Did You See This Ominous Warning from the Stock Market?

By: Robert McHugh


This weekend I want to point out a market condition existing right now that is screaming that a stock market plunge is fast approaching. To do this, I present below several charts from our December 4th, 2015, issue 2729 to subscribers at www.technicalindicatorindex.com that showed Bearish divergences that led to a stock market plunge in January 2016. The same condition exists right now, as the Bearish divergences we see this weekend are similar in time and extent as we saw back then. I also present the current charts below as well so you can see the comparison.


S&P500 versus Demand Power and Supply
NYSE 10-Day MA
NASDAQ100 versus Demand and Supply
NASDAQ100 10-Day MA
NYSE 10-Day MA
S&P500 Daily Chart
Secondary Trend Indicator


Back in December 2015, in that weekend report, we saw that over the prior two months the S&P 500, NASDAQ 100, and Russell 2000 price indices had formed formidable Bearish divergences with their 10 day average Advance/Decline Line Indicators, their Demand Power Measures, and our Secondary Trend Indicator. Those two month divergences led to a 13.5 percent, 285 point plunge in the S&P 500 and a 17.8 percent, 850 point crash in the NASDAQ 100.

This weekend, we have the exact same stock market set up. In the five charts below we see two-month, large extent, Bearish divergences between these same major stock indices and their 10 day average Advance/Decline Line Indicators, Demand Power measures, and our Secondary Trend Indicator.


NASDAQ100 versus Demand and Supply
NASDAQ100 10-Day MA
NASDAQ100 Daily Chart

Our S&P 500 versus 10 Day Average Advance / Decline Line Indicator (Identifying Bullish and Bearish Divergences for early detection of future trend turns)

Just like we saw from October 2015 through December 2015 just before a 285 point, 13.8 percent plunge in the S&P 500 in January 2016, we now see a similar size Bearish divergence between the S&P 500 and its 10 day average Advance/Decline Line Indicator.


S&P500 versus Demand And Supply

Our NASDAQ 100 versus 10 Day Average Advance / Decline Line Indicator (Identifying Bullish and Bearish Divergences for early detection of future trend turns)

Just like we saw from October 2015 through December 2015 just before an 850 point, 17.9 percent plunge in the NASDAQ 100 in January 2016, we now see a similar size Bearish divergence between the NASDAQ 100 and its 10 day average Advance/Decline Line Indicator.


Secondary Trend Indicator


Our NASDAQ 100 Demand Power / Supply Pressure Indicator (Identifying Medium term Buy and Sell Signals and alsoBullish and Bearish Divergences for early detection of future trend turns)
Just like we saw from October 2015 through December 2015 just before an 850 point, 17.9 percent plunge in the NASDAQ 100 in January 2016, we now see a similar size Bearish divergence between the NASDAQ 100 and its Demand Power Measure.


The appropriate usage of Bearish divergence charts is, once you see these divergences become large in time and extent, it is a late warning, but early enough, to prepare for a coming stock market plunge. It is not a signal that the plunge has started. It is a warning that one is coming.

It means we should be on high alert, and prepare for a plunge. Risks are high.

The signal that the plunge has started comes when our Purchasing Power Indicator and Secondary Trend Indicator (that we update daily and supply to our subscribers at www.technicalindicatorindex.com each night) generate new Sell signals at the same time that the wave mapping and other predictive patterns we follow look complete.

The Fed has become increasingly political, and they have taken their role within the Plunge Protection Team, their legislative right from the President's Working Group established in 1988 after the 1987 stock market crash, to greater heights, more frequent intervention, and intervention that occurs outside of a stock market crash environment which was the original intent. In other words, the Fed can print money, hand it to its Wall Street surrogates, and order the purchase of stock index futures to push the stock market higher, or to slow or stop declines.

With the establishment that empowered the current Fed Chair and open market committee members politically incented to make sure the stock market remains steady, and that no collapses occur before the November election, it is difficult to believe that a stock market plunge could occur before November 8th as these Bearish divergences warn is likely. We also are entering a period of time seasonally where stock market plunges and strong declines are more likely to occur than other periods of each year. So a rational analyst would expect the Fed to be goosing this stock market hard over the next two months, mitigating the possibility of a plunge.

However, the previous two times we had a U.S. presidential election where no incumbent president was up for reelection, we saw stock market plunges the adjacent months before the election, in 2000 and again in 2008. In both cases, the president that was elected came from the party previously out of power. So the next two months present a fascinating situation for the U.S. stock market. Knowing that a plunge is highly probable, will the Fed and Plunge Protection Team be working overtime to prevent that natural tendency for a free-market stock market? Or, are the divergences identifying an underlying Bearish condition so severe that they will overpower all the king's horses and all the king's men?

Speaking of goosing markets, The Labor Department's Bureau of Labor Statistics reported with a straight face that the U.S. economy created 151,000 non-farm payroll jobs in August 2016. However, they also reported that they included in that figure a guess, an uncounted fudge estimate, that 106,000 of those 151,000 reported new jobs were created by new businesses they hope started up in August and guess were hired by those new businesses in excess of lost jobs from business that ceased operations, their CES Birth/Death model report. In other words, the truth is closer to 45,000 new jobs were created in August, not the 151,000 they reported. The U.S. needs to create at least 150,000 new jobs each month just to break even, so it is clear the Fed has its excuse not to raise short-term interest rates in September and risk triggering a stock sell off. The guess here is nothing happens with interest rates until after November 8th. The labor force participation rate (the number of people who are either employed or are actively looking for work) came in at 62.8 percent in August, which means that 37.2 percent of the working eligible population is not working. Of course the political spin unemployment figure harboring all the headlines is 4.9 percent, not the real 37.2 percent. How, is this difference possible? The BLS simply decides not to consider 85 percent of the unemployed as unemployed for one reason or another. The bottom line: 95 million U.S. work eligible persons are not working.

0 comentarios:

Publicar un comentario en la entrada