I'm again beginning to hear why "this time is different." I hear hypothesized
reasons why Dow theory is an antiquated relic that is no longer relevant. I
hear that the manipulative efforts of the Money Masters have made the cycles
irrelevant. I hear all the reasons that the Money Masters are in "control" and
that the market will never ever be "allowed" to go down again. I heard the
same thing in regard to the 2000 top and again as the market ramped up into
the extended 4-year cycle top in 2007. However, reality is, the unscrupulous
manipulative practices on Wall Street have not change. The debt-money system
hasn't changed. The underlying technical condition of the market continues
to rot at its core. The velocity of money continues to slow. The real unemployment
rate continues to rise. Debt levels continue to rise. There is no real underlying
economic recovery. The actions by the Money Masters have only intensified,
which in and of itself is representative of the poor and continuing deterioration
of the underlying market and economic conditions. All the while, the sheep
continue to be sucked into the trap while hypothesizing and trying to convince
themselves that everything is okay, why this time is different, why technical
analysis does not work and why the man behind the curtain has complete control.
Fact is, hearing and seeing people thinking in this manner once again is, in
reality, only part of the cycle.
Now, as for technical analysis, Dow theory, cyclical analysis and the statistical
approach that I have used successfully for years is still every bit as valid
today as it has ever been. Popular opinion is that the phony bologna manipulative
efforts to keep everything afloat has somehow invalidated every method of analyzing
the market known to man. This could not be further from the truth. Reason being,
technical analysis is based upon price movement. It matters not to price if
the underlying "reason" for a move, up or down, is based on a sound fundamental/economic
foundation or if it is based on the smoke and mirror practices by the man behind
the curtain. Regardless, the bottom line is that whatever the "reason," the
underlying fundamental, economic, or in this case liquidity driven foundation
is, everything is ultimately discounted into price itself. As long as price,
regardless of what is driving it, unfolds in either a bullish manner or a bearish
manner, it will continue down that path until the technical data changes. It
is these changes that reverse trends, top out or bottom out cycles and trigger
Dow theory bullish and bearish trend changes. It is then at these points that
we know the change has occurred. Until proper technical, and in my case statistical
evidence, which again, is all based on price, is seen, a prevailing established
trend will remain intact. Even in terms of our Dow theory founding fathers,
once a bullish or bearish primary trend change was established, it was considered
to be in force until it was authoritatively reversed. With technical analysis
the key is understanding what the data, as is represented by the price movement,
is telling us. Personally, I quantify the technical data in a manner in which
we can assign probabilities, which brings a more scientific approach to technical
analysis. Probability also eliminates biases and outside influences.
As for the current market environment, the longer-term technical data continues
to tell me that the advance out of the 2009 low has not occurred within the
context of a secular bull market. Rather, the underlying technical and economic
data continues to tell me that this is a cyclical bullish advance within the
context of a much longer-term and ongoing secular bear market. When looking
at the charts of other asset classes, the fact that they have not also moved
to new highs tells me that the efforts by the Money Makers is failing and that
stocks are the last man standing. Yet, another bubble they have created. Think
about it. If the efforts weren't failing, why wouldn't other asset classes
be at new highs? If the efforts weren't failing, why would they be continuing
with those efforts? If the economy was so good, why would continued efforts
be needed? If we go to the doctor and he gives us an antibiotic don't we get
off the medicine when the issue is fixed? Wouldn't we only continue to take
the medicine if the efforts from the previous round had failed?
It is a fact that the longer-term statistical data clearly shows the longer
a cycle stretches, the worse the revision to the mean tends to be. The 4-year
cycle advance into the 2007 top that was stretched by the liquidity driven
practices of the Money Makers is a perfect example of this. Combine a stretched
cycle with the phony liquidity driven efforts by the Money Makers and you have
yet again the recipe for yet another disaster just like before.
The fact that the very foundation of our economy has moved from agriculture,
to manufacturing, to financial, to a phony liquidity driven environment tells
me that we have no economic foundation to support a bonafide secular bull market.
It tells me that the Money Makers are simply trying to reignite the previous
secular bull market. While the advance out of the 2009 low has pushed higher
and we have yet to see the required technical evidence of its top, at the same
time, the underlying technical data also continues to reflect the poor underlying
economic foundation. The underlying technical picture tells me that its all
a house of cards and that it will not end well.
The Dow theory has proven to be a valuable market tool since 1896, when properly
understood and applied. The same goes for most other properly applied technical
approaches as well. The problem with technical analysis is that people try
to apply them, but when they don't truly understand how to do so and it doesn't
work out for them, they want to say that the method failed or that it is no
longer relevant. In reality, it was their application of the method that failed.
Price is what it is and again technical analysis is based on price. If you
don't know how to read it, it's not price's fault. Fact is, the same properly
applied technicals approaches that have worked since the inception of the stock
market worked in 2000, they worked in 2007, they work today and they will work
100 years from now.
The emotional thinking that "this time is different" and particularly that
sound proven technical methods that have stood the test of time are somehow
no longer valid are simply part of the cycle itself.
If you would like much more detailed research that is based on
sound technical and statistical methods, that research is available at www.cyclesman.net
