Peak Wealth

By: Jan Allen | Thu, Sep 7, 2006
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One can visually see the market peaking using 5 Day Financial Reports of the EFTs. The 5 Day Financial Report for the SPDRs (SPY), which reflects the S&P 500, is shown having closed down at 130.509

Of particular importance is the 5 Day Financial Report for iShares Lehman 20+ Year Treas Bond (TLT), an investment which reflects long-term government bond performance. TLT's drop from 88.08 on 8-31-06 to 87.05 on 9-6-2006 signals a financial market top and de facto interest rate hike. Stock value cannot increase in a bond-deflationary, interest-rate inflationary environment.

The charts indicate Peak Wealth may have occurred yesterday 9-5-2006; if not, Peak Wealth will occur immediately prior to or immediately after the September 2006 911 Anniversary.

I. Numerous Commentators Confirm Peak Wealth

A. Ike Iossif in Financial Sense Market WrapUp for September 5th, 2006 speaks of this saying: "The indices in the charts for the week of of 9-5-06 did close above resistance, suggesting that the bulls will make a run towards the May/June highs. However, the divergences in almost all the indicators we follow also suggest that the indices won't be able to exceed those highs. To get a better picture, take a look at similarities in the charts below. The patterns of price, of the BSE, and of the T.O. are almost identical to the patterns we observed going into the May highs."

B. Bill McLaren in Stock Market: CNBC Report for September 05, 2006 writes of an FTSE high saying: "We have been watching this pattern of trend develop for the past three months. Remember, three thrust up below a high will put the up trend at risk of completing. Last week I didn't believe the third thrust up was complete since a lower high was unlikely until the third thrust shows a new high. If after the third thrust to a marginal new high a lower high does appear, as occurred in May, then the odds favor a sharp move down. This is a weak trend up and can be defined that way since each time in has broken to a new high it has immediately and significantly run back below that break away high. Yet, each of those moves down has become smaller and smaller indicating support is coming at increasingly higher levels. When this picture occurs it is usually resolved with a fast move and can be in either direction. The smaller and smaller corrections can indicate the buyers may need to be exhausted with a big spike up to complete the trend. Or once a marginal new high is in place to complete the three thrusts, the FTSE Index could show a lower high and fast move down as occurred last May. As you know my forecast has called for the index to go up into September 12th. So next Monday could be a critical time for this trend if there is an exhaustion move up. Remember, even though this trend is weak it could still exhaust up into next Monday due to the consecutively smaller counter trends."

And Mr. McLaren continues with remarks on the S&P 500 Index: "This is another index I thought had a minimum move of 90 calendar days after the June low...This usually indicates an exhaustion high is necessary to complete the movement. Resistance levels are 1313, then the old high at 1327 then a 1/8 extension to 1340 to 1346. Time remains the key factor for an end to this trend. The first date is the 12th then the 29th then October 16th. [U]But we need to seriously consider the time window around the 12th for a top."[/U].

C. Adam Oliensis in Are We There Yet? dated September 05, 2006 relates: "We're clearly getting very close to the end of what is, more often than not, the most bearish part of this cycle."

"September is notoriously the worst month of the year for the SPX. Since 1962 the monthly close of the SPX has been down in September 57% of the time, with only the month of July joining September with its head below sea level. Moreover, during Year 4 of the 4-Yr Cycle (that's where we are now) the SPX has closed down in September 70% of the time, with an average monthly change of -3%."

"The average gain of the "up" Septembers in Year 4 of the cycle is +3.5%. The average loss of the "down" Septembers is -5.8%. So, both in terms of frequency and average magnitude of W's vs. L's, we have entered into a period that is extremely dangerous for the bulls."

"So, what are we looking at? A rally up to test the SPX May high on extremely contracted volume and volatility, both of which conditions leave the index extremely vulnerable to a near-term retrenchment. And we're seeing this as we head into the teeth of the weakest month of the year during the worst year of the 4-Yr Cycle."

"Could the market go up? Sure it could. There are very few if any certainties in the stock market (except that it will go up and that it will go down). But trading profitably over the long term is mainly about stacking the odds in one's favor. And, as stacked odds go, they are not currently in favor of the near-term bullish case beyond Wednesday when a (very slight) seasonally bullish "zephyr" expires."

D. The usually bullish Charles E. Kirk in his September 05, 2006 article Current Status: Severely Overbought writes: "It is true. Strong bull markets tend to stay overbought while weak bearish markets tend to stay oversold. However, when you look at the stocks trading above their 40 day moving averages (and other time frames), one must really wonder whether we are really on the cusp of a great buying opportunity. Recent history tells us that buying into the severely overbought conditions has not been fruitful."

II. The Physical Commodity Gold Is The Best Vehicle For Preserving And Maintaining One's Wealth

A. The Financial Flight To The Security Of Gold Has Begun

The chart of gold shows a price breakout on 8-31 and 9-1-2006.

And Thomas DeChastelain's Bullion Charts are bullish for gold and the HUI gold mining stocks.

I do not recommend gold stocks, the reasons being presented in my article The HUI Could Reach 405, But

B. Wise Choices For Investing In Gold

If one has less than $2,000, one can invest in the ETF (GLD) but this carries risk as it is not a real asset.

If one has more than $2,000, one can buy, store and sell gold at Bullionvault.com. The advantage of this service is that one personally owns the commodity where it is guarded by Brinks - a global leader in security.

 


 

Jan Allen

Author: Jan Allen

Jan Allen
Prospering Bear

Jan Allen is an analyst and journalist with Prospering Bear, a website providing thoughtful information on how to prosper in the coming Bear financial market.
http://my.opera.com/prosperingbear/blog/.

Copyright © 2006-2007 Jan Allen

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