-Markets / Stock Markets 2018 Sep 23, 2018 - 03:58 PM GMT

By: Harry_Dent

Stock-Markets The Trump rally into January 2018 looked like the classic final blow-off top.

It had been advancing in a clear channel, then it broke above that in a classic “overthrow” pattern, followed by a sharp correction.

Was that the beginning of the final and greatest crash?


Maybe not, which is why I detailed, in the September issue of Boom & Bust, the two scenarios I believe we face in the months ahead.

My first problem with the idea that we saw a top at the beginning of the year was that past major bubble peaks in stocks have averaged a 42% crash in the first 2.6 months. This has been the case for seven global stock bubbles since 1929. The range for the initial crash is 30% to 50%.

But, this time around, the S&P 500 only crashed 12% and has moved mostly sideways, with an upward bias, since then.

My second problem was that such extended sideways patterns, following a strong advance, tend to break up in the same direction to new highs.

In late August, the S&P 500 followed the Nasdaq’s break to new highs. The Dow was just 3% behind the S&P in doing that. Only the broader NYSE lagged further than that.

Markets spent some time in the red on Monday, but as of this morning they were back in the green, and we’re still near record highs.

So, is this that new high that precedes a sharp 40% or so crash in the coming months, forbearing the next great bubble crash?

Or will stocks pull back more modestly after this break up, while the Trump rally continues well into 2019 before we see an even bigger blow-off top – like Dow 30,000?

Those are the two most likely scenarios as we approach the late stage of the longest bull market rally without a 20% correction.

As of yesterday, this rally from early March 2009 has lasted 3,480 days. That’s longer than the longest one from late October 1990 into early March 2000.

By that measure, we’re in new territory for bull markets.

And many classic indicators are not pointing to a major high and crash ahead.

The advance/decline line measures how broad the rally is and that tends to narrow in the late stages of a major bull market. That line has continued to make new highs with this rally and is saying it’s still healthy.

However, the FAANG stocks (high-tech large-cap leaders) are showing such narrow buying, while the tariff and trade war threats favor small caps over large, as they are less exposed. That could throw this indicator off.

The yield curve – 10-year Treasury yields minus six months – tends to invert before a major top and recession. This is approaching but has not occurred yet. And even if it does, it can be many months before the downturn starts.

Gross domestic product growth is accelerating out of the 2% doldrums of past years. Normally it would decelerate a bit before a major top.

The Fed is raising rates, which will eventually trigger a top. So far inflation and long bond rates haven’t risen enough to signal danger, as investors expect rates to rise when economic growth accelerates.

Household net worth just passed $100 trillion after peaking at $69 trillion in late 2007 and $45 trillion at the 2000 top. Compared to GDP, it has risen from just over 4.4 times in 2000 to 4.8 in 2007. Now it’s just over five times that amount.

This is another good sign the bulls tout, but I think this is one of the biggest reasons that the economy has been holding up amidst declining demographic trends and record levels of debt.

Central banks – and now Trump through tax cuts – have been able to dramatically goose financial assets and net worth while real wages continue to stagnate or fall, all the while economic growth has been subpar.

But as we’ve seen thus far and throughout history, such bubbles are fleeting and always burst.

Trump has been proposing a second tax cut through adjusting capital gains for inflation that he may be able to force through without going through Congress. That will again favor the top 1% to 10%, but not the broader economy or his supporters.

Suffice it to say, the broader consensus is that this market is not ready to top yet.

But I’ve a sneaking suspicion that we may see a surprise crash just ahead; one that almost no one expects. It’s one of the two scenarios I explore in the September issue of Boom & Bust.

The actions of stocks and some key indicators over the next few months should tell us which scenario is more likely to come… I urge you to read the latest issue of Boom & Bust for all the details.

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 © 2018 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