A18 January 2014 YACHTING CAPITAL
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If stock market patterns look familiar, could be an opportunity On Nov. 29, the stock market – specifically the Dow Jones Industrial Average – was the highest it had ever been. The housing market was at its highest since the 2007-2009 crash. The jobless market was as low as it had been in five years. But let’s not forget the old phrase “What goes up must Yachting Capital come down.” Mark A. Cline We can be terrified by this phrase or embrace it. Let’s go over some facts from a well-respected analyst, then I’ll share my thoughts on how to potentially profit from it. In the course of keeping up with various financial writings, I recently became aware of a fascinating price pattern analog uncovered by legendary technical analyst Tom DeMark. He figured out that the recent pattern of stock price movements looks a whole lot like the lead-up to the 1929 top. A lead-up to just any old top is one thing, but the 1929 top was followed by a fairly memorable decline, which makes it all the more worthy of our attention. The operating theory behind price
pattern analogs is that similar market the pattern is that it shows that the conditions can produce similar equivalent of the Sept. 3, 1929, high is patterns; history repeats itself. The due Jan. 14. difficulty that most people have is in No one should take that date equating the market conditions from literally, however, since the pattern one period to another. alignment fore or aft a few days still In 1928, for example, the Fed raised mirrors each other. And the market the discount rate as high as 5 percent. tends to only approximate the 1929 The stock bubble continued along pattern rather than repeat it precisely. merrily in spite of it, as the fad of In other words, expectations of chasing the latest precision are just hot stock captured not realistic. the public’s The approximate The theory behind imagination. Jan. 14 date is price pattern analogs That Fed all the more is that similar market tightening of the interesting in late 1920s is not conditions can produce light of a couple what is happening of independent similar patterns; now, yet the pattern pieces of analysis history repeats itself. is nearly the same. that depict January This point suggests 2014 as a top in the that it is not the market. “usual suspects” that are the driving So in short, there are several wholly force behind creating price structures. unrelated technical disciplines pointing Something else must be the cause. toward a big market top out in midNot all periods are created equal. In January, just about the time when the 1920s, and indeed until the early the current congressional agreement 1950s, the NYSE used to trade six days on the debt ceiling comes up again. a week. So 1928, for example, had 295 Expect this to be a reasonable cause trading days. 2012 had only 252 trading for investors to take pause in their days, mostly because of the loss of enthusiasm. Saturday trading. This issue of unequal With the Feds’ involvement in calendars has to be accounted for in a “printing money” to the tune of $85 good analysis. billion a month, they were not likely to One interesting implication of yank away the money gift at the recent
meeting just a week before Christmas. There is, however, at a meeting late this month, a greater possibility for finding out that the markets may have to start living without the money infusion. The Federal Reserve Board’s Federal Open Market Committee meeting of March 18-19 fits right about where the Black Thursday crash of 1929 fits into this picture. To see a lot of these reports, Google and check out The McClellan Report, and follow up with my dollar-cost averaging article in the May 2010 issue. This investment technique will help you survive this type of downturn in the market. Worse case scenario: by going into cash now and dollar-cost averaging into aggressive funds over the next year or two, you may miss out on a higher high than we have now, that is, if you believe the market can go higher. Information in this column is not intended to be specific advice for anyone. You should use the information to help you work with a professional regarding your specific financial goals. Capt. Mark A. Cline is a chartered senior financial planner. Contact him at +1 954-764-2929 or through www. clinefinancial.net. Comments on this column are welcome at editorial@thetriton.com.