Selling Climax Approaches

As I posted earlier this summer, we approach Dow 10,000 next.
Given how fast this crash has been, we could approach it ...
This week? Possibly tomorrow -- Soon, for sure.

Have been holding short positions since April but will coverand go long sub-10,000.

Here's a napkin chart I drew up in the Spring, lets you know what we here at
The 1930's Scenario think will happen in the markets over the next 1-2 years.

S&P 500:


As I finish this post, Dow futures down -300 again tonight.

More charts comparing our market to the Great Depression Bear coming
in the days and weeks ahead ...

Let's Try This Again

Last year I started this blog with the intention of informing people that we are headed into a Depression even worse than the Great Depression.

I still believe this to be the case. Technical analysis says so.

Now I know the naysayers will point to last year's failed prediction of a crash ..... They'll also have a good laugh at our expense --- nothing less should be expected. The record is there for everyone to see.

But unlike other blogs, The 1930's Scenario will never delete bad calls or censor criticism (just don't go overboard!). When we're wrong, we're wrong.

But this time, we're gonna be right.

You see, The 1930's Scenario now has an even better understanding of the relationship between the 1929 Bear Market and our own.

Keep an eye on this post, and future ones ... we'll show you.

We weren't necessarily wrong last time -- just WAAAY too early.

-------

With all that out of the way, I'll be posting more charts in the near future.
But first, let's start at the beginning.

Here are two charts leading up to the 1929 and 2007 tops.

From Prelude to a Depression:


1928-1929:


And 2003-2009:


^^^
As you can see, the charts look the same leading up to the 1929 and 2007 tops.

According to The 1930's Scenario, the all-time record highs that were reached in September 1929 and October 2007 match up perfectly.

In both cases, you had speculative orgies that were created by macroeconomic imbalances and cheap, easily available (and artificially mispriced!!) credit.

These "bubbles" only lead to short term prosperity and long term pain.

----

In future posts, I'll get back to the charts, but for now, consider this:

One of the central beliefs of The 1930's Scenario is that once a bubble is formed, painful deflation cannot be avoided.

Often you will see history books and professors claim that the Depression only happened because the money supply was allowed to rapidly shrink in the early 1930's, or because new tariffs killed off international trade, etc.

And now ....

Men like Ben Bernanke and Milton Friedman claim to have solved Depressions!
They would have you believe that if they just do THIS ... and THIS ... and then THIS ... we can have prosperity forever!

Rubbish.

Economic collapses are not the result of policy errors on the way down.
They are solely the result of policy errors on the way UP!

Once the bubble forms, painful deflation cannot be avoided.

If you can grasp this central belief, it will help you see that no matter what bailouts are approved, or "kick-the-can" schemes are thought up ---

In the long run, the charts will ALWAYS look the same.

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Until next time, keep an eye on the Market Forecast, bottom of the page.

Beginning this summer,
the markets will resume an inexorable decline back towards their 2010 lows.

Targets:
Dow Jones Industrial Average: Dow 10,000
S&P 500: 1040

It's a very, very long way down to the bottom -- we're just getting started.

Imminent Stock Market Crash Ahead

The 1930's Scenario is now predicting an imminent stock market crash,
which will begin here in October or no later than early November.

See the following charts that compare present with 1930.

Big picture:

1930:



2010:



And right shoulder inserts:

1930:



2010:



Notice there was a run-up in late May 1930,
very similar to what we've experienced in Sept-Oct. 2010.

The formation of the right shoulder looks very similar both times.
And I would characterize them as abc corrections in a new downtrend,
(C-wave down).

Also, please read the material at this link provided in comments.
It discussed Fed minutes and correspondence from May-June 1930.

You will find that the Fed began QE2 at the beginning of June 1930,
and a spectacular 25-30% crash immediately followed that month.

Fast forward to 2010:
Guess what the Fed is expected to do on Nov. 3?

Timeline Update

As you can see near the top of the page,
I'm updating our "Current Time" to June 1930.

Charts to follow in the near future.

A-Waves

Sorry I haven't posted much this summer,
but as you can see...we've had time to wait out our right shoulder.

Let's look at the A-waves from both the 1929-1932 bear market
and our current 2007-?? bear.

Again, they match.

1929:



2007-2009:

Following the tops of Sept. '29 and Oct. '07,
both A-waves occur in 5 waves.

1:
The market sells off to support (see previous blog post).
The selling climaxes in a panic, either Bear Stearns in March '08,
or a similar incident but with the exchange firms in beginning Oct. '29.

2:
First attempts at intervention hold support.
The market rallies back to resistance,
and everyone believes "whew, we dodged a recession".

3:
The rally fails at resistance and selling returns with a vengeance.
The market first falls to support and breaks it.
This massive technical breakdown leads to major panic and then intervention.
(see Wall St. banker bailout of Oct. '29 and TARP bailout of Fall '08).
The market trades sideways around support,
but ultimately forced selling enters the equation and the powers that be
are unable to prevent a full scale crash.

4:
A dead-cat bounce follows.
Bargain shoppers buy up oversold stocks en masse.
The height of the dead cat bounce occurs near
what would eventually become the 38.2% fibonacci retrace.

5:
Intentional short-selling of the market.
First, profit taking enters the equation....
and the market falls back to its organic lows (230 and 8,000 respectively).
The government and the banks then drive the market up
to what would eventually become the 23.6% fibonacci retrace,
then they intentionally short the market to the bottom.

They do this in order force the public to sell its positions,
so the banks can buy up the cheap stocks and profit from the next rally.
The government and the banks work together to steal money from the public,
in order to recapitalize the ponzi banking system.

The proof can be seen by the bottom forming a head on and inverse H&S.
Negative distribution.

Next time I'll compare the corrective B waves of the two markets.
You should already see the first aborted h&s formations,
which followed the bottoms and had neckline at the 23.6% fib retrace.

But more on those next time.

For now, enjoy the rest of our right shoulder and
short-lived V-shaped recovery.

Also notice that I've updated the market forecast
at the bottom of the page.

Prelude to a Depression

More charts tonight!

Before our market takes another leg down later this year,
I want to walk you through both bears and illustrate how they match.
Fully analyze them.

We start here with the peak of the bubbles,
then the initial drop off the top.

1928-1929:
2003-2007:
First, just looking at the charts,
you should notice they are almost identical.

You can't see it on the 1928 chart,
but there was a 15% crash in 1 week in Dec. 1928 (the chart starts after that).
From there, the Dow regained all of its losses that month,
then traded in a range between 300-325 for Jan-May 1929.
This established support.

You also can't see it on the 2000's chart,
but I'm sure we all remember the 2000-2003 recession (chart starts after that).
From there, the Dow regained most of its losses that next year,
then traded in a range for 2004-2006.
This established support.

Eventually, both markets broke out of their range to the upside,
and made their final push to the top.

Once liquidity dried up in financial markets,
the bear markets began with declines back to the indicated support.

The next post in this series will begin analyzing the declines.

First Charts

First crude charts I can put up tonight, just to emphasize where we are.

2007-2010:

1929-1930:

1. After the crashes, both bottoms form inverse head and shoulders.

2. Along the inverse RS, both markets form an aborted h&s.

(neckline at the 23.6% fib retrace)

3. Both markets then put in a much bigger head and shoulders top.

4. The top came upon reaching the technical target of the inverse h&s.

Admin Notes:

I'm analyzing the DJIA on this blog because:

1. more of the public pays attention to it

2. can compare directly to the 1929-1933 bear market

I will occasionally add in S&P 500 targets and charts as well,

but when I don't, I assume anyone interested can figure them out.

Finally:

Look forward to stage-by-stage analysis of the bear markets!

Both technical and in general terms ...

And so it begins ...

First, welcome.

This blog will track our current bear market as it follows the one from 1929-1933.
Yes, the one that started with the Crash of 1929 and ushered in the Great Depression.

Our market is an exact match.

Unfortunately, that means we are heading for an even worse economic collapse.
30 straight years of credit bubble after credit bubble will do that to you.

The Millennial Depression cannot be avoided, but we can prepare for what is to come.

Follow here as I lead you through the ups and downs of the stock market.
The final target is (gulp) below Dow 1,000 ...