A Deflationary Outcome
As the market moved down into the March 2009 low, I told my subscribers, prior to that low being made, that price was moving down into a higher degree low. I have since made my views public that it is my belief that the rally out of the 2009 low is a counter-trend advance within the context of a much longer-term secular bear market. Specifically, I maintain that the rally out of the March 2009 low is the rally that should ultimately separate Phase I from Phase II of the ongoing long-term secular bear market. As the 2009 low was being made, I also said that the longer the rally out of that low lasted, the more dangerous it would become. Point being, the longer the rally lasts, the more convincing it would become and the more people it would draw back into the market. I have also maintained all along that the post 2008 rally seen in oil, gasoline, other commodities, housing and most other asset classes are also in counter-trend rallies as well.
My views on this have not changed. Reason being, the research that told me this in the first place has not changed. Fact is, this rally has now gone on long enough that it has sucked the masses back in and I bet there isn't 1 in 1,000,000 who understands the concept that we are still operating within a long-term secular bear market. As a result, the rallies we have seen in not only equities, but virtually all other asset classes have again convinced the masses that price can go nowhere but up. This is exactly what I said it would before the 2009 rally even began. Just this past week I saw on CNBS that the experts were calling for Dow 17,000 before the end of the year. I also saw another "analyst" on CNBS saying that we are in a secular bull market. Locally, I'm, seeing a few more houses being built and the consensus is positive on that front. I'm also hearing talk about $5 and $6 gasoline as if it is common knowledge that it will happen. The other day I was at the gym and I walked by a TV on which there was a "buy gold and silver now" commercial. That same day I came home and literally within the course of 10 minutes I saw two more "buy gold and silver now,...... don't miss the boat" commercials. It appears that most everyone is bullishly optimistic on not only equities, but pretty much all asset classes. Psychologically, the rallies out of the 2008/2009 lows have worked their magic on the masses.
I have also said here in numerous articles that the rally out of the 2009 low was likely synonymous with the rally out of the 1966 Phase I low. I believe that this is not only true of equities, but that there is enormous risk this will prove to also be true with most other asset classes as well. I have again included a chart of the 1966 to 1974 secular bear market below.
Think about it. Everything went up together into the 2007 top, with the commodity tops occurring in 2008. Everything then moved down together into the late 2008/2009 bottoms. Since then, everything has moved up together. We hear all the reasons for higher prices in equities. The economy is better. The Fed is doing this or that. The jobs report is good. Gold is going up because the Fed is printing money. Crude oil is going up because of fears over Iran or because of supply and demand issues. Housing is going up because it can't go any lower. Etc. Etc. Etc..... But, fact is, it all went up together. It all went down together and it has all gone back up together. Furthermore, once the setup materializes and the Phase II decline begins, the deflationary forces of the ongoing secular bear market will again take it all down together. Oil supply and demand issues did not prevent it from falling in 2008 in conjunction with the Phase I decline, nor did the Fed's policies prevent gold, silver, housing or anything else from declining. Know what? This time is not apt to be any different and the key to this setup, from my perspective, are the DNA Markers that I have identified and which have appeared at every major top since the inception of the DJIA in 1896. Once in place, the deflationary furry will again be unleashed. If you would like to know more about these DNA Markers and their development, this is all covered in the research material at Cycles News & Views. For now, the cheerleading on TV remains prevalent with calls for Dow 17,000, misinformation about us being in a "secular bull market," "buy gold and silver now" commercials and the "elect me, I can fix it" political campaign garbage is the order of the day. Just remember, these guys did not see, nor did they warn you of the 2000 top in equities, of the housing top in 2005, of the equity top in 2007 or of the commodity top in 2008. I did and it's documented. I'm telling you, don't be fooled. It ain't over!
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