Stock Market Bearish Forecast
For some time now I have been observing bearish "cracks" appearing within the stock markets. The speed of the market's drop during the month of August came as no surprise to me.
The bear market rally ended last week, after it had a 50% retracement of its initial decline. By Friday, September 4th, 2015, the index was trying to hold on, so as to support that which was created by a critical short- term trend line that had already been violated. The DJIA weekly chart gives a good argument by expressing the view that a bear market may already have begun.
The signs should be very obvious! The prolonged uptrend that ended in a large congestion pattern, which was followed by a sharp decline. Moreover, the bearish trend sliced through three important moving averages (30 week moving average, 90-week moving average and 120-week moving average), simultaneously, violated a 6-year trend line. The momentum indicators are also in a steep downtrend with no apparent sign of deceleration or divergence.
I believe that we should be prepared for an imminent resumption of the decline. Cycles are not due to bottom out until the end of this month, as I have further elaborated in this analysis.
After a long period of distribution selling, which capped a 6-year uptrend, the stock market has entered a corrective phase, which, at a minimum, should result in a significant decline. If the total amount of BEARISHNESS, which has been stored up during the distribution process is released, it will manifest itself as a lengthy downtrend reaching a price level which is most likely inconceivable to most investors.
We are currently in wave-5 down on the DOW. Then, although wave-5 may not exceed the wave-3 low, due to the fact that they were quite steep (the wave 3 lows), there is a possibility that wave-5 may be truncated. After the wave-5 down is completed, and there is a corrective bounce, to the upside, I expect much lower prices, as explained further, in this analysis. Therefore, we shall remain on the sidelines and hold our current positions, for now.
Non-Technical but Supporting Arguments for a Bear Market/Market Crash
The info below is to be taken with a grain of salt. I only talk about it because it falls in line with my technical outlook.
This past weekend´s and next weekend's updates are likely to be the most important ones of the entire year of 2015. We are approaching the last week of the Jewish year "5775", and the last days of the "Elul". The 29th of Elul will fall on Sunday, September 13th, 2015, which is on the same day that we will observe a New Moon and a Solar Eclipse.
Markets are closed on the Sunday prior. However on Monday, September 14th, 2015, (which is the first day of the Jewish New Year) it will be a very critical day within the US markets. This will become a very volatile day for all assets. I believe, September 14th, 2015 to be the most likely day for a "US stock market crash" in correlation with the Shemitah cycle (as I have extensively discussed in several previous articles). Potentially, this "stock market crash" could become much more severe than the one we had experienced on August 24th, 2015.
The Jewish Year 5776 begining on the very day of September 14th, 2015 is exactly 4000 years after what some refer to as the "Year of the Devil", while others refer to it as the "Year of Lucifer".
During the next critical trading days, the last trading day of Elul is September 11th, 2015 which corresponds exactly fourteen years after 09/11/2001! I forecast that September 14th, 2015 will become an important closing price swing low for US Index's. Furthermore, it should also become a strong declining day for stocks. On September 15th, 2015, the SPX is likely to trade lower than it will on September 14th, during some point of time. However, the indices are likely to close higher. September 16th through September 18th, 2015, will then become BULLISH…and it is my belief that the indices will invert into a swing high.
The big picture will show that September 14th and 15th, 2015 are the most important turning points for US stocks occurring during the month of the "Shemitah". Once we hit a low on September 14th and 15th, 2015 (as I am forecasting), I recommend that you follow my daily updates.
I believe that there are "hidden signs" that the Federal Reserve will raise its benchmark rate during its next meeting on September 16th through September 17th, 2015. Contrary to popular belief, this will help the US stock market because the bad news will be out of the way. A rate hike is clearly positive, as I project that a rate hike or MODIFICATION to the current rate is on the horizon. As the Federal Reserve does not publish their upcoming policies, I will call it a "high probability prediction".
I project that September 14th, 2015 will become the most important day during this cycle. Possible target prices for an SPX CLOSING price on September 14th, 2015 will be 1833, 1809, 1777, 1718 and 1666.
I expect major volatility within the market to continue for at least the next two weeks…if not longer.
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Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997. Chris’ mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility. Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication. Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P500 index, which solves his client’s biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market. He is the author of the popular book “Technical Trading Mastery – 7 Steps To Win With Logic”. He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. Chris is a graduate of Seneca College where he specialized in business operations management.