17-Year Cycle: Stocks III Financial Crises & Stock Corrections

Transcription

1 by Eric S. Hadik...Let us run with patience the race that is set before us. Hebrews 12:1 17-Year Cycle: Stocks III Financial Crises & Stock Corrections An INSIIDE Track Reprint of 17-Year Cycle Analysis 17-Year Cycle: Stocks III Financial Crises & Stock Corrections CONTENTS Dec IT Excerpt Nov IT Excerpt...3 When Cycles Collide...5 Dec. 2014: 2015 is nearing and so is a momentous convergence of diverse 7-Year, 17-Year, 40-Year, 80-Year, 100-Year & 120-Year Cycles - all portending a Major global shift, in everything from economics to balance of power. As already described, late-2014 is the culmination of a 40-Year Cycle of inflationary Stock Index advances (late late-2014). It is expected to usher in a steadily-developing top in equity markets as it goes through an initial transition phase between late-nov and late-april 2015 after which weekly & monthly cycles project a more sustained decline. The DJIA has fulfilled MAJOR, multi-year & multi-decade upside objectives - in price AND time - setting the stage for a decisive peak. However, it MUST trigger confirming signals before traders should consider acting on this (except for defensive strategies). Focus remains on - and is growing in intensity towards - the period from late-april--late-sept The scenario described on page 5 illustrates this. The following is a reprint of pertinent analysis from the Nov. & Dec. 14 IN- SIIDE Tracks - published to bring newer readers up to speed on these cycles & expectations Recent issues have discussed the Synergy of Synergy of cycles in (lasting into 2021) and, in particular, in When discussing these topics, it is like walking a tightrope - attempting to balance the severity & urgency of what so many factors are portending with the appropriate timing & rationality of that discussion. In other words, it is a challenge to warn without creating undue worry (since proactive thinking & ac- INSIIDE Track Trading Page 1

2 tions are the ultimate resource in preparing for this). That is why I prefer to be viewed as an Awareist, NOT an Alarmist was the preliminary stage - when the groundwork was expected to be laid. Events in Russia, with the BRICS, in Europe, et al, have fulfilled that is expected to see an increase in the intensity of events. Along with that, many markets are expected to reverse recent, 3--5 year trends. While much of these discussions focus on specifics & concrete analysis - specific cycles, specific markets, specific nations, etc. - it is important to periodically step back & discuss some of the general aspects of this analysis. One of the primary reasons for doing so is the frequency of false assumptions that appear to be drawn - based on comments & inquiries I receive. In almost every case, there are superfluous connections drawn & conclusions made often to fit a preconceived notion. In reality, each market and each cycle should first be viewed as independently and as simply as is possible before making any correlations or associations. Treat each market on its own. Occam s Razor... This is where Occam s Razor initially applies. Paraphrased, William of Ockham s principle for problem-solving explains that when faced with competing hypotheses, the one with the fewest assumptions should be selected. (There is no guarantee it will be right, but it should be the primary choice.) My Axiom of Market Correlation attempts to express a similar principle... in the markets. If it were distilled to one key point, it would be to treat each market s analysis on its own. Once that has been accomplished - and ONLY at that point - THEN associations & correlations can be applied. Hadik s Axiom of Market Correlation states -- Markets only follow other markets when the lead market is going parabolic or is in an extreme phase. Also, correlations are only effective when you can be CERTAIN of the current focus of traders....in any given period (day, week, month), different variables will affect markets differently. So, each market should be analyzed and traded on its own merits... even if it contradicts a seemingly obvious correlation....the key is to know - on any and every given day - which is the horse and which is the cart..it is impossible to know what will be driving traders thinking all the time... so do not depend on it any of the time! Even then, however, it is the correlations that should be discarded before the analysis if something does not unfold as anticipated... Big Picture In order to illustrate this, let s review the general outlook for the 2010 s: -- Dollar Index cycles bottomed in 2008 & 2011 and were expected to spur an overall rebound into mid-decade (even as Dollar fundamental factors were forecast to be deteriorating during this time) Many commodity/inflationary markets would surge into 2011 and set multi-year peaks at that time - led by Gold & Silver. Those peaks were/are likely to last for 3--5 years or longer and create subsequent corrections or crashes Those subsequent declines were/are likely to last into mid-decade, with 2015 being the most synergistic year for Major (3-5 year or longer) bottoms. As part of those declines, the sharpest sell-offs were expected into the midpoint of the overall down cycle. The anticipated 2015 trough was/is also expected to coincide with the onset of a new Food Crisis (in line with the 40-Year Cycle). -- There were some key markets - most notably Stock Indices & Livestock - that were poised to continue higher in the face of these deflationary moves extending their inflationary advances into 2014 (Stock Indices) and 2014/2015 (Cattle)... INSIIDE Track Trading Page 2

3 Synergy of Synergy; Weighed & Found Wanting (Nov. 14 IT) has been identified as synergy of all of these cycles - creating a synergistic convergence of synergistic cycles...leading to the conclusion (among others) that the financial markets, the US Dollar, Gold & Silver, the Euro, inflationary commodities, etc. would go through a dramatic shift the Dollar Index has been forecast to advance during the first half of this Major cycle - rallying from 2013 into Gold s Enslavement / Fiat s Liberty Underneath the surface, it is the concept of hard currency that is actually winning the race..the finish line is nearing. And Gold s day could soon come beginning in a 40-Year Cycle, or period of testing, from the 1976 Jamaica Accord was a type of Fiat Currency Declaration of Independence - exactly 200 years, or 5 40-Year Cycles, since America s Declaration of Independence is the completion of a 40-Year Cycle - of testing - from that rebellion... In 2011, INSIIDE Track explained why I was projecting a Major, multi-year peak in Gold for August a complete 40-Year Cycle (of testing) from the Nixon Shock of August There were many corroborating technical cycles aligning in Aug./Sept reinforcing that conclusion. Silver & some related ETFs & ETCs were identified as bubbles about to burst... Gold set its highest monthly close in August 2011 & its intra-month peak in Sept. 2011! That was expected to be a precursor to a new shock...it did not take long before the subtle, initial phases of that shift began. In fact, it took no time at all! On that EXACT anniversary - in August Hugo Chavez - one of America s more outspoken and belligerent antagonists - began the shift by ordering Venezuela s central bank to repatriate all but 15% of that nation s gold reserves!...similar actions had been seen from Iran & Libya...Romania - in late began pushing Russia to return their Gold reserves...a smoldering brush fire began flaring up around the globe. Soon after, Ecuador repatriated much of their Gold reserves Beginning in early RIGHT ON SCHEDULE - otherwise strong allies of the US began doing the same thing. Germany - who at one time held over 95% of their gold reserves abroad - began repatriating massive amounts of Gold... Germany s move triggered ballot initiatives - for similar, national Gold repatriation - in Switzerland (March 2013), Finland (Sept. 2013) & Poland (Sept. 2013)... At the same time, as already discussed, another revolt was taking hold. Brazil, Russia, India, China & South Africa (the BRICS nations) announced their alternative to the World Bank - the New Development Bank - in 2013 and opened it in July In May 2014, Russia announced the formation of the Eurasian Economic Union that comes into force on January 1, If I didn t know any better, I would say there is a groundswell of support for shifting monetary power AWAY from the U.S. And how would the Dollar respond if/when that shift ever reached the point of critical mass? Watch late ! These types of actions are rarely recognized for their full significance - until years later. But, when the ramifications are finally assessed, the period of will likely be pinpointed as the time when the Dollar s remaining foundation was decimated right in plain sight and right when the 40-Year Cycle was screaming for this to occur. Mene, mene, tekel, upharsin. INSIIDE Track Trading Page 3

4 In many cases, these analyses seemed to fly in the face of conventional wisdom. In even more cases, normal correlations were turned upside down at least for a period of time. In the case of the 2011 cycles, different commodities had different cycles - peaking in 1Q 2011 (Copper, Cotton, Sugar), 2Q 2011 (Silver, Crude, Coffee) & 3Q 2011 (Gold). That was expected to trigger multi-year declines - coinciding with a contrasting rally in the Dollar Index - masking the real problem for a final time. As these markets were embarking on multiyear declines (many losing more than 50% of their peak value in just a couple years), others were surging into unprecedented territory - like Soybeans (in 2012). Most of them should bottom in 2015 (partially due to Dollar Index cycles). And then comes The Golden Year. The Healthiest Horse... As discussed for over a decade, the outlook for the Dollar has to be viewed from two perspectives: 1 - The Dollar Index (a measure of the Dollar s value against other currencies). 2 - Gold (a measure of the Dollar s intrinsic and lasting value). Depending on which perspective one takes, the interpretation of cycles can vary. In the end, however, the final result does not change. But, there are periods of serious discrepancy - often lasting a couple years like The Dollar Index completed a 7-year decline in early at the same time Gold was setting a 1-2 year peak. In theory, if the Dollar had bottomed then Gold had topped. But, this is a perfect example of where the two perspectives diverge. Since its March/April 2008 low, the Dollar Index has never traded lower. In contrast, Gold s March 2008 high was an important peak - that held for about 18 months - BUT it was LESS than 50% of Gold s overall gain. The majority of Gold s gain - from a late-2008 bottom below $700 to a Sept peak at ~$ came in a 3-year period. During that period, the Dollar Index traded sideways to up, never setting new lows. So, anyone viewing the Dollar s value via the Dollar Index saw a stable currency generating multiple 15-20% advances. Anyone viewing it through a golden lens saw the Dollar losing more value. In other words, the Dollar has been the healthiest horse in the glue factory. And that metaphor might be more appropriate than is currently realized if the glue factory is where all of the fiat currencies are being herded. Another way of looking at it - through a cyclic lens - is that the Dollar Index, since 1985, has experienced two major 7- year droughts. The biggest drop was from The second was from In the midst of those declines, the Dollar Index did experience a 50% gain in value during the ~7- year period from early early-2002 (when it set a double top). And prior to 1985, the Dollar Index experienced a previous, ~7-year rally from was very much like in which Gold saw its biggest, parabolic surge AFTER the Dollar Index had already bottomed. Gold s 40-Year Cycle The Dollar Index is in the midst of what is expected to be its third, 7-year advance - from a precise 30-Year Cycle from the advance. The more intriguing factor is how this dovetails with the more significant 40-Year Cycle in the actual Dollar viewed through the golden lens was a momentous time for the relationship between Gold and the US Dollar. It was the final, tumultuous period immediately following the official divorce between the two. There had been multiple trial separations but this one would stick! 1976 witnessed the certificate of divorce known as the Jamaica Accord. 40 years later, Gold was forecast to see a Ma- INSIIDE Track Trading Page 4

5 When Cycles Collide Periodically, a subscriber question will be formulated into a Weekly Re-Lay Q & A... Question: History shows that the six month period from November 1 to the following April 30 coinciding with the last two months of the mid-term and the first four months of the pre-election year, is by far and away the best performing of the eight six month cycles in every election cycle. Post WWII, this six month period has never been down...in addition, when examining the possibilities for 2015 it is interesting to note that there have been no down pre -election years since Incredibly, that is 18 consecutive positive years. Given these facts, a strong argument can be made for market gains to continue at the very least through the end of 2015, and possibly longer...eric, this forecast definitely contradicts your outlook for a late 2014 bull market peak and the onset of a bear market into Eric, what would be your response to the arguments... Answer: The response can be broken into three parts 1 - The first possibility should always be the most obvious - I could be dead wrong and the prevailing Election Year Cycles could be right & remain as consistent as they have been in the past. 2 - The second possibility is that BOTH outlooks could be close to being right. A look at the action following the Jan./March 2000 peak gives a close approximation of what I am describing... What if... The Indices topped soon (for simplicity, let's pick a DJIA level of 18,000), saw a sharp drop into late- Dec. (already discussed as a possibility) and the DJIA closed the year at ~16, From there, the market could consolidate with some wild swings - as would be expected near a major peak and similar to what was seen in Maybe, the Indices work back toward the highs...and close on April 30, 2015 around 17,500/DJIA (which would make it slightly up for the Nov. 1--April 30 period, but still below the highs)... From there, the Indices could trend downward and see a sharp decline into August--October 2015, completing an overall 20+% decline from the ~18,000/DJIA peak and bottoming around 14, ,200/DJIA (which is also shaping up as the yearly HLS for 2015 and includes the 14,198/DJIA high of 2007 as a critical level of 'resistance turned into support'). That could be the culmination of an initial down phase... To close out this scenario, 2016 (The Golden Year) would arrive; issues with the Dollar could begin to materialize...and Gold/Silver could be forming a base... and then the next phase of a stock market decline unfolds... much like the declines of 2000, 2001 and ultimately If current expectations for 2016 are accurate, Gold & Silver would begin to move higher, Dollar uncertainty would grow (& potentially accelerate), perhaps a more serious event accelerates the global move away from the Dollar and... all of a sudden, investors realize that paper assets priced in US Dollars are a bit more tenuous then they originally seemed. A slightly more accelerated rush to the exits would then take hold (in 2016 or later). And then... When market historians look back, the DJIA would have adhered to both of its 4-year bullish cycle expectations... Even as a bear market was unfolding. In fact, those positive events (closing higher on April 30th and on Dec. 31st) could be touted as another reason for investors to maintain blind faith in paper assets and 'hold for the long haul'... and then the decline accelerates in xxxx [See complete Dec INSIIDE Track for additional details] Rules are made to be broken... and so are cycles. This could be the one time that the Election Year Cycle is wrong - reinforcing that the 40-Year Cycle projects a 'shift' of MAJOR proportions during this overall period - even though it would not dramatically change the overall average (of its various phases) for the future. It would just be the anomaly... or the outlier... as is present in every average. Every bubble eventually bursts even as the talking heads are proclaiming it s different this time! This bubble - a 40-Year Inflationary Cycle of Paper Assets - is poised to do the same thing. Just as interest rates cannot keep going lower, ad infinitum nor can paper assets appreciate forever (when ultimately funded by debt). IT INSIIDE Track Trading Page 5

6 jor, multi-year peak in 2011 followed by a sharp drop into late-2013 and an overall decline into mid is expected to see a dramatic shift - the culmination of that 40-Year Cycle - or period of testing from when the Dollar officially divorced Gold... National Cycles Updated As discussed last month, the global move to repatriate Gold began during the precise month that Gold was peaking - in August More significant, from a cycle basis, the global move to bring Gold home - in most cases, that meant taking it out of the hands of American banks, etc. - began EX- ACTLY 40 years of testing from when America shut the Gold window in August As I have explained countless times before, the fulfillment of a momentous cycle often begins VERY subtly. No one notices and it appears as though that cycle was meaningless. Then, after the first 5-10% (or more) of the new cycle unfolds and a transition is finally noticed, it is usually traced back to the precise cycle transition. When the global move to repatriate Gold hits its parabolic stage (2016? 2017?...), analysts will probably view 2011 as a watershed time - when the Gold buying of shifted to a more tangible taking delivery of those purchases. And that reality was reinforced during the past month... According to the World Gold Council, Russia was the largest global Gold buyer in 3Q 2014 and has tripled their Gold holdings over the past decade. Many believe this is preparing for a drawn-out economic war with the West (over Ukraine, etc.) which reinforces the oft-discussed topic of (Russian) Bears Begetting (equity) Bears. Natural Cycles Updated During the month of November (in the Weekly Re-Lay), I updated an intriguing sequence of moderate earthquakes striking the US - from Kansas to Nevada to Montana to Oregon to California at the same time Iceland volcanic activity was spiking... There are multiple cycles that corroborate that potential. They include a ~100- & 200-Year Cycle that dates back at least 800 years, a 50-Year Cycle - that most recently included 4 massive Alaskan earthquakes between , a 17-Year Cycle that impacts NW American volcanoes ( ) and an uncanny cycle that impacts global climatealtering volcanoes - and comes into play in , with the greatest synergy in It is cyclically likely that the US will experience a Major seismic event in the coming years (5--10 years, at most) and that the world will see another climate-changing super volcano erupt by Once again, this is NOT to generate alarm or panic. It is NOT an attempt at hyperbole. It is merely presenting a cyclic observation that appears very likely. However, THEN there is perception & reaction. One of the most intriguing aspects of perception has to do with a scenario I could see playing out in the US if/when a major earthquake strikes particularly if that quake is NOT on the West Coast. I will elaborate on that (and on the climate-changing volcano cycle) in future issues. IT STOCK INDICES 11/29/14 - Stock Indices have fulfilled multiyear expectations and projections for an overall advance into 4Q 2014 ideally into November 2014 and possibly stretching into December 2014 (since a rally into Dec. 6, 2014 would fulfill a precise 40-Year Cycle from the December 6, 1974 bottom). A stock market peak in 4Q 2014 would complete a 40-year inflationary advance in Stock Indices originating from the 4Q 1974 bottom. As discussed before, that particular cycle could stretch the advance into December However, with a cycle of that magnitude, the fulfillment is rarely that precise. On a 1-2 year basis, the greatest synergy of cycles converged in Nov INSIIDE Track Trading Page 6

7 - a focal point discussed since May linked to monthly cycles and year-to-year (anniversary) cycles like the previous Nov peak, Nov low & Nov low in the Nasdaq a peak at any time would accurately fulfill the overall outlook - for an advance into 4Q Up until now, that has been the key factor - that Stock Indices should continue moving higher (even with multiple intervening corrections) into 4Q 2014 and ideally into Nov For starters, the Russell 2000 created a very precise 21-week low-high-(high) Cycle Progression, spanning the majority of More specifically, that was a 147-day low (Feb. 5, 2014)--high (July 1, 2014)- -high (Nov. 25, 2014) Cycle Progression. That sequence was preceded by the early-sept low, 22 weeks before the Feb low. And that Sept. 13 low was preceded by the April 15, 2013 low - 20 weeks earlier. And that April 13 low was preceded by the Nov low - 22 weeks prior. And, wouldn t you know it?! The Nov. 12 low was preceded by the June 2012 low - 23 weeks earlier. Since June 2012, the Russell 2000 has maintained a very consistent, 21-week average (ranging from weeks back to Nov. 12, with one instance of 23 weeks before that) between key turning points. And, the Nov. 25, 2014 high was the latest phase of that. 21 weeks from the Nov. 25, 2014 high is the week of April , 2015 (incorporating the April 19th Date of Infamy on that Sunday). If expanded to the weeks that have governed the Russell 2000 for two years, it would also include the week of April th - discussed in previous analysis. April 2015 is also the next phase of the corresponding, week low (Nov 12)--low (Sept. 13)-- high (July 14) Cycle Progression... The trends are currently up, so traders should be watching for any signs of a developing reversal lower month & 6-12 month equity investors should continue to lighten up on long positions as the Indices enter a period when a major top has been anticipated weeks from the Nov. 25, 2014 high is the week of April , 2015 (incorporating the April 19th Date of Infamy on that Sunday)...April 2015 is also the next phase of the corresponding, week low (Nov 12)--low (Sept. 13)-- high (July 14) Cycle Progression INFLATION MARKETS - METALS 11/29/14 - Gold & Silver remain on track for another wave down - from 3Q 2014 into mid That is when - among many other things - an uncanny 11-year cycle (sunspot related??) between Major lows in Silver comes back into play. That creates a sequence between the 1971 low low (88% drop) low (77% drop) low (35% drop)-- potential 2015 low (already dropped 70%)....Silver is testing a decisive downside objective that could/should prompt a 1--3 month bounce. The attainment of this downside target ushers in a unique time that is already highlighted by intermediate cycles that bottomed on Nov. 3--7th. As explained then, a Gold low would create a ~4- month high-high-(low) Cycle Progression, connecting the March 17 th high & July 10 th high with a Nov th low...that low set the stage for a multi-week and potentially multi-month rebound that could support Gold into January degrees from the July 2014 high (and 180 degrees before the July 2015 cycle low. If Gold & Silver can rebound into January 2015, which would also represent a 50% rebound in time, that would set the stage for a subsequent drop into mid when an overlapping 7-year cycle high (1973)- -high (1980)--high (1987)--low (1994 was cycle low but price low came in 1993)--low (2001)--low (2008)-- low (2015) Cycle Progression. comes back into play. INSIIDE Track Trading Page 7

8 The Silver decline into June 2013 created a corroborating high-low-(low) Cycle Progression...in the ideal scenario, Gold & Silver would rebound into the first half of January 2015 and then turn back down... Platinum remains on track for an overall decline into 4Q perpetuating a 7-year low-low-(low) Cycle Progression. In the interim, Platinum may have just bottomed a couple weeks earlier than expected. A weekly close above /PLF is needed to confirm. IT [End of excerpt from Dec IN- SIIDE Track.] This reprint from the Dec. (& Nov.) 2014 IN- SIIDE Track updates ongoing analysis for a significant downturn in Stock Indices in 2015 while also updating corresponding analysis in Gold & Silver. Another application of the 17-Year Cycle involves expectations in Gold which will probably be correlated to other financial transitions taking place in Gold has its own ~17-Year Cycle that most recently timed the low-low cycle between its mid low & mid-1999 low. A powerful advance followed each phase of that cycle. The next phase of that cycle comes into play in mid-2016 and has some unique and surprising potential! As for Stock Indices, weekly & monthly cycles are reinforcing the 17-Year Cycle - all of which conclude that late-april 2015 should usher in a bearish time for equity markets. INSIIDE Track will continue to update this 17- Year Cycle analysis and the overall outlook for a MAJOR transition (economic, financial & geopolitical) in that includes the 17-Year Cycle of Financial Crises as well as the 17-Year Cycle of Stock Crashes & Corrections. IT Information is from sources believed to be reliable, but its accuracy cannot be guaranteed. Due to futures volatility, recommendations are subject to change without notice. Readers using this information are solely responsible for their actions and invest at their own risk. Past performance is no guarantee of future results. Principles, employees & associates of INSIIDE Track Trading Corporation may have positions in recommended futures or options. The discussion and/or analysis of any stock, ETF or Index is strictly for educational purposes and is not an offer to buy or sell securities nor a recommendation to do so. Please check all information before making an investment. No part of this publication may be reproduced or re-transmitted without the editor s written consent. All Tech Tips (underlined and italicized) -- as well as the term Tech Tips -- are trademarks of INSIIDE TRACK Trading Corporation and all unauthorized reproduction is strictly prohibited. Copyright 2014 INSIIDE Track Trading Corporation INSIIDE Track TM newsletter is published monthly with periodic (2-3/year) Special Reports. Eric S. Hadik -- Editor SUBSCRIPTION RATES: #1 - Monthly newsletter with periodic Special Reports (no intra-month Updates): $179 per yr. (12 issues) #2 - Monthly newsletter plus intra-month Updates: $199 for 6 mos. (6 issues & 6 months) #3 - Monthly newsletter plus intra-month Updates**: $297 per yr. (12 issues & 12 months) **Eric Hadik s Tech Tip Reference Library available for $249 (included as a FREE bonus with #3 subscription) Make checks payable to INSIIDE Track Trading. Credit Card payments can be made via (to INSIIDE@aol.com ) PO Box 2252 Naperville IL (vc) (fx) INSIIDE@aol.com HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY A PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE MANY OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF A SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS -- ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. INSIIDE Track Trading Page 8