Now Mr. Jones
Here is Garret's. Charts cannot be copied. He seems serious:
OOBBSSEERRVVAATTIIOONNSS
January 28, 2017
SOMETHING VERY IMPORTANT
“Calm mind brings inner strength and self-confidence, so that's very important for good health.” Dalai Lama “Never cut a tree down in the wintertime. Never make a negative decision in the low time. Never make your most important decisions when you are in your worst moods. Wait. Be patient. The storm will pass. The spring will come.” Robert H. Schuller “Smoking kills. If you're killed, you've lost a very important part of your life.” Brooke Shields
Garrett Jones (925) 820-0161 garrett111@comcast.net
2
SOMETHING VERY IMPORTANT
The common denominator regarding the quotes was ‘something important’. I put that last quote in just to make sure you were paying attention. I have a rather strange methodology that I have developed over a number of decades that has evolved in the following manner: About 3 times per year I will wake up in the early morning hours and am driven to get up and do my long term chart work. I will work uninterrupted for two or three hours until I am done. I used to attempt to set a time to do this, but it never worked – most of the time I just didn’t feel like getting up.
When I didn’t make any plans, it would just happen – and it has worked that way now for many years. To the best of my recollection, every successful major market call that I have made has been the result of one of those sessions. The last major market top in 2007 was a classic example. I’ve covered it before, but that work hit the July 2007 top to the day. That was a unique situation where I had a number of things (trend lines, channels, speed/resistance lines and arcs, Fibonacci time and price extensions, etc.) all meet at virtually the same price and time. That has never happened to that degree before – and, frankly, that type of ‘mega’ confirmation isn’t necessary for a good signal … but it is really nice when it does happen. I waited until it got close to that date to make sure that everything was still confirming. I wrote that Special Alert on July 17th and called for the top. The methodology seeks a confluence of various inputs to hopefully provide something meaningful usually with respect to a major turning point. It isn’t about hitting a top or bottom to a particular day – it’s more about seeing when a major turn or acceleration may be likely to occur. Note: Just because I get up early one morning and put in some serious effort doesn’t mean the there will automatically be some great opportunity that results – many times we are just in the midst of a trend and no ‘pearl of wisdom’ is found.
I never show these long term charts because they are proprietary and for years I kept them on rolls and did them by hand. Now I have some of them on the computer but they are crowded with data, lines, arcs, retracement, numerological input, etc. The charts are meaningful to me, but may cause eyestrain, nausea and vertigo to others. Here is just one example of a ‘line on close chart’ – the bar chart for this same chart looks entirely different: This chart shows the July 2007 top and the October top – both periods were indicated and I wrote Special Alerts before each top. The chart is purposely small because there is nothing to be gained from looking at it.
The market finally surpassed 20,000 this week. This has no real meaning other than the market is drawn to big round numbers … and usually hits them. Anyway, I have three charts to go over that I feel are very important. All three charts are of the S&P 500 Cash Index. The first chart is a monthly chart and points out something very significant. Note that the cycle you see on the charts is 80 months. Starting from the far left, this arbitrary cycle has virtually pinpointed every major cycle top over the past 36 years. There have been 5 of them so far – with 4 of the 5 being historical market tops. While 1994 was a cycle high, it was technically part of the 1987 to 2000 bull market. As such, it was far less pronounced than the other tops. If you allow a minimal leeway of only one month, you have four direct hits out of the five. The outlier needs only 1 more month to also be a ‘direct hit’.
While this is fascinating stuff if you happen to like charts and cycles … is there some other message here? Yes, there is one heck of a message here. The message is that there is a very clear and valid cycle over this specific time period that hits with significant accuracy every 80 months. This ‘valid’ cycle was due to hit in March of 2014 … almost 3 years ago! The current cycle is about to enter its 115 month. That’s almost 44% overextended from the realistic expectation of an exceptionally good cycle. I’ve mentioned before that we are in the second longest bull market in US history. Now we can look at it from a different perspective i.e. the current cyclical expectation over the past 36 years. Both of these facts give the same message – ‘A top is due’ … and the correction that follows shouldn’t be small.
3
The next chart is simply the daily S&P Cash Index chart. This message is also totally visible. The two red lines show the price channel that has defined price action in the S&P 500 over the past ten months – the two blue lines define the near term price channel that has defined price action over the past month. The significance is that both of these trend lines meet on February 1 at just under 2311.
This is important to be aware of because we are also many consecutive weeks at sentiment readings that have ranged between “danger” and “take action”. These factors alone do not guarantee a market top or correction, but they do jack up the odds significantly.
While all this would seem to be sufficient for a correction to occur, there is some pertinent information that may be of assistance. I have done a lot of research over the years on monthly seasonality and February doesn’t have its seasonal strength until the last 5 days of the month – the first 23 days have a different story. In post election years, February is the weakest month of the year. Here’s a graphic to show you how some of the major indexes have performed in February since 1953 in post-election years. Note the average move in the NASDAQ is down 3.9% -- and that’s just the average.
Since this election saw a two term president replaced by a new president from a different party, I wanted to throw that into the mix. We had the same situation in February 2001 and in February 2009. The results for the S&P 500 in those two months were -9.23% and -10.69%. These results are documented in the graphic on top of page 4. This now becomes pretty compelling. When you add that Republican administrations that follow Democrat administrations don’t tend to do well during the first two years of the new term, you have a bit more evidence to indicate that a correction is on the horizon. Any February correction may just be a precursor to a much more meaningful top later in the year.
4
One reason that the market has stayed up as long as it has may be that there is no other place to put money. This may be a very valid reason as bonds are in the opposite position they were in late 1981 when interest rates were very high and bond prices were very low (an ideal time to buy bonds – cheapest price; least risk; incredibly high return). Currently, bonds have the most risk, least return, etc. Real Estate is viewed by some as being in a similar risk position to where it was in 2007. So, being ‘the only place to invest money now’ may be an honest reason as to why the stock market is so high, it is still not a ‘good’ reason.
The final chart I want to share shows where I believe the market is likely to be headed before the second half of this year. My longer term work indicates that the upside price action will finish during the first half of 2017. This is what my recent ‘early morning session’ provided i.e. the positive market influences turned negative for the second half. This has not happened in my long term work since 2007. Remember, the key is that I have to wait until we are close to that time to verify that things will still confirm once the second quarter is ending. Note that the market would have to do something truly extraordinary in order for this outlook to change. The implication is for the second half will be a real washout. I originally sent this chart to a client a few weeks back and he sent it back to me late last week to show how closely the market was tracking my projection (note where the red line begins). In fact, it was his comments that prompted me to write this issue. It appears to me that we are in the process of completing wave 5 of wave (3). This wave (3) should top by Feb. 1st if it hasn’t topped already. We should then have an a-b-c correction down for a wave (4). This should complete around late February. We should then have a 5 wave move up into as late as May to end the current bull market.
Note: This is nothing more than my personal roadmap for the market based on how I view the current Elliott Wave count based my personal expectations from my other technical work. I have confidence in my other work because it has a lot of good quality history. My attempt to translate that into an Elliott Wave count is something entirely different. Ten people can view the same chart and each can come up with a different Elliott Wave count and they all can be wrong. Since this is a roadmap for me, it is flexible. If the market chooses to go in a different pattern than what you see, that will force me to change my roadmap to accommodate. That’s just the way it works. Again, my confidence is in the long term view – this is merely one way we might get there.
Closing thoughts: Bernard Baruch saw the danger in the stock market and exited in early 1929. Behind his back, the ‘late 20-something and early 30-something’ brokers of that era said ‘it was too hot in the kitchen for Bernie’ or ‘he lost his touch’ or ‘was too old to understand’, etc. Any good stock market student knows Bernard Baruch’s name; none of his antagonists are remembered. Here are some of Baruch’s quotes: “Millions saw the apple fall, but Newton was the one who asked why.” “Every man has a right to be wrong in his opinions. But no man has a right to be wrong in his facts.” “To me, old age is always fifteen years older than I am.” Quotations tell a lot about a man.
Baruch was 59 in 1929 – Jesse Livermore, 7 years younger than Baruch, saw the top coming and shorted it … making himself $100 million … roughly the equivalent of $2.5 billion today. Baruch was conservative; Jesse was not. Jesse married a woman in 1933 whose prior 4 husbands committed suicide … Jesse joined that group as the fifth suicide victim in 1940. Bernie lived a full and eventful life until 1965 when he died at age of 95.
continued
5
I am sure there are many morals to this story, but I didn’t share it for that reason. I think the reader can create his own moral to the story if he so chooses. The only point I would make is that strange things happen at the very late stages of bull markets. First of all, things are not rational or ‘normal’. The late 1920s was the Roaring 20s … the Great Gatsby era – a vast divide between rich and poor … and even between the ultra rich and the rich, for that matter i.e. the upper 1% do extraordinarily well at the cost of a shrinking middle class. The upper 1% is the group that did the best of all categories under the Obama era – that is a fact! The poor (those who everyone assumed would be helped … did the worst). For those doubters, go to Wealth Inequality in America https://www.youtube.com/watch?v=slTF_XXoKAQ. What you will see in not ‘rational or normal’ … but it happened and it is most similar to what happened in the Roaring 20s. Coincidence? No. Cycle? Yes.
Another thing that has happened is that people have stopped thinking for themselves … now they just parrot the news. When you stop questioning authority, the die is cast. People believe they are very aware because they watch the news every night. They fail to see that has little to do with being truly aware … it has everything to do with being aware of what the ruling class wants us to be aware of. Are people aware that 6 major corporations control all our news media? Are they aware that a couple of these mega media giants want to merge … making the control number even less? Are people picking up that the news is no longer reported – what’s reported is what those ruling corporations want you to see … and only that. Has anyone noticed that the news is also now interpreted for us? Whenever you see overwhelming political bias in your news, shouldn’t you question why? Of course you should … but no one seems to … they just blindly agree and do zero research to confirm what they hear. I have found that people have no idea where or how to research such things and no clue as to what are valid sources and what are not. You don’t ask the fox ‘guarding’ the hen house if he is the proper choice to hold that position if your brain is still working; but that is exactly the equivalent of what we are all doing right now. Those of us who claim they research the news go to the same sources for their confirmation…???
The 27 year old broker who just got his license four months ago is now the call that most investors want. He is excited and enthusiastic … and he has hot tips, man … and they are going up! The kid’s a genius. Nope, the kid is just a kid with no experience who has never seen what happens after a market tops. I have seen this scenario many times now. I am as excited to hear about “the kid” as they are … but for a different reason. For me, the kid is the canary in the coal mine. Currently, there is a peak number of these ‘kids’. Again, I’ll let the reader create his own moral to the story, but Bernie and Jesse knew that when they were getting tips from the guy who shined their shoes, the market was done.
The important lesson to take away from this is that anyone reading this over the age of 30 or so, most likely has experienced a market top. The last one was 2007. Try to remember what you were doing in 2007. Were you having fun in the market? Making money? Listening to a hot broker? Think about it. It is your own personal experience … and there is no better teacher. What happened? What would you change then if you could go back in time?
Anyway, I hope this was as important an issue for you as it was for me. We are getting close. When you allow yourself to relive past market tops, helpful memories will pop up. When an event changes from a “surprise” to an “expectation”, good things can happen. Being surrounded by folks who never anticipate a top is only great fun prior to the reality of that top … then everything changes.
“Intelligence is a gift. Awareness is a desire.”
Best regards,
NOTE: THIS E-MAIL REPRESENTS THE VIEWS OF THE AUTHOR AND IS INTENDED FOR EDUCATIONAL PURPOSES ONLY. THERE IS RISK OF LOSS IN ALL TYPES OF TRADING. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
OOBBSSEERRVVAATTIIOONNSS
January 28, 2017
SOMETHING VERY IMPORTANT
“Calm mind brings inner strength and self-confidence, so that's very important for good health.” Dalai Lama “Never cut a tree down in the wintertime. Never make a negative decision in the low time. Never make your most important decisions when you are in your worst moods. Wait. Be patient. The storm will pass. The spring will come.” Robert H. Schuller “Smoking kills. If you're killed, you've lost a very important part of your life.” Brooke Shields
Garrett Jones (925) 820-0161 garrett111@comcast.net
2
SOMETHING VERY IMPORTANT
The common denominator regarding the quotes was ‘something important’. I put that last quote in just to make sure you were paying attention. I have a rather strange methodology that I have developed over a number of decades that has evolved in the following manner: About 3 times per year I will wake up in the early morning hours and am driven to get up and do my long term chart work. I will work uninterrupted for two or three hours until I am done. I used to attempt to set a time to do this, but it never worked – most of the time I just didn’t feel like getting up.
When I didn’t make any plans, it would just happen – and it has worked that way now for many years. To the best of my recollection, every successful major market call that I have made has been the result of one of those sessions. The last major market top in 2007 was a classic example. I’ve covered it before, but that work hit the July 2007 top to the day. That was a unique situation where I had a number of things (trend lines, channels, speed/resistance lines and arcs, Fibonacci time and price extensions, etc.) all meet at virtually the same price and time. That has never happened to that degree before – and, frankly, that type of ‘mega’ confirmation isn’t necessary for a good signal … but it is really nice when it does happen. I waited until it got close to that date to make sure that everything was still confirming. I wrote that Special Alert on July 17th and called for the top. The methodology seeks a confluence of various inputs to hopefully provide something meaningful usually with respect to a major turning point. It isn’t about hitting a top or bottom to a particular day – it’s more about seeing when a major turn or acceleration may be likely to occur. Note: Just because I get up early one morning and put in some serious effort doesn’t mean the there will automatically be some great opportunity that results – many times we are just in the midst of a trend and no ‘pearl of wisdom’ is found.
I never show these long term charts because they are proprietary and for years I kept them on rolls and did them by hand. Now I have some of them on the computer but they are crowded with data, lines, arcs, retracement, numerological input, etc. The charts are meaningful to me, but may cause eyestrain, nausea and vertigo to others. Here is just one example of a ‘line on close chart’ – the bar chart for this same chart looks entirely different: This chart shows the July 2007 top and the October top – both periods were indicated and I wrote Special Alerts before each top. The chart is purposely small because there is nothing to be gained from looking at it.
The market finally surpassed 20,000 this week. This has no real meaning other than the market is drawn to big round numbers … and usually hits them. Anyway, I have three charts to go over that I feel are very important. All three charts are of the S&P 500 Cash Index. The first chart is a monthly chart and points out something very significant. Note that the cycle you see on the charts is 80 months. Starting from the far left, this arbitrary cycle has virtually pinpointed every major cycle top over the past 36 years. There have been 5 of them so far – with 4 of the 5 being historical market tops. While 1994 was a cycle high, it was technically part of the 1987 to 2000 bull market. As such, it was far less pronounced than the other tops. If you allow a minimal leeway of only one month, you have four direct hits out of the five. The outlier needs only 1 more month to also be a ‘direct hit’.
While this is fascinating stuff if you happen to like charts and cycles … is there some other message here? Yes, there is one heck of a message here. The message is that there is a very clear and valid cycle over this specific time period that hits with significant accuracy every 80 months. This ‘valid’ cycle was due to hit in March of 2014 … almost 3 years ago! The current cycle is about to enter its 115 month. That’s almost 44% overextended from the realistic expectation of an exceptionally good cycle. I’ve mentioned before that we are in the second longest bull market in US history. Now we can look at it from a different perspective i.e. the current cyclical expectation over the past 36 years. Both of these facts give the same message – ‘A top is due’ … and the correction that follows shouldn’t be small.
3
The next chart is simply the daily S&P Cash Index chart. This message is also totally visible. The two red lines show the price channel that has defined price action in the S&P 500 over the past ten months – the two blue lines define the near term price channel that has defined price action over the past month. The significance is that both of these trend lines meet on February 1 at just under 2311.
This is important to be aware of because we are also many consecutive weeks at sentiment readings that have ranged between “danger” and “take action”. These factors alone do not guarantee a market top or correction, but they do jack up the odds significantly.
While all this would seem to be sufficient for a correction to occur, there is some pertinent information that may be of assistance. I have done a lot of research over the years on monthly seasonality and February doesn’t have its seasonal strength until the last 5 days of the month – the first 23 days have a different story. In post election years, February is the weakest month of the year. Here’s a graphic to show you how some of the major indexes have performed in February since 1953 in post-election years. Note the average move in the NASDAQ is down 3.9% -- and that’s just the average.
Since this election saw a two term president replaced by a new president from a different party, I wanted to throw that into the mix. We had the same situation in February 2001 and in February 2009. The results for the S&P 500 in those two months were -9.23% and -10.69%. These results are documented in the graphic on top of page 4. This now becomes pretty compelling. When you add that Republican administrations that follow Democrat administrations don’t tend to do well during the first two years of the new term, you have a bit more evidence to indicate that a correction is on the horizon. Any February correction may just be a precursor to a much more meaningful top later in the year.
4
One reason that the market has stayed up as long as it has may be that there is no other place to put money. This may be a very valid reason as bonds are in the opposite position they were in late 1981 when interest rates were very high and bond prices were very low (an ideal time to buy bonds – cheapest price; least risk; incredibly high return). Currently, bonds have the most risk, least return, etc. Real Estate is viewed by some as being in a similar risk position to where it was in 2007. So, being ‘the only place to invest money now’ may be an honest reason as to why the stock market is so high, it is still not a ‘good’ reason.
The final chart I want to share shows where I believe the market is likely to be headed before the second half of this year. My longer term work indicates that the upside price action will finish during the first half of 2017. This is what my recent ‘early morning session’ provided i.e. the positive market influences turned negative for the second half. This has not happened in my long term work since 2007. Remember, the key is that I have to wait until we are close to that time to verify that things will still confirm once the second quarter is ending. Note that the market would have to do something truly extraordinary in order for this outlook to change. The implication is for the second half will be a real washout. I originally sent this chart to a client a few weeks back and he sent it back to me late last week to show how closely the market was tracking my projection (note where the red line begins). In fact, it was his comments that prompted me to write this issue. It appears to me that we are in the process of completing wave 5 of wave (3). This wave (3) should top by Feb. 1st if it hasn’t topped already. We should then have an a-b-c correction down for a wave (4). This should complete around late February. We should then have a 5 wave move up into as late as May to end the current bull market.
Note: This is nothing more than my personal roadmap for the market based on how I view the current Elliott Wave count based my personal expectations from my other technical work. I have confidence in my other work because it has a lot of good quality history. My attempt to translate that into an Elliott Wave count is something entirely different. Ten people can view the same chart and each can come up with a different Elliott Wave count and they all can be wrong. Since this is a roadmap for me, it is flexible. If the market chooses to go in a different pattern than what you see, that will force me to change my roadmap to accommodate. That’s just the way it works. Again, my confidence is in the long term view – this is merely one way we might get there.
Closing thoughts: Bernard Baruch saw the danger in the stock market and exited in early 1929. Behind his back, the ‘late 20-something and early 30-something’ brokers of that era said ‘it was too hot in the kitchen for Bernie’ or ‘he lost his touch’ or ‘was too old to understand’, etc. Any good stock market student knows Bernard Baruch’s name; none of his antagonists are remembered. Here are some of Baruch’s quotes: “Millions saw the apple fall, but Newton was the one who asked why.” “Every man has a right to be wrong in his opinions. But no man has a right to be wrong in his facts.” “To me, old age is always fifteen years older than I am.” Quotations tell a lot about a man.
Baruch was 59 in 1929 – Jesse Livermore, 7 years younger than Baruch, saw the top coming and shorted it … making himself $100 million … roughly the equivalent of $2.5 billion today. Baruch was conservative; Jesse was not. Jesse married a woman in 1933 whose prior 4 husbands committed suicide … Jesse joined that group as the fifth suicide victim in 1940. Bernie lived a full and eventful life until 1965 when he died at age of 95.
continued
5
I am sure there are many morals to this story, but I didn’t share it for that reason. I think the reader can create his own moral to the story if he so chooses. The only point I would make is that strange things happen at the very late stages of bull markets. First of all, things are not rational or ‘normal’. The late 1920s was the Roaring 20s … the Great Gatsby era – a vast divide between rich and poor … and even between the ultra rich and the rich, for that matter i.e. the upper 1% do extraordinarily well at the cost of a shrinking middle class. The upper 1% is the group that did the best of all categories under the Obama era – that is a fact! The poor (those who everyone assumed would be helped … did the worst). For those doubters, go to Wealth Inequality in America https://www.youtube.com/watch?v=slTF_XXoKAQ. What you will see in not ‘rational or normal’ … but it happened and it is most similar to what happened in the Roaring 20s. Coincidence? No. Cycle? Yes.
Another thing that has happened is that people have stopped thinking for themselves … now they just parrot the news. When you stop questioning authority, the die is cast. People believe they are very aware because they watch the news every night. They fail to see that has little to do with being truly aware … it has everything to do with being aware of what the ruling class wants us to be aware of. Are people aware that 6 major corporations control all our news media? Are they aware that a couple of these mega media giants want to merge … making the control number even less? Are people picking up that the news is no longer reported – what’s reported is what those ruling corporations want you to see … and only that. Has anyone noticed that the news is also now interpreted for us? Whenever you see overwhelming political bias in your news, shouldn’t you question why? Of course you should … but no one seems to … they just blindly agree and do zero research to confirm what they hear. I have found that people have no idea where or how to research such things and no clue as to what are valid sources and what are not. You don’t ask the fox ‘guarding’ the hen house if he is the proper choice to hold that position if your brain is still working; but that is exactly the equivalent of what we are all doing right now. Those of us who claim they research the news go to the same sources for their confirmation…???
The 27 year old broker who just got his license four months ago is now the call that most investors want. He is excited and enthusiastic … and he has hot tips, man … and they are going up! The kid’s a genius. Nope, the kid is just a kid with no experience who has never seen what happens after a market tops. I have seen this scenario many times now. I am as excited to hear about “the kid” as they are … but for a different reason. For me, the kid is the canary in the coal mine. Currently, there is a peak number of these ‘kids’. Again, I’ll let the reader create his own moral to the story, but Bernie and Jesse knew that when they were getting tips from the guy who shined their shoes, the market was done.
The important lesson to take away from this is that anyone reading this over the age of 30 or so, most likely has experienced a market top. The last one was 2007. Try to remember what you were doing in 2007. Were you having fun in the market? Making money? Listening to a hot broker? Think about it. It is your own personal experience … and there is no better teacher. What happened? What would you change then if you could go back in time?
Anyway, I hope this was as important an issue for you as it was for me. We are getting close. When you allow yourself to relive past market tops, helpful memories will pop up. When an event changes from a “surprise” to an “expectation”, good things can happen. Being surrounded by folks who never anticipate a top is only great fun prior to the reality of that top … then everything changes.
“Intelligence is a gift. Awareness is a desire.”
Best regards,
NOTE: THIS E-MAIL REPRESENTS THE VIEWS OF THE AUTHOR AND IS INTENDED FOR EDUCATIONAL PURPOSES ONLY. THERE IS RISK OF LOSS IN ALL TYPES OF TRADING. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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