Dow: Can't say I didn't warn you

February 5, 2018 10:06 AM

You can’t say I didn’t warn you. A week ago, markets, especially the Dow, hit 610 days from the August 2015 bottom. Most market participants are not aware of it unless they read me or a small handful of other market cycle experts. The challenge I’ve had is the bigger time windows from last September and October didn’t seem to fire off as usual. It was the first time in 19 years an important window didn’t seem to fire off. I contend it did, creating an inversion to propel markets higher. The problem here is even some people who understand the cycles have been lulled to complacency anyway because nothing seemed to stop this freight train.

I don’t care, I watch them all anyway because it's my job to warn you to the risk. Financial markets are a game of risk management. I now specialize in Kairos and variable change. What that simply means is I can identify when the pattern gets hot and a trader has that edge over the guy on the other side of the trade. Variable change is simply identifying what could be coming against you. In the world of risk management, what is coming against you can and will hurt you.

I can assure you plenty of people didn’t know what was coming against them last week and got hurt. Now the question I’m asked is whether this is the start of a new bear market. My answer? It’s an irrelevant question. There is an element of people out there who have dreams of getting rich by picking the top and riding it all the way down.

First of all, I’m the guy that did pick the top to within a day, but most traders won’t get rich by doing it. There is an old saying in this business. You can be a hero or you can make money, but chances are you won’t do both. So, let’s put this in proper perspective.

Last Monday was the first day in recent memory my YM 1-minute charts had trouble going higher. Markets got hit again on Tuesday but recovered and it appeared we might have a case of "here we go again." But those lows were taken out. Now it's important to consider day 618 from that August low with the window starting today.

But now we must look at sentiment. Friday was a day I’ve been pointing to for a long time, at least a year and a half. Readers of this column know I’ve been talking about the smorgasbord of domestic and geopolitical problems. I’ve quoted Lord Rothschild in this space who compared this market and place in history to 1937.

Much of the media blamed the bond market as the culprit and to a degree they are right. The bond market appears to be entering a new bear after a 36-year bull. Naturally, prices are dropping and rates are rising. But what has materially changed over the past 10 days? For one, we are on the other side of the time window and for whatever reason sentiment seems to change. Suddenly people are concerned about rising rates. But if people believe the Trump rally has created that much of a better economy, shouldn’t this economy be able to absorb higher rates for a while?  Did rates really change that much in a few days? I say not.

So it happened on Friday that Stuart Varney on FOX Business finally admitted he believed there was a link between the Nunes FISA memo and the market which dropped like a rock. The market knew this memo would be released and did not like its contents one bit. Is this a bear market? It is too soon to say but I can tell you just from the behavior last week something has changed. I’ve been telling you for years that when the market cycles hit the news event happens to appear, almost by magic. What is the news event? We have a constitutional crisis on our hands. A lot of people still don’t comprehend the gravity of the situation.

This FBI scandal makes Watergate look like pocket change in comparison. Let me be clear, it does not reflect on the great rank and file who protect this country.  This is not a minor corruption scandal in the middle of the food chain, there are a few bad actors at the top. It is a conspiracy designed to change the course of American history by influencing an election. This is not hyperbole, I wish it was. It is fact and the market knows it. From what I’ve researched, this is the tip of the iceberg. So if the market didn’t like this, it probably won’t like what is yet to come. I’ve shown you the Watergate charts, the market sold for weeks and months after that scandal broke. I don’t know how the country pulls out of this mess, nobody does.

It's hard to say what comes next because from the time Trump told the world he was being spied on and ridiculed for it time has proven him correct. If these markets responded to 610 days from August 2015 they can very well also respond to 610 from February 2016 which doesn’t happen until the middle of the year.

The market got hit and we know those who live by the market can die by it. Trump has been touting this rally from the day he won. Many were concerned since he took too much credit, he would rightfully get the blame when it inevitably reversed. But in a weird way, this isn’t Trump’s fault. If the market has finally turned and we get more days like Friday when the market finally woke up to the truth, it will not be Trump’s fault. Is it Trump’s fault the top of the FBI and intelligence spied and tried to frame him in some phony Russian collusion scam? Absolutely not.

As far as oil is concerned, last week we looked at the long-term chart where the stars did not align perfectly for a return to the bear. Thus far we’ve seen a trading range which is par for the course. Finally, look at the Dow high which vibrates at 616, as in 26616 we are now right in that window from the August 2015 low, we should be getting ready for low just as people are reacting to the high.

About the Author

Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.