STOCK MARKET DECLINE, WHEN AND WHERE?
The Stock Market is going to crash they say head for the hills! Negative sells as we all know and I am sure the Google searches for stock crash outnumber the searches for stock rallies by a huge margin. If I just wrote about a crash every day I probably could quadruple my traffic to my site. After being wrong most of the time I could run out and say see I told you so when one finally happened.
The chart above has a couple of different Presidential cycles on it and they show completely different forecasts. The top one which is a shorter term cycle has been pretty good until going off the reservation recently. One of the hardest things about cycles is grasping the concept that although they are designed to predict highs and lows what they really predict is turning points. When we look at one like this we see that for the most part it has picked highs and lows in sync with how the cycle shows it. However, when we get into a phase like this recent situation where price was going straight up while the forecast was predicting straight down, we cannot expect it to pick a low where the forecast shows it. This would be illogical. How could you expect it to pick a significant low after price had gone up that much. As a result in this case I would argue that it picked that high pretty accurately.
As much as we want to program everything so tightly so we will know exactly what to do, when to do it and will never be wrong, that is not the nature of the markets and not the nature of life either. We have to develop the best tools we can and then use them the best way we know how. I do think Cycles have value but they are not the end all. When we get something like that EURO chart I have showed in here so often, that picks dead on one turn after another, we do need to give it more credence until it gets out of sync.
Here is the Vix with the Bollinger Bands and also another band that is my own concoction that requires a larger move to reach. There is one thing to zero in on here, the 50 Period Moving Average. You can see 3 bad sell signals on the left but notice that we were clearly in a strong up trend with prices above the 50 day Moving Average. In the current situation we are below the 50 day Moving Average where the sell signal is occurring. This makes this a better signal.
I don't think for one minute that anyone should just run out and short this market yet. We are in the sweet spot for year end rallies and have seen some humdingers when we have sold off hard into this time of the year like this. However, we do have our November 30 date looming here. It is time to start looking for a way into the short side.