It Might Have Started Early

I thought I was probably the only one thinking about three peaks and a domed house (pattern above).  I did a Google search on it, and it turns out there are lots of people talking about it.  And they all seem to know more about it than I do.  The one thing I was keying on was that the pattern says it is 7 months and 10 days from point 14 to the final high at point 23, which I was saying would take us to about July 9.  Turns out, from reading some of what others are saying, that sometimes you have to count the 7 months and 10 days from point 10 rather than point 14, which would make the final high sometime in May.  It sure seems like that could be what's happening this month.  So I'm just going to say that I'm not a 3PDH expert and that you might want to Google three peaks and a domed house and read what others are saying about it.

However, I do consider myself an expert of sorts on the positive/negative numbers that I've been watching for over a decade now.  To quickly summarize:

I watch the positive versus negative numbers on the Nasdaq 100 to get what I think is a great long-term view of what's going on.  When I started watching these numbers, it was pretty regular that when the numbers got over 2 times the money on the positive side versus the negative side, we reached a high of some sort, then went down until the money was pretty much even positive versus negative or even maybe a little negative.  The highest ratio I had seen at the time was a 2.69 seen right at the all-time high back in 2007.  Then we had our big scary drop, with the largest banks failing, etc.  Then we climbed back up over the next few years, and this time that positive versus negative number climbed above 3 a couple years back, which I thought was amazing at the time, and kept going up, up to a high of over 7 last spring, when we were completing the third peak of the three peaks pattern.  Then we had the big drop into the summer.  Then we climbed back up again after an up-and-down start, and the positive versus negative number kept going up and up and up, past 7, past 8, up over 9.  We started going sideways earlier this year after the big climb, had a bit of a drop, came back up from that, and at that time we had the highest positive versus negative number ever seen by me of 11.05 times the money on the positive side versus money on the negative side.  That number came on May 2, just a couple weeks ago.  And we've been going down ever since.

So I'm worried the big drop has begun.  And please remember the premise of my blog, that history is going to get it wrong.  History will say it's because of all the debt in our country and others.  My blog says it's because of everyone piling onto the positive side, trying to make money where they can as all other ways of making money are drying up.

Again, I'm not an expert on 3PDH.  But even if we have started the big drop, I would still think there will be a rally from a low at what would be point 26 up to point 27 before all hell breaks loose, as Jerry Favors used to say.  And I'll also mention that I remember some examples of the 3PDH pattern in Jerry's newsletter that I used to get, and at least a couple of those examples had the move up from point 26 to point 27 actually going higher than point 23.  So it's possible that that rally will be a very big one.  Don't let it suck you in.

As usual, I'll say as I've said in the past, I hope I'm totally wrong about all this.  Because if the degree of the fall is directly related to how high the positive versus negative number got, which I think it is, the greatest fall of all time is coming right up and might have already begun.

Rob

Stunning Numbers, April 3, 2012

I will once again say that we are at or within a few days of some sort of important top. We are probably at point 15, although the numbers today do make me wonder if this is something far more important.

Again, to summarize, I've watched these positive/negative numbers for over a decade now. The highest positive divided by negative number at the time I had ever seen was something like 2.6 that occurred right at the all-time high back in 2007, which was followed, as you know, by a tremendous drop. After that drop, those numbers started coming back up again, going past 2.6, past 3.0, past 4.0, past 5.0, past 6.0, all the way up to 7.25 times the positive money versus the negative money that we saw back in early May of 2011. Then the markets fell some, and so did the positive/negative numbers. Now they have climbed back and then some. We had an all-time high of 8.18 times the positive money versus the negative money on March 14, a few weeks ago, then 8.57 on March 21, 8.68 on March 27, 9.18 on March 29 (are you kidding me??), 9.26 yesterday, April 2. And now, today, we reached a new all-time record of 9.46. Wow. I always figured, if a giant market crash was going to happen, we would first reach numbers something like this.

Even more powerful to me though is what happened today with what I'll call the hard number of positive money, the actual number of millions of dollars on the positive side. I remember what happened back at the high in 2007 very well with this hard number. Although the multiple of positive to negative was "only" 2.67, the hard positive number, after being in the 200's for quite a while, suddenly jumped up into the 300's, where it stayed for about a week. Then there was one final crazy day, right at the final high, where that number jumped all the way up to 500. And that was it, the final high.

Those Nasdaq 100 numbers for last week and so far this week:

3/26: 272.12

3/27: 273.56

3/28: 282.67

3/29: 282.25

3/30: 278.52

4/2: 278.55

today, 4/3: 316.70

I never thought I'd see this number up in the 300's again, but here we are. So are we at point 15, ready to start some down, up, down, up, down, then shooting up to the final head and shoulders top? Or are we already at the final high, ready to roll on the down side? Or, one other possibility, a very possible possibility, is that parts of the market have already just completed the first move down and back up, what would be 15 down to 16 and back up to point 17, and the Nasdaq is bucking that move and continuing up.

I would bet that we are just now arriving at point 15, ready to start a steep drop. The $200 million man has been jumping in on the positive side time and time again, only to have the market drop a little when he does, and so he gets out and of course then the market resumes climbing upward, and I think he's tired of being made a fool and is ready to just stay in. He did jump in on the positive side today. Good chance he'll stay there a while, even if we start dropping, which will lead to more dropping. Then the fear will finally set in, people will see their wonderful profits of this year dwindling away, and they'll jump out to save what they have left of this year, and we'll reach point 16 and start up again.

The above paragraph is speculation. We'll see what happens. But the number 316.70 is not speculation. That is shocking to see. If we are indeed only at point 15, imagine what that number might get up to by the time we reach the final high which the timing of the pattern suggests will be early to mid-July. But it does make perfect sense. At the final high before a drop into a depression, the market has to have everyone on board. That's how it works. That's what my blog is all about. People talk a lot about the deficit leading to economic calamity, but they obviously aren't too worried about it. Greed is blinding.

Rob

Still Looking for Point 15

I was obviously incorrect that we had reached point 15 and were starting down to point 16. We're still going up. I do think the recent brief move down will serve as a training experience, where people will be saying, darn, I should have bought on the dip. So when we reach point 15, instead of running scared, which leads to a strong move up like we've had since the dip, they'll go, all right, another dip, this time I know what to do. And they'll jump on the dip bandwagon, and down we go.

Rob

Sideways Move From 15 to 20 Has Begun

It appears that we have finally reached point 15 and have begun the move down to point 16, starting a sideways move where we'll go down until we have sufficient fear as we reach point 16, which will result in a strong move up, getting people to jump back on the bandwagon just in time to reach the top at point 17, then down, then up, then down to point 20, leading to the breakthrough move up to point 21 as this time on the move up people go, no, no, I've seen this three times now, it's just going to go back down, then down to point 22, then up to the final high at point 23, which I'm still saying, more than ever, will occur around July 6 or 9.

Who knows what the positive to negative ratio in the Nasdaq will be at point 23. We had a new record positive/negative number on February 22 of an incredible 8.08 times the money on the positive side versus money on the negative side. Please remember the whole point of this blog is that it's this massive jumping on the bandwagon that is going to lead to the crash, not current events like Israel maybe attacking Iran or the price of gas or the spending of Obama. We're just following a pattern of greed that must play out, unfortunately. And remember too that all hell will not break loose until we reach point 27, which will probably be several months after that early July final high, just in time for the election. I wouldn't be surprised at all if all hell starts breaking loose right on election day, no matter who wins.

It appears that point 16 is right in line with the top of the three peaks. That number in the Rydex Nasdaq 100 double fund was a value of about $140. It's now at $154.61. So that would be about a drop of about 9.4% in the Rydex Nasdaq 100 double fund, which would mean a drop of about 4.7% in the regular Nasdaq index. The Nasdaq closed today at 2910. 4.7% of that is about 136 points. So I'm looking for this decline from point 15 to point 16 to take us to approximately 2774 in the Nasdaq, or down another 136 points. That doesn't have to be straight down at all. Tomorrow could be an up day, maybe a large up day. This paragraph is definitely a bit speculative. The above paragraphs I don't think are speculative. I recommend stocking up on food while things are good. I think the biggest problem with the coming crash will be paying for things. I think you'll have people lined up trying to get their money out of the banks, the banks falling like dominos, and credit cards not working, at least for a while. I do believe we will work through all this eventually. See, I'm being positive. Positive Rob.

144 Days Until the Final High

I still believe more than ever that we are playing out the three peaks and domed house pattern. I believe it's playing out most perfectly in the Nasdaq 100. Below is a picture I took of the Rydex 2x Nasdaq 100 fund over the past year, and below that is the good old three peaks and domed house pattern. (Continued below...)

I believe we have just arrived at point 15 and are about to start a strong decline lasting probably a week or two. I believe point 14 came right at the end of November. And you'll notice that the three peaks and domed house pattern actually has a timetable from point 14 to the final high at point 23 of 7 months and 10 days. What more could you ask for? Counting that out, it takes us to July 8, which is a Sunday. So I'll say July 9, the Monday, for the final high. But obviously I will claim victory if it comes anywhere around that week or the previous week.

Just because we reach the final high doesn't mean all hell breaks loose immediately after that. First we have to come down and back up to make the right shoulder at point 25. Then we have to go down even farther and come back up to point 27. It is after we reach point 27, as Jerry Favors used to say, that all hell breaks loose. It could take two or three months to get from point 23 to point 27. Which takes us right up to the election. I think whoever gets elected is going to get caught holding the bag on this one.

And you'll remember the other part of my game, other than the three peaks and domed house, is looking at the positive versus negative numbers, particularly in the Nasdaq 100. My story has been that for over a decade of watching those numbers, the highest ratio I ever saw was at the 2007 market high, where we reached a ratio of 2.6 times the money on the positive side versus the negative. But that bar went up and up and up and up going into 2011 as we traced out the three peaks part of the pattern, up to the highest ratio ever at 7.26 right at the highs last April. So I have figured all along here as I've watched this pattern play out that we were going to at least up to that number and probably higher by the time we reach the final high on July 9, as we have the classic case of everyone jumping on the bandwagon -- literally everyone -- and we have the mother of all declines.

We had been running pretty high on that ratio over the last couple months, getting above 4.0, even above 5.0. But just this last week, there was a huge jump to the positive side, leading to a positive versus negative ratio today, Tuesday, February 14, of 7.29, the most money on the positive side versus the negative side ever. Ever. So that adds weight to my believe that we are at point 15 and are now going to have a strong decline down to point 16, probably a shockingly strong decline. And then you see from the pattern that we'll go back up to approximately where we are right now, then another decline to approximately the same low, yet another move back up to approximately where we are right now, then back down still again, although probably not quite as far as the previous two lows, totally wearing everyone out to where they get out and stay out for a little while, as we finally go shooting up to that final high, first doing the left shoulder, coming back down, and then on up to point 23.

The whole point of my blog has been to show that this is going to play out, not for the reasons that the conservative radio shows say, and not because the rich don't want to pay up like the rest of us, but simply because we are playing out a basic pattern of human greed and getting way, way, way too many people on the positive side trying to get rich. I do see Greece coming to America, but not for the reasons everyone thinks. If you want a bad guy, I still say it's the Fed, who refused to let normal business cycles happen for decades, always manipulating things so we continue going up, and now, all the little business cycle declines that should have happened for decades are going to combine and happen all at once.

As I keep saying, I hope I look totally stupid on all this. But even if it happens, I believe we will work our way through it, despite some horrible, horrible times. And as Jerry said, when we finally reach the low of all this (which I personally still think will be around Dow 1,000 -- yes, 1,000, not 10,000), it will be followed by probably the longest and strongest bull market in history, lasting years and years, probably decades. And if I'm correct about the positive versus negative numbers, you can see why. The bottom will only be reached when almost everyone throws in the towel, gets out of the market, even though they swore they'd never sell, but they will, and they will swear they'll never get back in the market again for as long as they live. And up we'll go. In the meantime, you should stock up on food.

Rob

Heading for Point 15?

193 days until the final high!!

Below again is the basic three peaks and domed house pattern that I do think we are playing out. The little red slash mark between points 14 and 15 is where I think we are. Still a slim possibility that we are only at point 13 or even back at point 11. More below ...

If we are indeed going from point 14 to 15, that means, if this old, ancient pattern plays out, you can count it almost to the day from point 14 to the final high of this pattern at point 23, that being approximately 220 days from point 14 to 23. I say that low at point 14 came in on October 3. So if this plays out as it says, it would be 220 days from October 3, or mid-May. Or, from today as I type this on Sunday, October 30, we have 193 days to go.

I obviously have no idea really if things will play out as the pattern suggests. But I am struck by how the markets this year so far have played out this pattern like a glove. So I'm just going to keep an eye on it. I'll be your three peaks and domed house reporter for you. My next post will be when either (1) we may be reaching point 15, or (2) I no longer think we're going from point 14 to 15 in the pattern, or (3) I don't think we're following the pattern at all anymore.

Rob

Evidence It's Down After All

I've been going back and forth on which way this market is going short term, whether we're on our way up on a long up run, or whether we still have some up-and-down action to go first. I have noticed one pattern that suggests it's down.

Back in mid-September, at the temporary high we had back then, the positive/negative numbers made a distinctive little pattern. First it climbed the ladder up to a very high number, above 3.00, followed by a large drop down to 1.75 the very next day, followed by two more days in that range. Then, to complete this pattern, it jumped back up to a very large number of 3.49 the first day after those three low days, then one more day with about the same very large number, with the high coming at the end of those three low-positive-volume days, and then we had a large fall in the markets into October 3.

So now, this past week, we had the Nasdaq 100 positive/negative number way up to 3.43 this past Wednesday. That was followed by three very low numbers of 1.75, 2.07 and 1.80 for this past Thursday, Friday and Monday, with the high coming in on the last of those three low number days, Monday. So I was very curious today to see whether that number would jump back up above 3.00 in a single day today as it did back in September, which began that month's decline. And we certainly did. That number today was way, way up to 3.91, which I believe is the highest number we've had since the all-time high of 7.25 that we had on May 11.

Just something I noticed. We'll see if we do get that big drop commencing immediately. Whether we do or not, I still think we're playing out three peaks and domed house. Another trip down would just push back that up and down and up and down action of the pattern out a ways, which would in turn obviously push back that final high of the pattern. If I am correct about three peaks playing out, any coming probably large decline will be a buying opportunity. That is a large "if."

Rob