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, and which was followed by a sharp decline, which 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 and reach 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
This 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, but 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, we see September 14th, 2015, as 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, which begins, 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 and 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, but the index’s are likely to close higher. September 16th through September 18th, 2015, will then become BULLISH, and it is my belief that the index’s will invert into a swing high.
The big picture will show that September 14th & 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 along with my forecast, and stating 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 markets, to continue for at least the next two weeks, if not longer.
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Chris Vermeulen
