Last week the DJIA peaked at the psychologically important 14,000 mark, closing at 14000.41 on July 19th. Since then a significant reversal has started to unfold:

As pointed out in my most recent article, the stock market tends to top and reverse from psychologically important thousand marks in the DJIA.

Historically, when the major stock averages, and the DJIA in particularly, reach or trade around psychologically important round numbers like thousand marks, the stock market may top-out and, failing to hold near or above the mark, sharply reverse course. A remarkable feature of these stock market reversals at thousand marks in the DJIA is that they are often associated with negative news that follows the market top.

For instance, on September 6th of 2001, the DJIA fell decisively below the 10,000 mark , THEN September 11th occurred driving the market down sharply.

Thus, when the DJIA reversed decisively from 10,000 in September of 2001, the breakdown in Western confidence manifested as the literal collapse of a key symbol of Western financial prowess and American global economic hegemony....the World Trade Center towers in New York City. Likewise, a blow occurred against the Pentagon in Washington DC, the symbol of American global military hegemony.

There are other major examples of significant negative historical events erupting in conjunction with reversals from key thousand marks in the DJIA.

Right after the DJIA failed at Dow 8000 in late-October of 1997, a mini-crash occurred in association with a financial panic in Asia.

Finally, between 1966 and 1982, the DJIA reversed from the "Magic 1000" barrier several times. After each reversal, all kinds of troubles emerged ranging from OPEC oil embargoes, to the Vietnam War, to Watergate. One of the most notable cases occurred in October of 1973 when the DJIA rose to just below Dow 1000 as the Arabs launched a surprise attack against Israel which, in turn, led to a major East/West confrontation and an Arab oil embargo against the West. Consequently, the world economy entered a severe contraction and stock prices plunged in the largest market correction up to that time since the Great Depression.

Given the historical pattern of major stock market reversals from key thousand marks in the DJIA, there is reason to believe that the new reversal from Dow 14,000 will be associated with a major decline in stock prices possibly exacerbated by some sort of historical "shock(s)" like occurred with such breaks in the past.

- HINDENBURG OMEN CLUSTER -

On top of the DJIA reversing from the psychologically important 14000 mark, there are other reasons to suspect a stock market crash may soon occur.

For instance, recently there has been a cluster of Hindenburg Omen signals that reliably predict stock market crashes. As explained at Wikipedia:

As explained by Robert McHugh in an article for Safe Haven, the record of the Hindenburg Omen in predicting major stock market drops is impressive:

Below is a table breaking down the record of this signal in predicting stock market declines:

In his daily Financial Markets Forecast & Analysis, McHugh points out that there has been eight Hindenburg Omen signals since mid-June. Given the record of this signal, this means there is a significant risk for a stock market crash in the days and weeks ahead.

- THE SEPTEMBER 11th SOLAR ECLIPSE -

On top of the Hindenburg Omen, one might also note that there is a risk of a major financial panic based upon the work of Steven Puetz concerning eclipses.

Steve Puetz discovered that almost all of the largest stock market crashes in history have occurred around the time of a lunar eclipse.

Consider the following excerpt from Peter Eliades online "Current Observations":

There's a solar eclipse on September 11th that will be preceded by a total lunar eclipse on August 28th. Furthermore, the full moon on July 30th occurs six weeks before the 9/11 solar eclipse. As indicated above, this means a stock market crash window will occur from July 24th to August 2nd.

This window should be expanded to a week before and after full moons according to a University of Michigan Business School study by Ilia Dichev and Troy Janes. This study examined 100 years of the stock market trends as they relate to the lunar phases. According to it, “Returns in the 15 days around New Moon dates are about double the returns in the 15 days around full moon dates. This pattern of returns is pervasive: We find it for all major U.S stock indexes over the past 100 years and for nearly all major stock indexes of 24 other countries over the last 30 years.”

Thus, from the week before to the week after the full moon on July 30th, there is the potential for a stock market crash. This potential seems much greater given the reversal from the 14000 mark in the DJIA and the Hindenburg Omen cluster.

Given that we are entering a window for a possible worldwide panic and global collapse of stock markets, it begs the question as to why?

If, indeed, a new large-scale decline in U.S. stock prices is getting underway, then what sort of events might erupt to upset investors' expectations?

Again, it could be that we are mainly dealing with an unraveling of the debt bubble that has been inflated by reckless government and Federal Reserve policies in recent years and decades. If so, then the stock market may now start anticipating a debt-deflation implosion in the economy that astute thinkers like Robert Prechter have been warning about for years.

Beyond the potential for a deflationary economic depression, however, what Prechter and other such long-wave theorists fail to recognize is that the social wave patterns they analyze do not necessarily unfold in a consequential manner, i.e., where a downturn in mood gives rise to the negative thinking and associated actions that beget greater upsets in collective confidence and reinforce given downtrends in collective mood. Rather, such historical wave patterns are synchronistic such that reversals and large-scale downtrends manifest as negative events collectively experienced as mass mood collapses. Accordingly, a reversal Dow 14,000 may be connected to negative historical shock(s) outside of financial markets and the economy. My concern remains for terrorism involving weapons of mass destruction and/or ultimately global nuclear war as I foresaw back in 1991.