“It’s going to be messy stock markets starting now.” – Market Wizard

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Its official! Almost every analyst on Wall St. is exceedingly bullish on the market. On the other hand market wizards have never been more concerned. I usually find myself to be of the same opinion as many of the prominent figures in finance. This is not because I follow them per say but probably because we utilize the same tools when it comes to analyzing the market. The structure has never been more clear in terms of the SPX. We are under a similar cyclical circumstance as the tech bubble and look at the environment we are under. We have excessive investment in technology. artificial intelligence in particular, similar to the environment we were under in the year 2000 with internet investments and the dot com boom. We have a republican in office which was the case after President Clinton’s presidency. Gold has been in a bear market for the last 6 years which is similar from a structural and correlation perspective as the bear market from the mid 1990s going into the trough in 2002. It is funny how people tend to believe there is no correlation between commodities and the stock market. The fact of the matter is that the 18 year cycle troughs in the stock market tend to coincide with 18 year cycle peaks in commodities and vice versa. Considering our outlook on the CRB putting in an 18 year cycle low we have reason to believe that the equity market will soon put in its 18 year cycle peak. Keep in mind that this 18 year cycle is the final one within the Kondratieff wave and hence the crash is likely to make the 2000 and 2008 calamities seem analogous to the hick ups of a drunk prior to the eventual throw up because the person chose to continue to drink rather than cut back conservatively. In fact the central banks around the world have been paying the tab for all the extra liquor that has filled our hypothetical person’s stomach. Eventually that person will have to throw up since there is a limit to how much he/she can drink even though the drinks are offered for free. All this market needs to do is break the 40 week FLD to confirm a top of the 18 year cycle. The reason for such a conclusion is because I analyzed the peaks of the DJIA as troughs and we are currently in the final 40 week cycle prior to put in a Kondratieff cycle peak. Charted below is the price of the SPX along with a 40 week FLD.

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I like the market to commit to me before committing to the market. Once this 40 week FLD gets taken out I will look to short the market for the current 18 month correction. It is important to note that the 18 month cycle trough is likely to occur this year and hence a corrective pull back that many participants will believe to be the resumption of the bull market will start prior to the infamous Christmas rally that speculators impatiently wait for every year. Once the rally dissipates we can say hello to the treacherous bear market that is likely to follow. Speculators and analysts on Wall St. are beginning to believe that a bear market will never come and we are in a new era and stock prices “have reached a permanently high plateau”. I am here to assure you that a bear market will come and it is likely to be much more dramatic than anyone that is alive can remember.

SPX standard deviation

Ahmed

 

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