The Dow Faces Hurricane Winds

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  1. As one deadline after another passes, the US government is beginning to shut down.
  2. This is a truly horrific situation, and I’m stunned by the incredible complacency being exhibited by stock market investors.
  3. For decades, I’ve labelled the September – October time frame as “crash season”.
  4. In my view, it’s critical that all mainstream investors get out of the market during this period, because it’s when the most devastating market meltdowns tend to occur.
  5. It can take generations for investors to recover the losses they experience during crash season. The risk of 25% – 90% losses far outweighs the potential reward of 2% – 5% gains.
  6. Today is the first day of October. The crash of 1929 occurred during this month. Can a similar event happen again? Of course it can, and the current atmosphere of complacency increases the risk of it occurring.
  7. Please click here now . You are looking at the weekly chart of the Dow Jones Industrial Average. The technical situation is deterioratingdramatically.
  8. There is a huge RSI non-confirmation in play. The Dow has made new highs while this key oscillator is exhibiting a horrific meltdown.
  9. There is also a nasty bearish wedge beginning to form, and there’s not much support above the 13,750 area.
  10. Please click here now . As horrifying as the weekly Dow chart is, this monthly chart looks even worse. Note the volume at the bottom of the chart. Despite tomes of bullish news, volume continues to sag. That’s a huge red flag for stock market investors.
  11. As somebody who bought key Dow stocks into the lows of 2009 without leverage, I find myself now holding almost the exact opposite view that I held then. The current complacency exhibited by many general equity investors could be viewed as an exhibition of financial madness.
  12. There is a gargantuan bearish wedge formation on this Dow chart, and a huge RSI sell signal is flashing. I’ve highlighted that sell signal with a red circle at the top of the chart.
  13. It’s possible that the Dow is able to move higher, despite facing a growing hurricane of bearish seasonal, technical, and fundamental factors involving the US government. Regardless, the risk of being in the market probably vastly outweighs the potential reward. I wouldn’t touch the general stock market now with a ten foot pole.
  14. There is some very good fundamental news for gold investors. Currently, nine Chinese banks control all gold flowing into and out of China. When gold was sold heavily by Western investors in April, the Chinese banks imposed restrictions on the amount of financing available to Chinese gold dealers. That meant that Chinese buyers couldn’t absorb the gold offered by sellers. Only the banks themselves could buy in size, and they appear to have allowed gold to experience a “free fall” event.
  15. Yesterday, Reuters News announced that the Chinese central bank would allow more Chinese entities to import gold. In my opinion, this announcement is a fundamentally important event, because it should allow Chinese gold investors to buy more of the gold that is offered for sale during market panics.

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