As investors continue to believe the stock market correction is over, the next big stop LOWER for the Dow Jones Index is 19,000. When the Dow falls below 19,000, all doubt will be removed as the best investment strategy would be to sell the rallies, rather than buy the dip. However, most investors buy at the top and sell at the bottom. So, it looks like investor carnage will continue for the foreseeable future.
I am quite surprised that investors don’t see the writing on the wall as it pertains to the most overvalued stock market in human history. While the PE Ratio of the S&P 500 isn’t as severe as it was in 1999, the debt, leverage, and margin are orders of magnitude higher. For example, in 1999 the U.S. Govt. debt was only $5.6 trillion compared to the $21 trillion today. Also, with higher debt levels comes higher interest payments.
Unfortunately, the U.S. Government and the economy is in a nasty feedback loop heading towards complete destruction. You can’t continue to print money, increase debt and leverage without causing severe disruptions in the future.
Today, investors have become way too complacent as the broader markets trade near their highs. However, as the markets really start to fall, complacency will eventually turn into panic. According to my analysis, the next critical level for the Dow Jones Index is 19,000:
I picked the 50-month moving average (MMA), shown in the blue line as the first critical level. Once the Dow Jones Index falls below 19,000, the next critical level will be 13,000, or the 200 MMA (in red). These levels aren’t “possibilities,” but rather, “guarantees” to occur over the next few years. Why do I say a guarantee? Well, if we look at some of the insane stock price charts below, you would have to be a complete imbècil to arrive at a different conclusion.
First…. let’s start with one of the FANG stocks, and look at Facebook’s price chart as it has been receiving some negative press in the media presently:
Facebook is a relatively new company that has seen its share price increase from $20 in 2012 to a peak of $185. However, the knowledge that Facebook uses its clients’ information to push certain political agendas, etc, has driven its price down another 5% today. While Facebook makes a lot of money from its advertising business model, during a market meltdown, its share price will fall along with the rest.
Second… the next stock itching for a huge correction is Amazon. Currently, Amazon is trading at over $1,500 a share. That’s one hell of a share price when we consider that it was trading ten times less that amount at $150 in 2012:
Since the beginning of 2017, Amazon’s share price has surged from $850 to $1,500. However, the company’s net income is only 1% of its total revenues, and with a 257 PE Ratio, Amazon is one truly expensive stock. Watch out below if Amazon takes out its $1,000 level. If we look at Amazon’s 50 MA of $686 and 200 MA of $250, the collapse of its share price will most certainly be quite similar to the popping of the Cryptocurrency bubble market.
For example, Ripple is one of my favorite cryptocurrencies to use as a perfect example of what’s wrong with the crypto market. Ripple is one of the biggest bubbles in recorded history. From trading at a fraction of a penny to $3.00, Ripple provided a very very brief illusion of massive digital wealth for its investors:
Now, if you were able to buy at the bottom and sell near the top, you have my praise. However, most investors do not buy at the bottom and sell at the top. So, I would imagine only a fraction of Ripple investors made handsome profits. Those Ripple investors listening to the supposed Crypto Aficionados who are advising HODLing & BUYing the Dip will probably regret it as Ripple heads back to a penny… or below.
I would like to remind my followers that I stated that Bitcoin and the cryptos were in a MASSIVE BUBBLE last year. Currently, Bitcoin is 54% off its high while Ethereum and Ripple are down 56% and 75% respectively from their peaks. Unfortunately, the crypto market selloff isn’t over yet as nothing goes down in a straight line. I can assure you, no bubble in history surpassed its peak. Thus, I highly doubt Ripple will ever see $3.00 again.
Okay… getting back to real companies and their inflated stocks. The last example of a stock that has one hell of a long way to fall is Netflix. While a lot of people use Netflix, the company isn’t making any money. So, I don’t believe its present $310 share price will last long:
If Netflix’s share price chart over the past few months resembles the Antenna on top of the Empire State Building in New York, then your brain is functioning correctly. In just a few months, Netflix has shot up from $190 to over $300. Now, if you can’t see any trouble here and believe Netflix is a good place to park your hard-earned money, I would suggest the best action might be just to flush your Federal Reserve Notes down the toilet now and forgo any future frustrations.
However, if you can see just how highly overvalued the stocks above are, then it might be prudent to invest in something that is trading closer to its lows. The silver price is currently trading at its 200 MA and below its 50 MMA:
I believe investors need to start thinking about PROTECTING WEALTH rather than BUILDING WEALTH. The next few years are going to be tumultuous, so the best strategy is to keep what you have than losing a lot in the markets. But, of course, 99% of investors will not protect their wealth during the coming downturn. And to make matters worse, a falling stock market is bad for the oil price. So, as the oil price falls, it will crush the already weakened U.S. Shale Oil Industry.
Lastly, I will be putting out a new video over the next few days about the markets on my youtube channel.
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The final,revised and official silver production from the “Secretaria de Economia de Mexico”
(Mexican Ministry of Economy) for 2016.
http://www.siam.economia.gob.mx/es/siam/ep_2016
4,109,608 kg or 131 million ounces.
The Ministry data is monitor by the INAI (instituto de transparencia)
According to the report, silver production declined by 17% from 2015-2016. That’s a big decline. That was also before Mexican gasoline prices skyrocketed. I’m going to assume production is going much lower and may accelerate to the downside. By the way gasoline prices continue to go higher. I assume the gasoline black market will continue to grow and PEMEX will continue to decline. All bad news for miners in Mexico.
https://www.globalpetrolprices.com/Mexico/gasoline_prices/
169 large scale mining projects halted due to ridiculous
low metal prices and very high operational costs.
http://www.jornada.unam.mx/2018/03/17/economia/018n1eco
Nice catch. Brutal reality for Mexican PM producers. At some point there won’t be any PMs available to the marketplace. This is what happens when market price discovery is distorted for too long.
“I am quite surprised that investors don’t see the writing on the wall as it pertains to the most overvalued stock market in human history. While the PE Ratio…….”
We will see in the time framework of coming months to a couple years from now if the Fed et al can continue to levitate the markets. Up to this point/level, in the most manipulated market in history,the fundamentals you mention haven’t matched the manipulation.
While I do agree silver is a going to be a winner (hopefully sometime in my lifetime), Bash the cryptos at your own risk. You have governments coming around to the point where they are accepting Bitcoin for tax payments. Arizona for one right here at home…
Can’t wait to see it all crash so bitcoin can take over. If our current system were not so rigged there would be no use for Bitcoin. BTW there is no central control of Bitcoin like all the other shitcoins, bitcoin is global, it’s not even advertising itself, it just is and nobody can stop it, not even the G20, unless they take out the internet and most satellites which would be the end of life as we know it. Until then long live Bitcoin.
how do you value bitcoin?
You don’t… it’s magic and it will solve all our problems. 🙂
Smart vs Dumb
Insider sales to buys sits at 45:1 this trend started in mid December 2016.
The dumb money is suffering from price insensitivity, in it’s desperate search for yield.
Meanwhile, the price of silver has done nothing but chop sideways between $16 and $18 since November 2016. This has stored a great amount of energy, as in a coiled spring. When the reset occurs, the silver price will indeed soar. That’s if any can be found for sale!
Historically all markets pull back 50% after big run ups . That is why I see the DOW retreating to 13,000 before President Trump completes his first term . Yes , now is the time to invest to protect your money and keep what you have . I agree with you SRSRocco . Your charts point the path of a blood bath in the making on wall street .
That is charting 101 in my view Carl. If it drops (and closes) below 50% the high, generally, it will eventually drop to 25% even 12.5%. The 1929 crash is a great text book example of this.
This is when (IMO) the SWHTF and we will see a massive paradigm shift which will be either organised or chaotic. TPTB it would appear would appear to prefer the latter.
Russia and China among others can see this coming a mile and are doing everything they can to be independent of the wests financial system as well as sure up their resource supplies.
Bullies don’t like losing!
We are all screwed! Can’t wait to see all that crap going down the piper!
One of the first expenses corporations cut in a recession is marketing. This will hit the social media giants big time. Also many investors when the market is in a free fall is to pursue the strategy of “picking the flowers and growing the weeds.” In other words they sell their most profitable investments and hope their losing investments recover in the future.
Looking for The Crypto-Bubble to expand until at least The Seneca Cliff. Still at less than 3% global adoption. Energy is still insanely cheap. It would be crazy to ignore these 500% impulses and 400% corrections…. Ripple (XRP) as an example. Surfs up.
Until then:
C60, H2 Water, Rife
It seems when news comes to light about Tech, it’s long after the event. We found out about the Equifax hack long after it happened. Same with Facebook now. These companies collect every bit of info about us they can get, not to say foreign governments including China, Russia, NOKO. All these bastards have no conscience or morals. If it can be done, do it. All the tech companies are negotiating off some of their secrets for opportunities in China.
Point being our social security #, bank accounts #, investment accounts#, etc or in the hands of criminals now, waiting for opportunities to move. Why wouldn’t they be, after we have seen nearly every system, gov, banks, utility, business, HACKED. A lot of places don’t even know they have been hacked. Keep your wealth (PM) somewhere safe and shut your face.
I disagree, I think if we have another stock market crash, they’ll just shut down the markets. It’s not hard folks, we already have manipulated markets as it is.
They will NOT ALLOW a general deflation across the economy. So the route we will take instead is HYPERINFLATION even as gold and silver are managed down, due to an INFINITELY EXPANDABLE PAPER SUPPLY.
Caps are so that you people get it.
dolph,
Your degree of intelligence about the markets is quite lacking, to say the least. So, you think SHUTTING DOWN THE MARKETS won’t cause panic?? LOL… that’s a good one.
Dolph, I find it amazing that you continue to come in here and publish some of the worst RUBBISH, but you think you are doing GOD’s work as the bankers also claim. I would kindly like to remind you that HYPERINFLATIONARY EVENTS don’t last long… maybe a few years. However, even during a HYPERINFLATIONARY EVENT, it will push the values of GOLD & SILVER up much higher. If you think investors won’t rush into gold and silver during a hyperinflation… then you should not come back in here when it occurs or you will be the laughing stock.
steve
A few years? How many years has it been for Zimbabwe?
Steve,
I like how you go all out to insult people’s intelligence.
Dan,
I believe I may be insulting people’s LACK OF INTELLIGENCE. While I try to be empathic to the human cause, I see one hell of a lot of stupidity in the world today.
steve
We have to wait to the Fed policies in order to know the level of pain the stock market is going to suffer this year. If mr. Powell chooses to raise interest rates significatively then the fracking bubble may burst and there will be mayhem in Wall Street. As mr. St. Angelo has explained to us the fracking companies are in dire straits and any interest rate increase could be lethal to them.
In my view central bankers are not understanding the situation in which a diminishing EROI is bringing us so for the sake of tradition and for the sake of rentiers they may be inclined to higher interest rates. If it’s so then they may accelerate the fracking’s decline.
Are we going to see soon a general bail out of the oil industry ?
Once again apples are pitted against oranges. They are crypto currency, not crypto stocks.
I find it strange that folks who dislike govt issued and controlled fiat do not see the potiential for an uncontrollable currency.
I say uncontrollable, but some are such as ripple which is controlled by the bankers. Those who really know cryptos have nothing to do with ripple.
I certainly agree pms are and will be in the future the very best store of wealth, but again I ask how does one expect to conduct commerce in the future? Are we destined to carry around 10 to 20 ounces of silver in our pockets?
Finally we have a medium for the exchange of wealth (a currency) which is not controlled by a central govt!
Granted there are many different cryptos with different attributes attached, but hey at one time there were many different autos offered until public preferences through open markets found the best and weeded out the rest.
IMO now is the time when folks should be studying this new form of currency seeking out the best use and best crypto coin rather than behaving as sheeple fearing and rejecting change while finding comfort continuing in the use of govt issued and controlled fiat.
I’ve heard the arguments, cryptos require the web, the grid, well so does the dollar. Almost everyone at Wally World uses plastic and seem very happy to pay additional 3% for the privilege. Crypto transactions would be faster and cheaper.
One thing plastic does offer which cryptos do not is credit. Perhaps crypto bashers are living on credit?
I do agree the stock mkt is toppy and positioned for a crash, but one must ask where is all that wealth going when a crash comes?
Do you mean to infer that the DOW will fall to 13,000 i.e. dropping 50%. What about companies
that are making profits? Do they quit making profits? My PE ratios average 12 to 1. If the “P”
drops in half, I’ll be making 16.5% on the ratio or are you saying that the stocks PE drops tp
6 to 1 and the companies quit making a profit? If tat’s the case I best start packing my “stuff” to move out of the USA.
Joe
Pe ratios can drop to 6 in a bear market. We are currently at a very high pe ratio. It can revert back to mean and overshoot.
Also if the market drops the earnings of companies goes way do an, too. Some of your favorites may report losses during a recession.
Finally, when stock charts have hyperbolic patterns it is usually a top. The fang stocks are outstanding examples. I would not buy them!!
Dear Steve,
I like that you don’t have extraordinary registrations/sign ups for comments!
I like your quote:
“I believe I may be insulting people’s LACK OF INTELLIGENCE. While I try to be empathic to the human cause, I see one hell of a lot of stupidity in the world today.”
On all places, through the life!
Regards, Alex
Selle recos here, be prepared for new all time highs for US tech titans. BTC continues to bounce above 9000, for now it looks like all other market corrections, nothing more.
RD,
Pardon my french… but you are seriously incompetent when it comes to market fundamentals…LOL.
steve
I agree with your fundamentals analysis (that’s why I am here) but it looks “markets” do not agree with us !
All the best though !
Steve
RD could be more correct than we wish to believe.
These are strange times, historical analysis out the window.
The only recourse left to the Fed is to print dollars to address the massive debt.
The present Dow is a result of dollar creation, Dow will only correct if dollar supply dries up.
What does one suppose will happen to Dow in a hyperinflation environment?
no matter how well they continue to manipulate the markets it is inevitable that things will eventually fall apart. too many people are aware of the frauds and are no longer playing their game, or at least not in the same way as before. the exponential learning curve that humanity is now on cannot be stopped, only slowed, but all that does is buy time. they have been doing that for a long time now and eventually it will all snap. russia and china among others will ensure that does happen anyway. these things take years to play out, just be patient and keep stacking the gold and silver while on sale.
Only dollars will buy. And sell. So you end up with worthless dollars. Like Zimbabwe.
https://www.goldonomic.com/ZimbabweIndustrialIndex2007.GIF
houtskool
I agree dollar is headed to 0 from its present value of $0.04. So what would you suggest we use after? Another govt issued fiat?
As the dollar goes down we could see It takes $125,000 to buy the Dow basket, might also take $120,000 to buy a plain Jane Chevy.
Olegig, debt and fiat currencies are useful in a growth environment. The growth we have now is artificial, based on low interest rates, qe and rolling over debt. In a degrowth environment there’s no need for fiat currencies, nor debt, imho.
What do you think will happen when the masses have to acknowledge that growth is over? It all blows up. Imho we need to establish local economies with hard money.
They are working on de-globalization as we speak, with tariffs, trade wars and currency wars. The world needs to shift to local economies and .gov knows that. The road will be messy and bumpy, and a lot of people will drop from the Train to Less.
Degrowth and implosion of money markets destroys the fiat currency system. It simply doesn’t do the job anymore. I see monetary permaculture. Petrocoin, oil for yuan for gold, crypto’s, silver backed Peso, Natgas-Rubles etc.
Gold will play a major role in all this. No one will know its price, but everyone wants it.
Houtskool, I pretty much agree with what you said. I don’t know the immediate future, only the distant, but I don’t feel the immediate will be as comfortable as the near past.
I do feel the problem of the whole world is an ever decreasing amount of “easily” harvested natural resources.
Yes, agreed. Diminishing returns in all its ugly forms.
Fantastic, Steve!
I’m reading a lot your articles (with a bit help from google translate…) and I’ve buy silver and gold since year 2015.
your articles helped me to understand a little about why I have to buy PM … and for this I thank you very much.
Keep it up, and God bless you.
Greetings from Italy.
we may never see below 19000 in our lifetimes
“we may never see below 19000 in our lifetimes”
All those included in “we” are going to die soon?
Market to crash starting 3-22-18
The cognitive dissonance is strong with some these “never down, always up” prognosticators. “May never see below 19,000”? Have you guys been following the roller coaster that is the stock market for the past 18 years? We’ve had HUGE corrections that have been quite ubiquitous and are par for the course. This isn’t rocket science and neither is the greater fool theory.
It is true there is more at stake, and all-out manipulation by the Fed & others is the rule, not to let the markets drop. https://www.sovereignman.com/trends/congress-quietly-formed-a-committee-to-bail-out-200-pension-funds-23169/
That doesn’t mean they can hold it up for year longer.
If the Fed keeps raising interest rates they will collapse the equities market. The only slightly logical reason to steadily raise rates at this time is so they can lower them during the next recession…a recession they will hasten by raising rates.
Many are smarter & more knowledgeable than me on the economy…but the Fed isn’t smart enough to know what was stated above. A few in the Fed do, but the Fed’s decisions won’t reflect wisdom and they won’t accept responsibility for the effects of their meddling.
No matter, their members continue to strip the wealth from the public at large. Their policies directly result in the concentration of wealth into the top 0.1%
Jörgen Randers, a famous forecaster of the Club of Rome, observes that in an economy unable to grow we should see perpetual 0% interest rates. If this isn’t so it’s because class interests are important and we know how the GOP works mainly for wealthy oligarchs. If rentiers want higher interest rates then the Fed may obey and speed up the next crisis. Of course then they would be forced to reduce again interest rates.
In a world without growth deflation may wipe out large amounts of fiat money when evidence proves many debts are unpayable.
Well, Jörgen has it backwards but that’s OK… he’s famous, so he can afford that.
The correct statement is: “At perpetual 0% interest rates, economies will not be able to grow.”
ZIRP/NIRP is here to sustain governments and businesses that are not viable. I assume that central bankers don’t understand this because they are blinded by what they have learned in their economy classes. These people are completely divorced from the real economy, never worked a day in their lives, not to mention managing an existing productive and profitable business.
There can’t be any capital investment which is needed to grow an economy’s productivity BECAUSE capital needs competitive interest rates. Once there is no interest, capital is not interested anymore (pun intended) in moving to productive businesses. Instead it moves to fake businesses such as the ones Steve listed in this very article. Businesses such as Netflix that have never made a single profitable dollar, yet have enormous valuations. That in turn creates a booming stock market which politicians like because they think that’s proof of their competency. No, it’s not — a booming stock market is just a setup for an inevitable stock market crash. The whole thing doesn’t help the economy, neither does it create wealth. It’s simply a casino where the same capital is being reallocated. Nothing of sustainable productive value has been created. It’s a waste of time and a waste of irrecoverable finite resources.
It would be nice if people understood this.
So, please, stop listening to idiots like Jörgen and have an original thought instead. It’s not easy, it takes time. You actually need to understand what’s going on to be able to have intelligent thoughts but that’s what it takes.
Anyone who thinks the markets will stay up in the face of this is completely delusional:
http://investmentresearchdynamics.com/the-slow-death-of-the-u-s-economy/
Agree – IRD is a great site.
Some food for thought, for those perma bulls.
There have been 10 market crashes since 1929.
The S&P500 large cap average crash loss is 43.4%
I use the S&P500 large cap because of its much broader base of companies.
The DOW 30 is much too narrow a market slice, especially now since most of its value is restrained by just five big stocks – the so-called FANGG group.
Still more widely based is the Russell 2000 or when it comes to tech, the NASDAQ
One must ask themselves a question today:
With all the current information and data available, what are the chances of a full blown recovery, or recession going forward?
Make Goldman Sachs Deep State Military Industrial Complex Great Again!!!
Where do I sign up for my share of the debt slavery?
World war is inevitable and soon. It’s beginning will be America’s doing and if conventional at first the murikans will lose badly and then, having no soul, take it nuclear.
The only thing that will prevent this certainty is the intervention of some kind of outside dimension. “Aliens” if you will. Highly unlikely and I know, pathetic, but there it is.