I’ll tell you, the market rally from early 2017 into late January did look like the perfect blow-off rally and bubble top to me.
It was exponential.
It broke out of a steep channel into a classic “throw-over” rally.
Everything you would look for to know.
But it turned out not to be.
By April 2018, it was clear that there would be no major crash – a crash to end this unprecedented bubble – just yet.
You see, the “big ones” typically tend to see an initial 40% crash in the first two to four months. The average, from the last seven stock market bubble crashes, is 42% in 2.6 months.
So, I watch for early signs that such a crash seems to be developing so that we don’t wait until we’re 42% down and wondering what the hell just hit us.
The downturn that followed that January 2018 peak only saw a 10% to 12% correction in those first three months.
Not nearly big enough to warn of the Big One.
And then the rally that followed into September 2018 only took the Dow to slight new highs. It didn’t have the same orgasmic blow-off pattern of past bubble-ending crashes. In fact, it looked more like a “B” wave or bear market rally. 2018 ended up largely being a sideways market and that tends to set a base for another strong rally.
The most recent correction has taken the stock market to new lows, below those established in February and April, but… we’re three months in and we haven’t seen that classic 40% initial crash that says, “Bubble Over!”
Look at this chart…
December is normally the best month of the year, yet this year it saw its worst month since 1931… and the worst Christmas Eve ever.
If this market is going to crash faster and steeper, in line with the start of a bubble burst, we should see a steeper crash in January!
But, if the correction doesn’t continue in January, the big surprise could be another 2017-like rally, only stronger, to as high as 10,000 on the Nasdaq and 33,000 on the Dow!
That would be the final blow-off top into my 90-Year Bubble Buster Cycle.
I’ll be looking at the two most likely scenarios for 2019: the very bullish one, which I just described, and a bearish one that tracks more with the 2008 crash pattern initially, but ends up going longer and deeper to get the once-in-a-lifetime crash I have been forecasting.
January should give us a strong indication: a weak rally would signal the 2008 scenario; a strong rally would signal that bullish blow-off into late 2019; and a continued steep crash soon would signal the steeper, more ominous 2000 crash scenario.
One way or the other, 2019 is not going to become the mildly bullish year that Wall Street largely expects after a scary, but seemingly healthy correction in late 2018.
It will very likely be either much stronger or much weaker. So, stick with us as we work our way through what lies ahead, helping you to protect your assets as we pass rough patches, and growth your wealth all along the way.