The good news is that a
bottom for the crash should occur between Monday and Wednesday.
The bad news is that it may have occurred on Friday. The worse news
is that it is not “the” bottom.
When we come to the technical charts
shortly, we will examine previous Bear markets, including the Great
Depression era, in an effort to gain an understanding of where we
might now be – and what we will probably face in the coming
months.
The two most likely broad-outlook scenarios are:
· The 2007-2008 Bear is
within three days of ending.
· The first downleg of a massive Doomsday Bear scenario
is ending.
In either case, the historical evidence
indicates this is not “the” bottom and that even in
the first, optimistic scenario it would be totally without
precedent if current price levels were not retested within the next
3 months.
There is a third scenario, which
is really only a nuance of the primary themes – and it is
that Wall Street found a bottom in Friday’s erratic trading,
but it will produce a bounceback rally of only first or second degree.
If that is the case,
the rally will fail by this coming Thursday, or by October 28th,
and there will be another freefall.
When discussing the astrology last
weekend, I did not give sufficient weight to the current sign position
of Venus – Scorpio – where she is incapable of doing
much good.
When Mars repeats the same aspects
- sextiles to Jupiter & Saturn and a trine to Mars - later this
month and into early November, he will be doing so from a position
of rulership strength.
But he will be up against the first
precise hit of the 5-series Saturn/Uranus oppositions which coincides
with election day in the USA.
It is the extreme negativity of Saturn/Uranus
energy we’ve been discussing all year as the faster planets
translated the energy – and the fact that it’s a rare,
5-hit series which brings about the possibility of the Doomsday
scenario.
This is the DJI’S currently monthly
chart – against all the odds, a one-week devastating plunge
which crashed Wall Street all the way back to near the closing prices
of the last big Bear.
In last week’s report, I concentrated
attention on the S&P 500 and outlined the two key price levels
I believed would hold the decline - at 1077 and 956. I had an absolute
worstcase price not far below 800 but simply didn’t believe
it could be reached and didn’t include it in the report.
In the case of the DJI, I said: “The
primary downside target for the Dow Industrials is a mere 600-or-so
points below Friday’s close – and the timing target
for a bottom is only 5 to 11 trading days away. However, given the
irrational and emotive plunges and bouncebacks and the fact the
DJI is swinging around by almost that much in a couple of hours,
it could overshoot to the downside by another 1000 or 2000 points.”
Overshoot it did, plunging almost
the full extra 2000 points, down 2552 from the previous week’s
close to last Friday’s low point – and breaking a huge
number of records in its panic. Which is why we need to consider
the Doomsday scenario – that the entire
decline from last year is just the first downleg.
There is basically only one
template for such a scenario – 1929. [chart]
click
to view chart and download printable pdf document which includes
all text and charts...
And this is it.
The point of my including this chart
is to show the sort of bounceback we can expect to see – and
would expect to see starting this week – even if all Hell
is breaking loose and the sky is falling.
Unfortunately, my data doesn’t
go back far enough to show how the DJI performed leading up to what,
at least until now, has been called “The Great Crash”.
The latest surveys indicate more than
60% of Americans now believe we face an imminent repeat of The Great
Depression, complete with massive unemployment, widespread homelessness
and near-starvation among the destitute.
I could tell you the USA has a $14
trillion economy and the current problem is, maybe, a $2 trillion
problem and, in terms of current GDP, is actually less than the
savings & loan crash. That debacle was originally estimated
at 6.5% of GDP, but finished costing less than 3%. I
could point out all this comes back to houses, which aren’t
worth nothing, won’t be worth nothing, and that, in the end,
this won’t be even a one or two trillion dollar problem. But,
perception has become reality and the herd is spooked.
Some repeat of the 1929-30’s
economic downturn is possible, perhaps even probable – especially
since the usual decennial pattern has failed spectacularly. Normally,
the “8” years put in a bottom by the first quarter and
then resume rallying.
It looked as if that’s what
was happening when we had the January plunge successfully retested
in early March followed by the rally into May – and with significant
positive divergence occurring simultaneously with the Dow Jones
Transports and, to a lesser
extent, the Russell 2000.
The astrology pointed to a
similar scenario. The low point of Saturn/Uranus cycles
does not usually occur until close to the middle of the aspect range.
On top of that, financial astrologers with many years of daily experience
note that Pluto’s entry to a Cardinal sign normally brings
about an all-time High before plunging the markets to an all-time
Low.
Other market analysts suggest long-term
cycles which are still to make their lows are behind this year’s
weakness.
If they are right – and if Pluto
and Saturn/Uranus play out in previous form – we are not even
close to “the bottom”. Under this scenario, it’s
not going to occur until 2010-2012. Which is why we are looking
at the 1929-30’s chart. Because if the Doomsday scenario is
unfolding, the rally that’s about to get underway –
this week or next month – will be the last chance to get out
of any Long positions with a significant proportion of our money
intact.
The chart is worth close study –
as will be the technical charts over the next few months, especially
for any signs of negative divergence which give warning that the
bounceback is starting to falter.
The esteemed broadcaster, Mr Jim Cramer,
last week was urging everyone who needs money in the next 5 years
to get out of the stock market. In a week the market was in an unprecedented
crash it was something akin to a death bed conversion to Catholicism.
Everything was collapsing, not just
stocks. Everything was unloaded to raise cash. “Mutual funds”,
a polite euphemism for fast and slippery money, were facing a run
of redemptions. Some of them, and some of the darling hedge funds,
will be joining Bear
Stearns and Lehman Brothers before October is out.
Stocks hitting new lows continued
hitting record numbers day-after-day, culminating with Friday’s
record of 2631 on a day of 97% down volume. A day of utter hopelessness.
So, we have a roadmap to Doomsday
– the chart of the 1929 crash and its long-running aftermath.
We can now turn our attention to two
other roadmaps which lead to a more “normal” destination,
just in case wisdom should suddenly enlighten the world’s
political and financial leadership.
Am I being overly optimistic? I’ll
deal with that at the end of this report. But, Jupiter will leave
Capricorn and enter Aquarius, which has rulership of the stock market.
DJI 1969/70
[chart] click
to view this chart and download a printable PDF file.
This is the 1969-70 Bear, which has a pattern not too dissimilar
from our current circumstances.
The market put in a new High, followed
by a lower high which failed and led to a sharp plunge.
It consolidated sideways, with the
rallies managing to grab back a large portion of the first decline,
before then dropping again and the next rally failing to get back
above any resistance – and then the panic plunge.
The key point of this chart is the
retest. I’ve pointed out in recent weeks, a record number
of stocks hitting new Lows has always been retested.
It means this … even in the
“optimistic” scenario that we have witnessed, or will
witness, the absolute bottom of the Bear within three days, it is
most unlikely to be “the” bottom.
There is very strong historical evidence
that a retest is highly likely within three months.
DJI 1973/74
[chart] click
to view this chart and download a printable PDF file.
This is the 1973-74 Bear – again
with a pattern of trending not dissimilar from this year.
On a repeat of either of these “standard”
Bears, the first of which lost 37% of the high price and the second
of which lost 47%, the 2007-08 Bear is coming to end.
From its peak last year to its intraday
Low on Friday, the DJI plunged a tad under 46%.
As with the previous Bears, the last
leg was the sharpest and the fastest – sheer panic.
Once again, I want to inject a note
of caution. The “standard” Bear gets a retest of the
low price in the following two to three months.
We discussed last week the chance
for negative weeks to unfold during the first week of November and/or
the first week of December.
Please recheck the 1929 Crash chart.
It does not show the standard Bear pattern. The Vbounce lasted longer
and there was a hokum retest which failed dramatically many months
later … not a few weeks later.
DJI 1987
[chart] click
to view this chart and download a printable PDF file.
The size of last week’s slump
had some talking about 1987.
Even a quick glance shows this is
not the same circumstance; 1987 was a sudden and dramatic collapse,
not preceded by any warning signs.
(Well, actually, check the CCI, which
diverged negatively from the price.)
At this stage, it appears we are now
in the death throes of a relatively normal Bear pattern.
What is not “normal” is
the collapse of the decennial pattern; the astrological pattern
unfolding over the next couple of years; and the sheer global spread
of the money crisis.
If it’s Doomsday – and
it may be – Japan may provide some guidelines to how we’ll
cope; they’ve been living with deflation for almost 20 years,
since the days when the grounds of the Imperial Palace, in Tokyo,
were nonsensically valued at more than the
State of California.
Okay, there’s the history –
and in many ways this panic is now setting new historical
standards.
Volatility Index
[chart] click
to view this chart and download a printable PDF file.
The VIX – the fear gauge. Unfortunately,
the history goes back only to 1990, so we have no idea how this
panic compares in fear levels with previous Bear crashes.
I said last week: “History
is history, patterns repeat and, looking at the monthly, this thing
has overshot to the Moon.”
Obviously, I was wrong. It was “different
this time” – and it overshot to Mars. Could it fly past
Saturn, or maybe even Pluto?!
In all honesty, I don’t know.
I don’t think anybody does. We’re now charting whole
new territory.
Will it stay there? Obviously not
for long. But as I’ve remarked for the past few weeks, even
the relatively short history says it can stay at high levels for
3 or 4 months...
World
market charts, technical discussion, historical and astrological
comments continue...CLICK
HERE to view the charts and download the FULL printable version
of this report with all technical charts and further comments. (PDF
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Randall Ashbourne is a former
journalist and Australian political strategist who resides at times
in Thailand and in Australia.
*QHT Technical Charts created
using Quick
Harmonic Trader Software, by P.A.S. Astro-Soft, Inc. makers
of Galactic Investor Astrology software.
***
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