Thursday, October 15, 2009

Prediction: Stock market has peaked

October has been a dark month in the history of the stock market, and I have a feeling this year may be another example of that. Perhaps not another "black" day, but at least a dark and stormy day.

The current atmosphere in the stock market has a familiar pump and dump feeling to it. The Dow has roared above 10,000 inviting the desperate suckers on the sidelines to jump back in as suggested by Matt Taibbi in his blog.

What will trigger this rush to the exits is not at all clear. Basically just the return to reality should do it. Once the bonuses are handed out at JPMorgan and Goldman Sachs, then it will be time to have a horrible quarter to clear the decks in preparation for another record quarter to justify another round of obscene bonuses.

I think the equilibrium point is 1000 on the S&P. Currently the S&P is close to 1100, so that means about a 10% pullback. In some markets it may be much more worse than that. Just look at the emerging economies like Russia and Brazil represented by ETFs RSX and EWZ. They are up 100% year to date so they could easily fall 40% or more.

The way this will probably get written up by the idiots on the financial beat that look to justify every twist and turn of the markets gyrations, will be that this end-of-year cashing in on profits. So the timeline for a correction could be anytime between now and the end of December. But I wouldn't put any money into the stockmarket right now because I think it has just peaked.

What about Gold?

Gold has been much more stable than the markets. It could very well pull back from its highs, but I would expect it to stay above 1000 which would be less than a 6% pullback from current levels of about 1060. It might even go up further in response to the market volatility. I would not at all be surprised by gold ending the year at 1100. In the long term I think an investment in gold will be the safest, least volatile way to make money in the market.


princepersia said...

Have you heard of Reinhardt? He's really in tune with world history and corruption. I have seen very similar points made on your blog. Anyway, he's predicting the same you just predicted. However, he makes exact date predictions on when things will happen. His latest prediction is Oct 20, 2009, and that yesterday was most likely the top. I am not a spammer. Do your research and you'll see that he knows a lot about history, enterprises, corruption, governments etc. that's the link. I am very curious to how you feel about his claims. Please let me know.

Frank Hope said...

@ princepersia

I'm sorry I can't recommend that site because it requires a paid subscription. You'll notice that my site is free and I don't have any ads.

princepersia said...

Yeah I realize that. However, that doesn't make the information that he has provided in all those pages as "not useful". I think you would really enjoy reading the free pages he has provided. I don't and won't subscribe to it myself, because I feel that you are doing similar work to what he's doing. And that I can do similar work to what he's doing. I'ts called the "internet" lol. Nevertheless, it is nice to see that some people have a good understanding of how the world works. And watch out for Oct 20, 2009.

Frank Hope said...

@ princepersia

Fair enough. You may like this video from Joe Saluzzi.

Joe Saluzzi on Bloomberg

He warns that P/E's do not reflect the current state of the economy, and a sell off could be in the works.