STOCK MARKET TO REVERSE FROM DOW 10000 INTO GRAND SUPERCYCLE CRASH?

As I have pointed out time and time again, the DJIA tends to top around key thousand marks and then turn down, sometimes very sharply. Indeed, there is reason to be concerned that reversing below Dow 10,000 has everything to do with a reversal into a Grand Supercycle collapse that has been at least 200 years in the making.

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 bad news that follows the market top.

For instance, on September 6th of 2001, the DJIA dropped 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.

In 1997, the Dow reversed from the 7000 mark and the Fed raised interest rates for the first time since 1994 up to that point leading to a ten percent market correction.

Likewise, when the Fed hiked interest rates in 1994 precipitating a year-long correction in the stock market, it occurred right after the Dow reversed from the 4000 mark in late-January of that year.

In the summer of 1990, the DJIA reversed from 3000 and THEN Iraq invaded Kuwait, thereby triggering a Persian Gulf crisis and major oil- shock that caused the world economy to slip into a recession and stock prices to plunge by 25 percent. Notably, the DJIA topped by closing two days in a row at exactly 2999.75 on July 16th and 17th of that year (did not close above 3000 until the following year).

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 current test of Dow 10000 will be followed by a major decline in stock prices. Indeed, such a reversal may be triggered by some sort of historical "shock" like occurred with past breaks from thousands marks in the DJIA.

Investment letter sentiment has recently been the most bullish since August of 1987, and the low VIX reading reflects some of the greatest investor complacency in recent history. In other words, an extreme of optimism is occurring that is characteristic of other major tops around psychologically significant thousand marks in the past. The questions is, when and what form of a reversal will occur.

Importantly, according to Elliott Wave analysis, the stock market should be nearing a key reversal into a third wave down potentially of Grand Supercycle degree. The Grand Supercycle top was reached above Dow 10,000 between 1999 and 2002 after which an initial 40% downleg completed into October of 2002 and then an initial bounce back to Dow 10,000 has unfolded to present (importantly, a Fibonacci 61.8% rebound).

STOCK MARKET TO REVERSE FROM DOW 10,000 INTO CRASH?

J. Adams
December 3rd, 2003

STOCK MARKET TO REVERSE FROM DOW 10,000 INTO CRASH?

J. Adams December 3rd, 2003

J. Adams
December 3rd, 2003