THIS WEEK'S STOCK MARKET TREND SIGNALS
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(The signals shown below are the "regular" MACD signals, NOT the Advanced MACD signals, which are available separately for only $4.95 a month. See our website for details).
Shown below are the current "Weekly" signals for the Dow Jones Industrials, S&P 500, and NASDAQ using the "regular" MACD (as is available for free on many investment websites). These can change quickly, but can also go weeks or months between changes, so be sure to check each week's email. The Longer-Term "Monthly" signals (rarely change) are shown below. Then, at the bottom we provide our big trends for interest rates.
Dow Jones Signal - UP
S&P 500 Signal - UP
NASDAQ Signal - UP
LONGER-TERM (L-T) STOCK MARKET TREND SIGNALS
(The signals shown below are the "regular" MACD signals, NOT the Advanced MACD signals, which are available separately for only $4.95 a month).
These longer-term signals are based on 'monthly' intervals for the "regular" MACD, meaning that signals can only change at the beginning of the month. As such, these signals can go for months or years between changes - BUT when they do change it pays to take heed, since it signals a potentially VERY IMPORTANT change in trend or direction for the market as a whole. Subscribers that don't change their investments very often will usually follow these signals since they don't change very often.
L-T Dow Jones Signal - UP
L-T S&P 500 Signal - UP
L-T NASDAQ Signal - UP
INTEREST RATE OUTLOOK
These interest rate outlooks are based on the price and yield trends for U.S. Treasury bonds of various maturities. This kind of information is helpful for those investing in certificates of deposit, applying for a loan, and other reasons where the interest rate outlook is critical. While rates could move counter to the signals shown below from time to time, we show the LARGE trends for these rates, based on the monthly interval MACD.
Short-term (3-6 Months) - UP
Medium-term (2yrs-5yrs) - UP
Long-term (10yrs-30yrs) - UP
COMMENTARY:
'BRACE FOR IMPACT' IN 2010
Most people are by nature optimistic, and that's good. However, this helps explain why many people are not good investors. To be a good investor, you have to look at things realistically, separate yourself from emotion and look at how things 'are', not how you 'think' they are or 'wish' them to be. Another key trait is patience, and very few have the patience to analyze the facts or data, and wait for the correct time to buy or sell. It also takes time, but our newsletter helps everyone in that regard since we boil down lots of information (including stuff you probably haven't read) and present it each week. If you can't stand hearing bad news or warnings of bad things to come, then we suggest you stop reading now, and try to have a happy new year.
Now, for those of you that can 'handle the truth', here's a synopsis of what we've come across that indicates to us that this year, 2010, could be a real mess, in more ways than one. What we've shown below is a list of predictions and insights by forecasters that have had a good track record, and/or concur with our analysis. Does that mean everything listed will definitely happen in 2010? Of course not. As we often say (time and time again) we (and nobody) has a crystal ball, but some things are predictable, such someone maxing out their credit beyond their ability to repay WILL result in bankruptcy. It doesn't take any particular skill to see what happens in that circumstance; it's just a logical conclusion. Naturally, if the government forces a moratorium on bankruptcies, that logical conclusion would be altered or wrong. That's what happened in 2009. The government stepped in with massive amounts of borrowed trillions of dollars, and propped up a failing economy. But, that 'stimulus' or 'sugar high' won't last and like a sugar high, the crash will be even worse, with the added debt. So, let's take a look at what investors should consider as possibilities in 2010:
* Gerald Celente, of Trends Research (www.TrendsResearch.com) said in a recent article on Rense.com that he expects the onset of the Greatest Depression; there will be no 'recovery'; the Bailout Bubble is about to burst and we'll see the Crash of 2010; to expect more terrorism; and anti-immigrant, anti-China import sentiment.
* Karl Denninger at Market Ticker (www.market-ticker.denninger.net/archives/P1.html) puts it this way, "We have made no progress economically in terms of the common wealth of the average American but have added debt in dramatic amounts to paper over the deficiency. That's the bottom line on the 2000's, and despite all the crooning that "the economy is on the mend" one has to look a the reality of the common man on the street to see what's coming around the bend for our economy..." His predictions for 2010 include: the market may go higher for a short while longer, but watch out for one heck of a crash; long bonds could move higher in yields; housing prices could fall at least another 20 percent; banks may 'dump' their real estate and foreclosures; bankruptcies, especially for small businesses will be massive; credit will fall creating 'deflation'; states may ask federal government for handouts due to failing budgets but it won't help; the Fed's credibility will be at risk; Congress will continue 'tax and spend' sending the nation further into debt; sovereign debts will begin to collapse; return OF capital will be more important than return ON capital.
As if that is bleak enough, other data shows the whole last decade has been a wrenching nightmare. Adjusted for inflation and the falling dollar, the S&P is down 54 percent since the Year 2000, the Dow Jones Industrial Average down 37 percent, and the NASDAQ down a whopping 70 percent. So much for "long-term" investing. It's good to have patience as we mentioned earlier, but you have to recognize 'reality', and reality (long-term MACD trend signals) said get out of stocks in early 2000, get back into stocks in early 2003, get out in 2007, and back into stock in 2009. Few newsletters or systems have that kind of market insight. So, what do we see in the year ahead? Our outlook presumes there won't be any more substantive government stimulus programs, that 'kick the can' further down the road. Our expectation is they will try, but their games could be hamstrung by a backlash of public sentiment and foreign governments refusing to buy our nation's debt. Things could get ugly as America progresses into the darker parts of the next Great Depression we predicted started back in October, 2008. Here's our 2010 outlook:
* Stocks could rise for a bit longer, but they are skating on thin ice and losing altitude. Priced for perfection, stocks could easily be much, much lower at the end of this year. In fact, we expect a severe 'market correction' or even a crash.
* Residential real estate will crash further, perhaps as much as 50-60 percent more ultimately, but at least by the 20 percent mentioned in Mr. Denninger's forcast. New home sales recently plummeted 11.3 percent as the initial phase of home purchase credits expired (later extended). Realize however, that the sole driver of home sales now is a government agency, the FHA, which provides the majority of home loans today, at a rate of nearly 6,000 mortgages A DAY!!! This means that FHA, if collapsed, makes the residential real estate market substantially collapse. It also would mean the banks would have to finally recognize the losses in MBS's and other real estate derivative securities and contracts. Meanwhile, foreclosures have been held in abeyance due to government mandated moritoriums and workouts, and a hesitation to take losses. The "dam" could break open this year resulting in an avalanche of defaults and foreclosures, sending prices towards rock bottom. On top of this add rising unemployment, personal bankruptcies, and failed small businesses, and you can see how we are nowhere near the end of this collapse. Finally, a rise in interest rates would be the 'icing on the cake' adding to defaults and foreclosures for all those with adjustable rate loans. It could get really ugly.
* Commercial real estate could begin crashing as many of these mezzanine loans begin to come due and have no place to re-finance. Falling values could cascade into the avalanche long anticipated by many market watchers.
* Interest rates will rise as Treasury bonds lose their footing and prices fall for various reasons including: decreased foreign demand; perceived higher risk owning bonds from a bankrupt country with decreased productive capacity; and recognition of the overall increased risk with ANY debt - even U.S. government debt.
* Deflationary depression will emerge in the news, even though we've been talking about it since we recognized what was going on for years now. This doesn't mean we can't have hyper-inflation stacked on top of a deflationary environment - the worst of all possible economic scenarios where your dollars buy less and less and the value of your assets falls precipitously. We think overall, that this year people will fully recognize the precipice we have begun falling into, and there will be lots of angst as the year progresses.
* Gold and silver could fall a bit further in the near term, especially as the dollar finishes it's corrective rally, but them resume it's climb as more people recognize that these precious metals are about the only way to escape the collapse, and not lose everything. The problem with this strategy is storage of these hard assets, but later we see an actual 'shortage' of precious metals as the everyday American clamors for gold and silver, and it will be too late.
* We anticipate that crime will increase as the economy implodes. This doesn't take rocket science to predict and is fairly self-evident. This also means that businesses providing security will be very busy. Plan on adding to or providing more security for your home and automobiles. Also, watch for more 'scams' in the mail, phone, and on the internet. In the event of food shortages, crime will become rampant as even 'law abiding' citizens resort to stealing just to feed their families. Sorry, but even Pentagon studies have shown that people will steal food after two weeks, and will kill after 3-4 weeks without food.
* Watch the MACD trend signals, especially the Weekly signals for signs of a falling stock market. Then, if the Weekly signals turn negative, watch for the longer-term signals to turn. When they do, most times it means that it's time to get out of stocks until the long-term signals turn positive once more. If you need more accurate turn signals, consider our $4.95 a month timing service.
* More employees, now working for private industry, will end up working for the federal government. Just last week, the government took over GMAC, adding to the list of other entities taken over including AIG, Fannie Mae, Freddie MAC, General Motors, Chrysler, banks, and others. We expect the list will grow, which will reduce salaries just as the dollar implodes and deflation steals Americans blind.
* The Federal Reserve will fight it, but auditing of that agency looks certain. Granted, the initial audit may not find much, but it should find enough to prompt more calls for increased audits, and could result in the end of the Federal Reserve or even a U.S. Treasury takeover. Remember, the Federal Reserve isn't "federal", i.e. it is not a government agency, but is owned by private companies and families; many foreign.
* We expect political upheaval in the wake of the monstrous health (death) care legislation. Unfortunately, while there may be more Republicans elected as a result it doesn't matter since there's no difference between these two parties, and many recognize that the whole two party system is a charade. We could see the rise of a real 'third party', but unfortunately even that party would soon be compromised under the emergency powers act that gave the president near dictatorial control (check out the presidential directives and John Warner Defense Act).
* We expect the re-emergence of the "Victory Garden", or those installing gardens of all types in their yards. As prices for fresh produce escalate, tearing out roses and planting vegetables will be popular. You can get a head-start by visiting our website, www.FoodFromYourYard.com It's a great way to get fresh air, teach your kids how things grow, and could actually put food on your table. Check it out.
* We expect the potential emergence of a more robust and deadly version of the Swine Flu virus, as chronicled at the website www.LabVirus.com The initial wave of Swine Flu was weak, just as in 1918, with this first wave called a "herald wave". Then, as the virus recombines it comes back in subsequent waves, more deadly than ever. There's evidence that birds and pets could also be carriers, and some versions of this flu called D225G, as seen in the Ukraine, could be a hemmorrhagic form of the disease, resulting in death within 24 hours. A true outbreak could force the government to impose martial law. Naturally, any of these things, or a combination thereof could severely impact stocks and bonds, if not shut the markets down altogether.
* Finally, expect the unexpected. We see there could be some very 'surprising' revelations as the economy and investments plummet and social unrest increases. We have some ideas what these revelations might be, but we'll save them for later, since most subscribers wouldn't believe us if we told you! (how's that for a prediction!)
This isn't a pretty picture, but those that successfully navigate the troubles ahead will be those that at least consider the possibilities ahead, and prepare for them. This doesn't mean their won't be opportunities ahead (we mentioned a few above), but it will be easier to take advantage of those opportunities if you're able to preserve what you have during the coming hard-times. We hope we've opened your eyes to some of the possible outcomes for the year ahead, and we wish everyone the best of luck.
That's our opinion. Take care, and all the best for your health and investment portfolio.
J.E. Rapp,
Editor-in-Charge
(PS - We don't charge for this newsletter, but we do ask that you send it on to as many people as you can, and ask them to subscribe. It's the only way we can help people as we navigate what will likely be a historic plunge into economy chaos. Also, please consider subscribing to our Advanced MACD signals, for market timing that beats the "buy and hold" method, and the "regular" MACD seen in the trend signal changes at the top of this free newsletter; all for only $4.95 a month.)
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