False Move on the Yearly Level
QUESTION: Marty; This is what you explained at the last WEC. The risk of a false move on the yearly level. Correct?
ANSWER: Yes, it is always fractal. A Yearly False Move is rare, and it becomes the biggest possible slingshot to the upside. The Dow made a Yearly FALSE MOVE on a number of occasions. For example, the high of 1916 dropped from 8500 to 6590 and established the low in 1917. It then swung to the upside, reached new highs at 11960 in 1919, and then on the panic back down.
The Dow made its intraday high in 1889, which was followed by a one year panic into 1890. It then swung back to the highest yearly closing in 1892 with the famous Panic of 1893 immediately thereafter.
A similar pattern unfolded with a high in 1872, a panic penetrating the previous year’s low in 1873, and then a dramatic swing to new high the next year in 1874.
These are just a few examples.
Our Forecast Array on the Yearly Level warns of 2017 as a turning point. The year 2018 will be a Panic Cycle Year, and then there will be a reversal of fortune into the bottom of the ECM for 2020, followed thereafter by a turn in 2022. So, there is no TREND here as we look ahead. It looks much more like wild swings back and forth.
Why This Week’s Low is So Important
The Dow fell as far as it could possibly go without reversing the trend on a long-term basis, even technically. The low this week has been 15370.33. This has flirted with our Third Monthly Bearish Reversal at 15550, but we also have a simple technical point of great importance — 15284 — which happens to be last year’s low. Penetrating that number would open the door to a slide into March of 2016.
Consequently, penetrating this week’s low will be INCREDIBLY significant for it would set the stage for an OUTSIDE REVERSAL TO THE UPSIDE in 2016 that would be just about the worst type of PANIC you could possibly create. WHY? Because this would imply a total meltdown in government and the rush of assets from government paper to private assets would be like a building on fire with all the doors locked, except one.
Oh, the bulk of people predicting a market implosion will yell, “The sky is falling!” while waiting for the Dow to fall to 100 for their chance to say, “I told you so!” But we have to stand back and ask: if everything collapses, will the world really just meltdown so easily? Even during periods of extreme hyperinflation, ALL assets rise in value. So there is no possible way for the world to meltdown while ONLY gold rises. That is just insane and the people who argue that money is not tangible are really thieves because it is fiat. They are clueless because ALL money is fiat if it has a fixed value — even gold. Money is purely an agreement for there is NOTHING that exists that is “money” in the context that they preach. Money is merely a medium of exchange that you are willing to accept simply because others will accept it from you. It does not matter if it is gold, paper, or bricks of tea.
Illustrated above is a brick of pressed tea from China that was used as money in 1949. This illustrates that any commodity can be used for a medium of exchange simply because it has a recognized use. In Japan, bags of rice were the medium of exchange for 600 years. Cattle has long been a monetary base in Africa, and it acted as the foundation of the Roman monetary system from the outset, so much so that their bricks of bronze pictured cattle to illustrate its value in exchange — bronze backed by cattle. Roughly, 5 pounds of bronze (Aes Signatum) was equal to one head of cattle. Bronze had tremendous utility value for it could be shaped into a tool for agriculture or into a sword for weapons.
Therefore, the prospect of only gold rising is simply gibberish. If we penetrate this week’s low, then the type of Phase Transition that follows will be the worst type that we could ever imagine. This would set the stage for the complete meltdown in government. This will become our greatest concern for the pendulum will swing to the extreme left which will propel the swing to the extreme right. This becomes totally insane.The Coming Phase Transition & the Dow
QUESTION:
Mr. Armstrong,
Thanks for all you do. I do have one question in regards to the Phase Transition above 23000 into the 35000-40000 number you have spoke of. If we experience a close below 15500 for the month of August and see a continued correction into October to around the 12000-13000 number would the top end thereafter be 23000 or would there still be a possibility of a phase transition regardless of when the low takes place, be it August or October? Thanks for the clarification.
Tim
ANSWER: No. The three targets are price: 18500, 23000, and 30000-40000. That is independent of TIME. The doubling is the minimum. Our original forecast that the Dow would at least double by 2015 from the 2009 low of 6440 gave us a MINIMUM target of 12000-13000. We exceeded that and went to the next target of 18500. The next level being 23000 is at the MINIMUM requirement for a Phase Transition — double, if we fell back to retest the old doubling target, but we need not pull back that far. The criteria is to turn the majority bearish to run into bonds.
A lot of e-mails have been coming in saying they can now tell who follows us and who does not. The followers are selling bonds into the high and others who do not follow are buying. That is probably a fair statement.
Our target for the high was 2015, and so far it formed in May in equities leaving the ECM for the interest low, which was also on target. Those who continue to predict a collapse in the stock market as some catastrophic event where only gold will rise, have no clue that gold is by no means a viable safe-haven for the big money — that is for the individual.
Big money must choose between equities and bonds. We are at effectively reaching a5,000-year low in interest rates. It cannot get more bearish than this for government. What we face is monumental. Trump is tapping into this anti-establishment momentum and the press is showing how corrupt they are constantly attacking Trump to maintain the establishment who they surrendered their ethics to a long time ago.
Oil & The Commodity Risk
COMMENT:
Mr Armstrong,
I work in engineering and last year I was offered a position back in a major North Sea oil company. The reason I turned it down was due to your forecast that oil was going to slump. If that was the case, I thought I would duly be paid off not long after it slumped. It turned out to be spot on as the some of the men who did take up the roles were given their notice (they were promised 5 years work like myself). For this I have to tip my hat to you and give you a huge thank you. Can I ask then, how do you see the next few years panning out for oil? I know your immediate forecast is for it to hit $30 / barrel (TWI or Brent??) but what about next year and the year after? Many thanks once again for all your work. You have helped the little man more than you know.
Regards.
GG
REPLY: This comment illustrates that forecasting is more than just trading. Understanding the trend can assist in making many decisions. The bulk of losses we have to help fix are typically involving currency risk and/or commodity risk.
Oil will drop to the first support zone $31-$35. Breaking that level will warn that we should see a broader decline. It does not appear that oil will make new highs in real terms. Technology is shifting and oil will gradually fade in use over decades ahead.
The Fraud in Global Warming Continues
It is pretty bad when a national government agency is continually caught fudging the temperature data while refusing to make corrections. They are clearly following orders to maintain that there is global warming to support taxes. They now need global warming to implement carbon taxes on businesses and cars. States are looking at additional road taxes because people are driving less and using less gasoline. Since they are receiving fewer taxes from gasoline, they now plan to introduce a tax per mile driven. They are even requiring the odometer readings to register cars. How can global warming be increasing yet people drive less and/or have more efficient cars? The two trends are in conflict.
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