Financial Storm Ensures Stocks Bear Market has Much Further to Run
Stock-Markets / Stocks Bear Market Oct 01, 2008 - 03:05 AMBy: Ronald_Rosen
When all around us are moaning and groaning and pulling out their hair, and when they are concerned with their loss of money as though it were a loss of life, remember all those times that you were called a fool for buying and holding gold. Remember when you were thought of as a silly alchemist turning “good” paper into worthless gold. Be thankful for the fact that you will be here to pick up the industrial, transport, utility, and technology shares of the surviving companies as they are tossed away like garbage. The United States of America is not through for a simple reason. You, the honorable, the sound, the wise, the patient, and the gold holders and believers, will rebuild your nation. This process has been repeated over and over again. It is being repeated once again.“Garbage”collection day is not that far away!
For several years I have from time to time suggested to subscribers that one of the best investments they could make is a top notch pair of ear plugs and a set of horse blinders. They would allow you to ignore all of the “Johnny come lately” doomsayers. The S & P 500 and the Dow Jones Industrial Average topped in January 2000. That was almost nine years ago. They have been in a bear market ever since. The charts posted below show that they are in their final C leg down. This is when the financial disaster talk will become overwhelming. In addition to the doom and gloom you will begin to hear and read about how important gold is to our national and international monetary system.
As the stock markets approach the bottom there will be extreme anger and disgust directed toward Wall Street and stock brokers. “I'll never buy another share of stock as long as I live.” will be a common cry. Based on the technicals that I use plus the 50 plus years of being involved in the markets it is my opinion that the stock averages will bottom in about 18 to 24 months. That will be “garbage collection day.” About that time gold investments and in particular gold shares will be considered an absolute necessity for everyone to own if they want to survive. The demand for quality gold mining shares will be at a peak.
For us that will be our signal to begin executing: ‘The Big Switch.” The “Big Switch” is when we begin to sell our gold investments and buy top quality collapsed common stocks. If you were called or thought of as a fool when you bought gold and gold shares, you will be considered outright stupid when you commence the “Big Switch ” So, save yourself some aggravation and grief and don't talk about it, just do it when the time arrives.
I will be closely following the stock indices all the way to the bottom. Their weekly and monthly charts will appear in just about every report from now on. The daily charts, ITD turning points, and trading suggestions for all items we follow will be covered and presented by Alistair when he deems it appropriate.
It is not possible to painlessly undo what has been done to our economy. There is no rescue plan that can be created that will automatically protect the public from the harm that has been accomplished over many, many decades. If Congress manages to implement a plan of sorts it may lead to momentary market relief. The real pain will begin to be felt when the realization finally surfaces that there is no way out but to allow the markets to reflect all the internal damage that has been done to our monetary system. When that realization finally surfaces we will be close to the end of the bear market that began in the year 2000. It appears that the C leg down of the S & P 500 and the D. J. I. A. may bottom in 18 to 24 months. The price of gold should reach a top around that time. However, the gold shares should continue moving up based on earnings and dividends.
It is not possible to painlessly undo what has been done to our economy. Keep this in the forefront of your thinking when you hear politicians and commentators suggesting cures for our economic and monetary problems. There is no cure other than recognizing the truth. When the markets are finally permitted to recognize, reflect, and discount the truths, the bear markets will be complete. The bull market will then begin. As the noise gets louder and the “Woe is me.” echoes world wide and the blame game really gets going, the stock averages will be rising. “It is ever thus.” Nothing we do has changed and nothing will change until we change.
The new high achieved in the S & P 500 at 1586 in October 2007 was not confirmed by a new high in the MACD. This non-confirmation indicates that leg C of the bear market that began in the year 2000 is continuing on down. If the C leg consumes as much time as the A leg did, the bottom will be reached in approximately 18 to 24 months. The bottom should be slightly below the 767.50 low that occurred in 2002.
“In expanded flats, wave B of the 3-3-5 pattern terminates beyond the starting level of wave A, and wave C ends more substantially beyond the ending level of wave A.” … E. W. P.
The expanded flat correction in the D. I. J. A. indicates that the final C leg bottom will be substantially below the 7,180 low of 2002.
A new high above the $1017.50 previous high will be the signal for gold bullion to begin the dynamic portion of its bull market.
SUMMARY
Having cash and T bills and owning and holding on to your gold coins/bullion and quality gold shares is the way to ride out this storm. That and a refusal to be taken in by all the nonsensical cures will lead us to safety and the bottom of this bear market. For trading purposes, listen to Alistair and have the patience to wait for his suggestions.
Subscriptions are available at: www.wilder-concepts.com/rosenletter.aspx
Ron Rosen and Alistair Gilbert
M I G H T Y I N S P I R I T
Ronald L. Rosen served in the U.S.Navy, with two combat tours Korean War. He later graduated from New York University and became a Registered Representative, stock and commodity broker with Carl M. Loeb, Rhodes & Co. and then Carter, Berlind and Weill. He retired to become private investor and is a director of the Delta Society International
Disclaimer: The contents of this letter represent the opinions of Ronald L. Rosen and Alistair Gilbert Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Ronald L. Rosen and Alistair Gilbert are not registered investment advisors. Information and analysis above are derived from sources and using methods believed to be reliable, but Ronald L. Rosen and Alistair Gilbert cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.
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