Market Direction and Stock Trends

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By: Marty Armstrong | August 9, 2020

Nothing has changed. Normally, a high in 2020 would be followed by a 2-year correction similar to gold following 2011. If we look at just the NASDAQ, that would be the typical cycle forecast. However, we are in the middle of a Paradigm Shift like that which took place during the Great Depression. Back then, 40% of the economy was Agriculture. With the invention of the combustion engine and then the Dust Bowl, the collapse in the ABILITY to grow crops wiped out jobs and drove unemployment to 25%. By 1980, agricultural jobs fell to just 3%. We are seeing this as brick and mortar business fail and commerce has been moving to online thanks to lockdowns. The longer the lockdowns, the greater the damage. These small businesses, which account for 70% of all employment, are hated by the left for they see them as the "rich" who exploit labor as they view the world still through Marx's eyes.

Originally, the "ideal" pattern in the US share market was calling for a 2018 high followed by a 2020 low with a rally into 2022. The Dow exceeded the 2018 high which was 26951.81 in 2019 reaching 28701.66 and then moving into the ECM topping out at 29568.57. I warned at the WEC in Orlando that since we took out 2018 high, this suggested we would see a crash on the ECM turning point come January 18, 2020. What is astonishing is just how all the indexes have gone their separate ways. Typically, we get the highs and lows forming together such as the 2000 high in the Dot.COM Bubble still produced the high in the Dow at 11750.28 and then the decline into the ECM turning point in 2002. Then the all rallied into 2007 and crashed into 2009. However, a close look reveals that a split was just starting since the NASDAQ did not make a new low in 2009 holding the 2002 Dot.COM Bubble low. The lead we see now in the NASDAQ was set in motion from the 2002 low. This means we have an 18 year high in the NASDAQ here in 2020 compared to an 11-year rally in the others.

When we look at what Socrates has done, it is long one weekly position in the Dow, two in the Russel 2000 & SP500, and three in the NASDAQ. This illustrates my point that the markets are completely different. The Dow still reflects the big institutional money from overseas and it has been lagging BECAUSE the dollar has been declining ahead of the US elections thanks to the polls. Therefore, if we are going to talk about the real slingshot, that is not in the NASDAQ which is at a much higher risk of peaking-out before the other indexes as big money views those high-flyers with skepticism. For the slingshot, we need the big international money to just want to PARK in the dollar because everything else is in trouble outside.

In silver, I have done a number of public interviews and stated bluntly that silver would outpace gold. The silver/gold ratio peaked and that was one part of the puzzle that was necessary for the setup going forward for the slingshot. I warned numerous times that for a truly sustainable bull market in the metals, the ratio had to decline not to rise. While Socrates took 5 positions on gold, it has 7 positions in silver. Even shorting gold and long silver was a profitable trade that is not yet over long-term.

So how do we put this entire mess in some sort of outlook for the future? I believe that perhaps the Russel 2000 will be the key since that peaked in 2018 and there the original forecast calling for a 2022 high would NOT be a Cycle Inversion but a normal cyclical trend. So we still have to deal with a potential high in August with a decline into October, or does this flip into a rally into October and then a decline into January? You really have to pay attention to each report because they are so different. This is when you switch to the Daily Bearish Reversals to signal a correction is starting. The timing is still on track for August.

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