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posted on 11 November 2017

Sell Everything!

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On Tuesday, November 7, 2017, the Dow Industrials, the S&P 500, the NASDAQ Composite, and the NASDAQ 100 all set new records for all-time Highs. On the next day (Wednesday, November 8), the Index prices closed sideways to higher as the S&P barely missed setting a new all-time High while the NASDAQs did set new all-time Highs. On the next morning (Thursday, November 9), prices opened gap-down, hard. The Dow Industrials hit a Low of 23310 in that dive. (Corresponding Lows for the S&P 500 and for the NASDAQ Composite are 2566.33 and 6687, respectively).

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(I believe it is very probable that the respective Lows of that dive marked, and continue to mark, and will for all time continue to mark the “make or break" points for the bull market). (Just as we remember “9-11," we will remember “11-9.")

After the great dive of Thursday November 9, the question then became - “What would be the nature of the inevitable bounce from those Lows?" Would it be a powerful upmove that would surpass the existing record all-time Highs -so as to keep the bull market rolling, or - on the other hand - would it be a more languid affair, constrained by the limits of “typical" retracements (“recaptures") of part of Thursday’s Big Dive - and thereby waving the bull market good-bye?

We observed strong evidence of the answer by Closing time on Thursday: it seemed clear that the bounce out of the Lows was NOT going to be an earth-shaking zoomer that would thrust aside everything in its path and catapult the Indexes to new Highs - and thereby insuring a continuation of the bull market.

Instead, this bounce rose to a point of retracing 61.8% of the previous decline, was “lassoed" there and “brought back into the corral. In short, this looked like a “standard-issue" retracement. This assessment was enhanced by price action Friday: In what appears to be a “final kick" of the bounce, prices lost further ground and were further constrained by the “Fibonacci retracement limitation ratios 0.618 and by its square, 0.382.


This may sound exotic and “off the wall;" but we’ve seen even a fast-moving retracement stopped dead in its tracks and turned around so many times that it’s obvious that it works! We don’t know why; it just does.

Long-time subscriber Tom Nogaro was kind enough to send me a note (with chart) pointing out the bearish “megaphone" pattern in the mini-S&P futures. I confess that I hadn’t heard that term in this application, so Tom taught me something new today; and thank you for that, Tom... If you will peek at the chart of the mini-S&P futures (below), you will also see three red candles in a row and - more importantly, I think - a very nice three-bar bearish “Evening Star" pattern at the top - in which the middle bar, the “Star," is a “perfect Doji" - in which the Open and the Close were not just “close," but identical - a “Super-bearish" Evening Star!


Here’s the bottom line:

  1. I think that it is very likely that the Dow Industrials and the S&P 500 have peaked and reversed (i.e., that the bull market in those Indexes is dead);
  2. It seems a little less likely that the NASDAQs have peaked and reversed; but in any event, such peaking and reversal is extremely close;
  3. My belief that it is very likely that the bull market in the Dow Industrials and in the S&P 500 is dead would be confirmed and “locked down tight" if the Dow Industrials were to decline below 23310 and the S&P 500 were to decline below 2566.33 (both of which are within easy reach, and such an event could happen anytime now;
  4. Time’s Up. I think that you should get out of the stock market immediately. Run to Cash.

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