Americans: The Most Parochial People In The World

Another month in 2017 has come and gone.  And, I have to say that June was for the most part pretty quiet compared to what the stock market saw earlier in the year.  In June we saw seven new BEV Zeros (new all-time highs) in the Bear’s Eye View chart below.  But for all that the Dow Jones ended June only 341 points higher from where it found itself at the end of May.  When looking at a market over 21,000, 341 points isn’t really much of a gain after seven new all-time highs.

Looking at the area of the BEV chart for the November election, now seven months ago, it’s very obvious that something changed. The BEV plot moved from -4.01% on November 4th and then slammed into the BEV Zero line only three trading sessions later. That’s one heck of a move, nothing unprecedented, but an advance not seen very often. Since November 4th, the Dow Jones’ BEV plot did descend down to -2.67 on March 27th, but for the most part has remained above its -2.50% line.

This is a situation that isn’t going to last for the rest of the year. If it does, I’ll be surprised. It takes buying to make a market go up, but gravity alone can bring it back down. The last time the Dow Jones found itself below its -5.0% line was on June 27th of last year (-6.40%).  

Look at the Dow’s BEV Chart above. In the normal ebb and flow of the market, twelve months is a long time for the Dow Jones not to have seen a correction of greater than 5% from an all-time high.That makes the past year in the market an anomaly, and by definition anomalies don’t last forever.  But I suspect this anomaly will last for as long as the “policy makers” have the will and means to continue it.

Let’s take a look at the BEV Plot series going back to day one of the current bull market, back to 09 March 2009 in the chart below.  Since March 2009, there have been four double-digit corrections that took the Dow Jones down below its BEV -10% line in 2010, 2011, and again in 2015 and early 2016. It can be argued though that the 2015-16 corrections were a single correction, as there were no BEV Zeros separating them.

But what is undeniable is that since last summer, the Dow Jones has found its path of least resistance in going up, not down.

Like I said before, this is something that isn’t going to last forever. The day will come when Mr. Bear will veto the “policy makers”, and the Dow Jones will once again break below its BEV -10% line (19,376).  The question then will be what’s next?  A return to a market where new all-time highs in the Dow Jones are common occurrences?  Or a market where the Dow Jones experiences ever deeper declines, down below the Dow Jones BEV -20% line?

Short term I’m a bull.  For as long as the “policy makers” can maintain the valuation in the Dow Jones where it doesn’t breach below its BEV -5% line above, or maybe even its BEV -7.5% line, I expect we’ll continue seeing this aging  advance in the Dow Jones capable of making new all-time highs.  But for every bull market, there is its Terminal Zero (TZ) in a BEV chart – its last all-time high. That’s been true since 1885 in this BEV chart for the Dow Jones below.

Longer term I’m a grizzly bear on this market because of the horror I see in the following chart. Is it only me, or do you also see the historic market bubble in the chart below?  Look at the past year – straight up.

I don’t want to look at this monetary monstrosity the FOMC has inflated into the stock market.  In the chart’s insert I have the Roaring 1920s and the depressing 1930s plotted.  Do you really believe Mr. Bear isn’t going to deflate our bubble too?  If we see only a 70% bear market we’ll be lucky, but I’m expecting a repeat of the Great Depression Crash when Mr. Bear pops this bubble.  When he does, he won’t ask Janet Yellen for permission to do it.

If you don’t understand why I’m always recommending my readers purchase, and take home some gold and silver bullion, and have some exposure to the mining issues, it’s because when this bubble begins to deflate in earnest, chaos will be the order of the day.  That’s when you’ll be glad you took my advice.

Back to the Dow’s BEV charts.

As I read the BEV charts above, the day the Dow Jones breaks below its BEV -10% line, if you’re still in this market, you had better get the hell out of Dodge City.  Wild Bill Hickok, and his partner Mr. Bear, are coming to gun down all the cowboys whooping it up on Wall Street.