Weekend Newsletter For Sunday Dec 9th

To say that the market has been volatile is an understatement!  Following the best week in 8 year as the market rebounded from the Thanksgiving low last week was a bloodbath. The market gapped up last Monday and traded down strongly for the rest of the week (except for Wed as the market was closed).  In my newsletter last weekend I stated that a gap up on Monday would be a great sell opportunity and boy did that call play out.  For the week the SPX /Dow lost -4.55%, while the Nasdaq/NDX lost -4.8%, and the Russell 2000 small cap index lost -5.6%. Those are big numbers folks and we are seeing range downs of 75 - 90 points on the SPX and 600 - 800 points on the down! On a positive note precious metals had a decent week and some of the stocks have been doing well, especially the long ideas we put out for AGI, WPM, ABX, GOLD etc.

One of my favorite quotes:   It's said that "every bubble is in search of a pin, and history shows that they always manage to find one"

Certainly bubbles have not popped yet (or still have a lot of air left in them), however we all know that the bull market went on far longer and higher than it normally would have had the Fed not blown it up.  The Central banks have the exceedingly difficult task of trying to let the air out without causing a fast deflate i.e. pop. But as the quote states above, that's never been successful in dealing with bubbles as they always find that 'pin'. 

Anyway so far this month Dec is down -4.6%.  As I discussed in my weekend newsletter from last week, while Nov and Dec are are historically positive up months for the market, this is not the case however for bear markets. During bear markets usually both Nov and Dec or one of the months closes in the red. Since Nov closed slightly positive last month if we are in a bear market (which has been our stand now since Oct), odds probably favor December closing the month in the red.  Yes there will probably be a bounce near Christmas but I would not be surprised to see Dec end the month on a down note.

Nothing has changed on our Big Picture view, as you know we think that market put in a significant top in Sept and is in a bear market. Also this significant volatility that we are seeing is typical of bear market action. My SPX 401K Paint Dry system is very very close to giving an exit signal. However I also have long term paint dry systems on other markets, 8 in total counting the SPX. All of them except for the SPX are in cash: The QQQ Technology long term system is in cash, the RUT Small Caps long term system is in cash, the ADR International system is in cash, the Emerging markets is in cash, and both of my bond systems are also in cash. That should tell you something, anyway I"ll show you that below, and I may also add those systems to the website as well along with the SPX 401K system. 

In the short-termthe market appears to be in a complex ABC type corrective pattern taking the form of a double zigzag; and is now trending down in a wave c that should take the major indexes below their October lows. On a positive note, once this wave completes we should see a decent counter trend rally.  The Russell 2000 has already already taken out its October lows. For the year the Down is down -1.3%, SPX down -1.5%, Nasdaq is up 1%, NDX up 3.4%, and the Russell 2000 is down -5.7%.  However many of the major market sectors are down big numbers:  OIH Oil Services is down -35%, and XLE Energy is down -9.5%.  Banks and Financials are down -12.6% and -8.9% respectively, and Transports are down -6.25%, and Industrials are down -8.9%.  Utilities are up about 10% for the year and has a been a safe haven.

There's a lot of potential news time bombs in the market, from Tariff and China news, to Trump and the Russian Investigation which may be about to be released finally.  On a side note, during the Nixon Watergate scandal, the market was down 35% by the end! Realize I'm not trying to compare Russian Gate to Watergate, I'm simply making a point that it can have a negative impact. The market is also very concerned with the Bond market, and yield curve which is not very far from inverting. 

Also regarding China I'm hearing rumblings that is in a pretty precarious debt situation that some insiders fear could pop sometime next year fist quarter, especially if the US eventually goes through with the 10% tariffs. The point is that's another thing that could send the market down much lower next year as well.