Clarifying the Dow

2014 is the next big turning point. That means we either get a high or a low, We did NOT achieve a Yearly Bullish Reversal at the end of 2012. We need a monthly closing ABOVE 14280.00 to signal a 2014 high. The failure to elect the Yearly Bullish Reversal is a caution that we must remain careful.

Either we get a high closing in 2014 with 2015 as a Panic Cycle warning we can see an outside reversal in trend exceed the high and penetrating the low of the previous year. If we CANNOT achieve a monthly closing above 14280.00 after August 7th, then we may see a low in 2014 and then 2015 would be a Panic Cycle to the upside. This would tend to warn that the 2016-2020 period will be a collapse in bonds and a rise in stocks.

Dow-LongBond-21-41

Of course there is the nonsense that stocks decline with rising interest rates and rise when the declining rates. That is another relationship that just does not hold up to any correlation. Illustrated here is the Dow and long bonds during the Great Depression. The Dow rose with rising interest rates and the bonds declined. The the Dow peaked in September 1929, the bonds rallied as they ALWAYS do – it is called the flight to quality. However, when the Sovereign Debt Crisis hit in 1931, the bonds collapsed WITH stocks as capital was destroyed.

Thus a LOW in 2014 would set the stage for a full scale economic meltdown of the debt markets between 2016 and 2020. We would see the strangest patterns with rising stocks as capital flees all bonds. These are the times that forge men’s souls. This is no time to try to be in search of some guru. This is a time you better start to understand reality. The Free Markets are always right. The Reversals will guide us. The market speaks through action. It is up to us to listen.