Harry Dent Blog | Nearing A Line In The Sand | Talkmarkets
Founder, Dent Research
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Harry S. Dent Jr. studied economics in college in the 1970s, receiving his MBA from Harvard Business School, where he was a Baker Scholar and was elected to the Century Club for leadership excellence. Harry grew to find the study of economics vague and inconclusive and became so disillusioned by ... more

Nearing A Line In The Sand

Date: Monday, August 20, 2018 10:14 PM EDT

China Image Investment Help Dent Research Economy and Markets

Most of the classic technical indicators favor a continued rally in stocks into 2019.

And that’s still my preferred scenario for a final peak. One that happens in late 2019, coming off of this Trump rally that started in late 2016.

It could be near its peak growth rate after the 4.1% GDP report.

But it’s not likely to be sustainable for long given that we are running out of workers to rehire, and the real estate bubble seems to be finally be running out of steam due to such high prices making homes and rentals unaffordable.

So, do we peak just ahead, or could it sustain well into 2019 before peaking… and I see low chances of it sustaining past that point where our proven fundamental indicators are the lowest between 2020 and 2023.

The first warning sign for the near-term peak is the sharp collapse in the Smart Money Flow Index over this year’s rally after the late January 2018 peak.

But another warning sign is the collapse in China’s stock prices down 26% recently, after a second bubble peaked in late 2015, and crashed 49% into early 2016.

Such a continued crash would be a bad sign for the global economy, not just China. If it breaks much below its major support at 2,638, it’s due to crash to at least 2,000 in the next year, and more likely to 1,000 over the next few years. And it’s just a bit less than 1% from that level on Friday.

(Click on image to enlarge)

This has been a classic dead cat bounce scenario ever since that low in early 2016 – which is now failing again and approaching the lows of the last crash at 2,638.

The ultimate support level is 1,000, at the bottom in 2006 just before the first great bubble that peaked at 6,200 in late 2007 and crashed 72% to follow.

Emerging market stock indices are also down just over 20%, with a rising dollar and interest rates that they largely borrow in impacting them negatively…

This could be the next subprime crisis in debt, as most of the global debt came from emerging countries since the 2008 debt crisis when the U.S. had lower interest rates and a lower dollar.

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