Market tops don’t happen overnight. They go through a topping process which can take several weeks or months to develop.
Yet, after the huge selloffs in October, as well as in early November, analysts all over financial TV talked about the sudden “dip” the wiped out the gains the major indices this year.
However, our Smarte Trader clients were well aware of a coming decline.
How we identified the October market top:
- Smarte Trader - August 15: “We have called the rally since February a bear market rally which, typically goes back towards the first high, sometimes even exceeding it. Those are bull traps.
Bull traps like this occur on lower volume than the first high, in this case in January. Here is the chart showing that. The high early this month may have been an important high.”
- Smarte Trader - August 17: “Nobody talks about this, but many of the most important stocks in the US are close to or already in bear markets…
This supports our case that global markets are already in bear markets and the US markets are following as the US economy has been much stronger than others.. How can this be ignored by all the analysts in the media? Are bear markets in these stocks supposed to be aberrations or company specific? Note that they are in different industries. We think that markets around the world are either in bear markets or on their way.”
- Smarte Trader - August 21: “The charts we have shown previously are very similar to the rallies of “secondary tops” of the past, ahead of substantial declines. Of course, there is no guarantee it will happen this time. However, combining this with the declining volume during the rally of the past 6 months fits the requirements perfectly for a secondary top. These can either be higher or lower than the primary top that occurred in January for some indices, and a little later for others.”
- Smarte Trader – September 12: “Everything we’ve been looking for over the past six months is coming true, namely the rally we’ve been seeing has been a bear market rally. The majority of buying during the rally has been buybacks, which may amount to $1 trillion dollars this year, along with short-covering. We are still looking for the heavy selling to start in the second-half of September.”
- Smarte Trader – September 13: “We have written that China is in a bear market according to the popular definition of a 20% decline. Does any intelligent person really believe the US markets can continue to rise in this interconnected world?”
- Smarte Trader – September 19: “The top 10 performers this year gained 122% of the S&P 500. That means that the other stocks actually on average were down. All this confirms our observations of the past 6 months; this is a bear market rallydesigned to fool the largest number of people.”
Smarte Trader – September 26: “We had cautioned for a week about the IWM (ETF for the Russell 2000) to watch chart support for a potentially negative break. That almost happened 2 days ago. Today it did! Here is the chart:
Our analysis since early this year said that the entire rally of the past 7 months was a bear market rally. Each step along the way has been confirmed even when financial manipulation moved some of the major indices to new highs.”
- Smarte Trader – October 4: “Today confirmed everything we had noticed on our technical indicators the past few months… the trend since January looks very much like a bear market even though some indices made new highs recently. In fact that doesn’t contradict what we say, but supports it.”
- Smarte Trader – October 8: “Several weeks ago we wrote that one sector after another would be sold hard even while the DJI was making new highs. This is how the start of a bear market is disguised. The intermittent rallies lure in the bargain hunters, and then trap them at the top of the rally.”
- Smarte Trader – October 10: “It is our opinion that the US has now joined other countries in bear markets. We have warned for several months, that a secondary rally after the initial top (late January) could even go to a new high in some indices, while other indices don’t make new highs. That’s exactly what happened. That formed the “bull trap” in late September.”
- Smarte Trader – October 11: “All four major indices are now below their 200-day moving averages, a level that the DJI, NASDAQ, nor the Russell 2000 has closed below anytime this year. That suggests they are in bear markets or on the way there…The chart below shows how the S&P 500 was manipulated far higher than the very broad NYSE COMPOSITE, which includes many more stocks. The spread between the two indices went to an extreme. The blue line is S&P, the candlestick is the NYSE. Now the plunge narrowed the spread again, although it is still not back to normal.”
- Smarte Trader – October 22: “The S&P 500 closed below its 200 day m.a. The Russell 2000 is already quite a bit below that critical level. And the very important and broad NYSE Composite broke through its 200-day m.a. on October 10. These are all bear market signals.”
- Smarte Trader – October 24: “The S&P 500 fell 3.1%, its biggest loss since February 8th, and the DJI fell 608 points. All three indices have now completely wiped out their gains for 2018 and are now negative. Meanwhile, the NYSE Composite plunged exactly to the February low as we expected, and then later in the day plunged through it, setting a new 13-month closing low. Failure to hold support is bearish.
Many key stocks are down around 20% and many sectors are down 30-40%. The Semiconductor sector is down 44%, aluminum is down 43%, steel is down 26%, biotech is down 17% in 3 weeks... Citigroup and Bank of America down 21%. Chipmaker AMD was down over 22% today alone. You get the idea: this is a bear market that only very few analysts have identified.”
- Smarte Trader – October 25: “We wrote over the past several months how global liquidity was shrinking. And that produces bear markets, according to our “Theory of Liquidity & Credit” developed in 1976, one year before we started our firm.
- Smarte Trader – October 26: “This has been the worst performing October for the markets since 2008. Over 75% of the stocks are down more than 10%, with about half of them in bear market territory…It’s no longer “a dip,” as financial TV initially proclaimed.”
- Smarte Trader – October 30: “We expect a rally, and it could be a very vigorous one. Thereafter, the bear markets should probably resume.”
At this point in the market cycle, traders and investors need to tune out any advice they hear from Wall Street and turn to unbiased and independent analysts that have experience in identifying market tops.
Now, you can gain our over 40 years of professional investment guidance expertise with our special 20% Discount on the award-winning Wellington Letter and our premier trading services, the Smarte Trader and Fearless ETF Trader.
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