Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Deflationary Effects of the Crashing Stock Market Kress Cycle

Stock-Markets / Cycles Analysis Mar 06, 2014 - 06:44 PM GMT

By: Clif_Droke

Stock-Markets Stocks came under selling pressure on Monday in the wake of renewed concerns over geopolitical instability in Eastern Europe. An escalation of tension between Russia and the Ukraine led to a plunge in Russia’s stock market, which in turn had a spillover effect on U.S. equities.

Russia is currently the focus of Wall Street’s worries right now. One of the better proxies for Russia’s stock market is the Market Vectors Russia ETF Trust (RSX), which lost nearly 7% in value on Monday. RSX made a 4-year low today which underscores the political and economic troubles facing that region of the globe.




Aside from the potential spillover impact of Russia’s stock market decline, an even bigger concern as we head into spring is China’s stock market. The iShares China Large Cap ETF (FXI), our favorite China proxy, is struggling to get back above its 50-day moving average. It’s also dangerously close to its recent low from early February. A violation of the February low would almost certainly touch off another wave of investor concern over China’s economic outlook and could have spillover impact on U.S. equities later this year after the melt-up phase of the bull market is complete. There has been an historical correlation between FXI and the S&P in recent years, with China stock weakness leading to U.S. market weakness more often than not.



Meanwhile the rush into the safe havens continues unabated as investors are clearly concerned over the developing overseas market and political woes. The iShares 20+ Year Treasury Bond ETF (TLT), our bond proxy, continues trending higher and recently tested its previously high from Feb. 3 when investor fear was spiking. Gold meanwhile also continues its recent surge and made another new high for the year on Mar. 3, as seen in the SPDR Gold Trust ETF (GLD) below.



Both of these financial safe haven assets are proof of not only investor fears, but they also reflect to a certain degree the deflationary undercurrent that is accelerating between now and later this year when the long-term Kress cycles are scheduled to bottom. The Fed and other economists have convinced themselves that deflation has been defeated, yet the deflationary threat remains until the last of the cycles comprising the 120-year Kress cycle series bottoms in the coming months.

Russia’s crashing stock market is in many ways similar to the tumultuous events of the summer of 1998, which witnessed an outbreak of deflationary pressure in commodities. It began early that year with weakness in Asian economies and was accelerated by the Russian ruble crisis. By the summer of ’98 those troubles were brought to bear on the U.S. financial market. In only a matter of weeks, a record high in the Dow was transformed into the shortest bear market on record – a 22% plunge in the S&P over a period of just a few weeks. Of course the bear market bottomed in October and by year’s end the major U.S. indices were heading back toward their old highs. But the lesson learned in that event is that deflation-driven bear markets can occur swiftly and suddenly, even when everything looks rosy. Keep in mind also that the U.S. economy was experiencing a powerful bull market in its own right at that time, which reminds us that the state of the economy can’t be used as a leading indicator when it comes to the stock market.

The 1998 experience, and more recently the Russian crisis, also reminds us how swiftly deflationary undercurrents in the global economy can lead to major trouble. It pays to keep on your toes during the final year of the long-term deflationary cycle, and stock picking and market timing are absolutely essential. A good money management strategy (i.e. a stop-loss discipline) is also a must in the event of a rapid reversal of trend.

To give you another idea of just how potent the deflationary phase of the 120-year Kress cycle is, look no further than Japan.

Japan’s Nikkei stock index peaked in 1989 and the country entered a bear market and deflationary depression lasting some 20 years. Only in the last year or so has inflation finally shown signs of life after a record-breaking amount of liquidity created by the Bank of Japan. Shinzo Abe, the architect of Japan’s re-inflationary monetary policy, has thrown everything but the kitchen sink at the country’s economy in hopes of fighting deflation. As it stands the efforts have been only mildly successful by historical standards; indeed, Japan’s inflation rate is up only 1.4% from last year despite a 56% year-over-year increase in the monetary base.

As economist Ed Yardeni pointed out in a recent blog posting, Japan’s core Consumer Price Index (CPI) inflation rate has been positive for the past four months through January, when it was 0.6%. “That’s still awfully low,” he writes, “but it beats the 55 consecutive months of negative readings from January 2009 through July 2013.”

When it takes this much money creation (see chart below) just to put a floor on deflation, you know the deflationary cycles are still coming down hard.



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

© 2005-2019 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