Today we are going to review irrefutable evidence that a slow motion train wreck is already well underway across global markets, that will end with the last wagons on the train, the S&P500 index and the Dow Jones Industrials, disappearing into the abyss right after their immediate predecessors.
We start with the 6-month chart for the S&P500 index, where we see that it has just broken down from a topping Triangle, that formed after the big October recovery. This breakdown was predicted on the site last week. From this position it is vulnerable to a precipitous decline, which could happen next week ahead of the Fed meeting, or after it – or both.
On the 5-year chart for the S&P500 index we can see exactly why it stalled out where it did, and has now reversed. It had arrived at the boundary of a giant Distribution Dome that started to form way back late in 2011. Some bullish writers have claimed that the market has broken out upside from a smaller Dome of shorter duration, but their Dome is overridden and nullified by our bigger stronger one. As we can see, our Dome has capped the advance and is bearing down on the index, forcing it lower, and it is now clear that the recent advance served to complete the Right Shoulder high of a large Head-and-Shoulders top. Last ditch support is above and at 1800 - once this fails, the market should plummet.
Emerging Markets are in ragged retreat again, and descending from the 2nd protracted peak of a gigantic Double Top. The Emerging Markets indices made a good recovery from their 2008 crash lows, with investors thinking it was back to business as usual but they were unable to make new highs and have limped along sideways for years marking out a very elongated 2nd peak of what is viewed as a giant Double Top. Now they are clearly on the defensive again and if the $30 level on the EEM chart gives way, it could plummet quickly all the way back to its 2008 lows – or lower still. Again, this clearly means Big Trouble, not just for Emerging Markets themselves, but all markets.
The slump in world trade has contributed to a decline in shipping rates to very low levels – they are now close to hitting record lows, another sign of depression…
Turning to sectors within the US stockmarkets that look set to implode, we have Biotech, which signaled that it is entering a bearmarket back in September, when it plunged on huge record volume as it broke down from its parabolic slingshot uptrend…
Meanwhile the Tech heavy NASDAQ index still looks relatively strong, but has just double-topped with its highs of last Summer, and is moving in conformity with the broad stockmarket S&P500 index, and so should drop with it. Interestingly the NASDAQ appears to be topping out just a shade above its 2000 bubble highs, and even though the current bubble does not look so serious this time round because it has not risen so steeply as in 2000, the red-hot Bay Area (San Francisco) property market certainly has the attributes of a bubble about to burst.
Speaking of the property markets, they are still riding high, but don’t expect that to last much longer. The REIT chart below shows that it is still at a high level within an uptrend, which should fail soon as rates rise and stockmarkets crash. If you own speculative property you should offload it to the bagholders as soon as possible.
End of report.