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May 1, 2018 | Moving Average Bounces Getting Weaker and Weaker: Major Carnage Coming

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Bounces off the 200 Day exponential moving average lines keep getting weaker for all the major indexes.

S&P Daily

Russell 2000 Daily

Nasdaq 100 Daily

When those moving average bounces fail, and they will, what then?

For the answer, let’s look at weekly charts.

Dow Weekly

S&P 500 Weekly

Russell 2000 Weekly

Nasdaq 100 Weekly

Those 50-week exponential moving averages will break. When that happens I expect a quick plunge to the 200-week EMA.

Will that be the end? If I am right, that’s not even close.

I expect all the gains back to 2007 to be wiped out. To visualize, we need to look at monthly EMAs.

Dow Monthly

S&P 500 Monthly

Russell 2000 Monthly

Nasdaq 100 Monthly

With the exception of the Nasdaq 100, a decline to what is now the 200-month EMA would take us to where I believe we are headed.

Superbear?

Does this make me a superbear?

Hardly.

John Hussman, who does excellent technical and fundamental work is far more bearish: “I Expect the S&P 500 to Lose 2/3 of Its Value” said Hussman in January.

My charts suggest about 50% except for the Nasdaq.

Pension Fund Disaster

The sad part of this story is that despite the biggest bull market in history, pension funds are extremely underfunded.

Whether the decline is 33%, 50%, or 66%, pension funds will get crushed.

Heck, given 7% per-year assumptions, even flat returns for seven years will destroy many if not most of them.

By the way, asset bubble bursting episodes are anything but inflationary. If you think massive inflation is right around the ben, please think again: Velocity of Money Picks Up: Inflation Coming? Stagflation? How About Deflation?

Mike “Mish” Shedlock

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May 1st, 2018

Posted In: Mish Talk

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