Market Mayhem

Market Mayhem

As if ongoing U.S. political turmoil wasn’t enough, chaos hit the markets.

Common stocks. In what appears to be a “pause in trend,” stock markets everywhere were hit hard last week. The U.S. Dow-Jones Industrial average dropped 14%—from a Feb. 12 29600 high to a Feb. 28 low at 25409—with most of the plunge occurring during the final 3 days. End-of-the-world pronouncements cascaded from market pundits who don’t understand what’s really happening.

Although the correction isn’t over, most of the damage appears to have been done. The Dow enjoyed a Monday bounce, and according to Martin Armstrong, its Monday 3/2 close above 25744 “eases the decline for now.” Subscribers to his services who reacted to his 2/24 alert avoided the final 8% drop.

Mainsteam media attributed the market’s contraction to the Corona Virus, but a larger reason was Bernie. Recent U.S. market gains have not been powered by American investors … but by international capital moving here as a potential safe haven to escape economic chaos in Europe and Asia. Trump is attracting that capital, but a Marxist in the White House would have the opposite effect.

Armstrong is maintaining his forecast for an eventual Dow peak above 40000, for which this correction could be considered the requisite “bear-trap,” hence a dip suitable for buying. But probably not yet, as we may see an even lower low in March. Meanwhile, only a closing below 25744 will leave the market “vulnerable to a retest of support.”

Precious metals. Gold made a February run at 1700 before tumbling $100 by month-end, and apparently still not ready for prime time. Gold and silver seem destined to go much higher, but believe it or not, things are just not crazy enough yet. So PM’s are another asset class looking for a final bottom to be bought on the dip.

If gold proves unable to hold critical support at 1546-1551, it’s probably headed for a retest of 1432 or even 1363. Gold’s fall will be propelled by a dollar rising to record highs—out into 2022—due, in turn, to the impact of the REPO crisis.

Cryptocurrencies also gave ground, with Bitcoin falling 12% over the period to 8700. That’s just a little more than normal crypto volatility, but heralding the emotional effect spilling over from larger markets.

The preponderence of good information I’m receiving on these developments comes from Martin Armstrong, who called the drop the day before the plunge began—expecting the Dow to fall to at least 25409. Closing thoughts, from this 40-year market veteran: “This is going to be hard because you have to keep your human emotions in check. There is no human who has EVER traded through such a convergence in history.”

(Wayne Peterson published this blog on his website.)

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