The Dow Jones Industrial Average continues to retrace the 15-51 Indicator’s steps seven months in arrears. The laggard that it is, the Dow Average should peak in value around mid April 2013, and then start a steady and prolonged decline thereafter. I fully expect the Dow to breach the action zone high (14,854) before the slide begins. The slide, a.k.a. correction, should send the Average towards “fair value,” shaving off at least 2500 points in the process. Discussion to follow after chart.
Once again, stock market strength via the 15-51 Indicator flattened out in July of last year; peaked in September; and then started its steady decline. The Dow is following along – be it seven months behind. The 15-51i is again ahead of the game. For two reasons.
First, the Indicator is not manipulated by the Wall Street establishment. As previously mentioned, poor monetary policy is being used to artificially inflate widely followed stock market indexes. These inflated averages help Wall Street lure idle capital off the sidelines –- which helps them make more money. (Remember, mutual funds are currently experiencing their largest inflows in history.)
And what better corroboration for the advertisement of stocks than an artificially low gold value? Strong economies produce higher stock markets and lower demand for gold. So from the vantage point of just the Dow and gold, “the market” picture seems “normal” or at least getting back to “normal,” as stocks are rising and gold is falling. This dynamic makes it appear as an “opportune” time to invest – or at least that’s how Wall Street is selling it.
But that’s so not the case. Truth be told, the Wall Street establishment is again exploiting poor monetary policy and using it to defraud investors. This is them at their worst.
Second, and as explained thoroughly in my book, it’s easy to stay ahead of the stock market if you take your cues from the Market and utilize superior 15-51 construction. Because the 15-51 Indicator is not widely followed, it isn’t being manipulated by the Wall Street establishment. As a result, it shows a truer picture of the actual Market condition. This makes it easier to read and more reliable.
In addition, 15-51 construction moves faster and is more nimble than conventional portfolio models. The 15-51 Indicator therefore inflates faster, corrects sooner, and experiences swifter recoveries after downside corrections than the Average.
These features make portfolio management easier to perform and much more profitable!
For instance, on September 16th, 2013, my blog centered around the 15-51 Indicator reaching its all-time high. At that time I defined the stock market as “extremely over-valued.” That is clear to see when using the 15-51i (the red line) as a reference point. That’s the point here. See chart.
When “high” happens faster and is easily seen – it’s easier to capitalize on it.
And remember, it’s buy low and sell high – not the greedy interpretation: buy at the lowest and sell at the highest. It’s too easy to slip on a wet floor.
Corrections occur when investments are over-valued – in other words, when inflation and speculation have pushed prices beyond economic worth. Remember, fourth quarter GDP rose just .1% and the stock market is already up 11% this year. The Dow just reached another all-time high, and is poised to move higher.
Conditions are ripe for a significant correction –- 15 – 20%, easy.
The impetus for such a steep Dow decline are the same that triggered the 15-51 Indicator to fall late last year. First, the Dow Average is extremely overvalued. And in the face of a slowing global economy, a global currency crisis, the threat of international war and unrest; the extremely poor employment picture existing throughout the world; and persistent government incompetency, mismanagement, and corruption – “the market” has no solid foundation.
Just this week, U.S. regulators announced that they are investigating the price of gold. You may recall I noted the historical amount of short activity surrounding gold a few weeks ago. “Shorting” is the process of selling high and then buying low at some future point in time. It is the opposite of investment, where an investor buys low and then sells high. Shorting is divesture – a bet that the price will go down – as opposed to traditional investment which bets that the price will go up.
Excessive shorting forces prices down, sometimes artificially. This dynamic, one should note, may be caused by something other than solid Fundamentals – be them related to a Market, Stock, or a Commodity, like gold. Purposeful manipulation and speculation in regards to short positions can easily cause a security to move down for no good reason.
And that’s what’s happening to gold right now.
The current price decline in gold, the rise in the U.S. dollar, and the increase in the DJIA are not due to strong economic condition. Instead, they are due Wall Street speculation and manipulation, weakening global positions, and inflation.
Proof of this was once again identified throughout the Euro Zone this week. The EU reported the highest level of unemployment in the region in more than seven years; the IMF warned of bigger EU bank losses than expected; Italy’s credit rating was again downgraded by Fitch Ratings firm; Spain is looking for help to fix its banking system after an auction to restructure a major midsized bank failed; and French President Francois Hollande announced that their budget deficit would exceed his campaign pledge made just ten months ago when he won the election.
Things aren’t getting better over there.
And in America this week, Goldman Sachs and JP Morgan Chase received “weak” grades from their stress tests. There is absolutely no reason for this considering the billions of dollars being pumped into the banking system every month. Unemployment remains painfully high, at 7.7%; growth is non-existent; and gas prices are once again on the rise.
Needless to say, things aren’t getting much better here either.
If you are following along you know that the Dow’s upward trend is nothing more than an inflationary move facilitated by the Federal Reserve and manipulated by the Wall Street establishment to solicit idle capital from cautious investors.
Don’t get sucked into this misnomer.
Defense wins championships.