There’s real danger lurking in the markets, so we won’t beat around the bush. First off, the Dow Industrials look like they’re headed down to at least 6195. If so, that would represent a further drop of 27% from yesterday’s settlement price of 8519. Measured from the all-time high at 14198 recorded almost exactly a year ago, the decline would equal 56%. And if the Indoos were to retrace a Fibonacci-esque 0.618 from the highs, it would imply a bear market low at 5424. This hardly seems unlikely, given the incipient economic disaster taking shape in the U.S. What we fear most, however, is that the collapse of stocks will occur much more quickly than any of us are prepared for – than any of us could have imagined just a few short weeks ago.
Even the gloomiest permabears tend to think of a market bottom as an eventuality that lies years down the road. But the way stocks have moving lately, the bear market could be mostly over in a matter of weeks. At 5424, the Dow would have fallen by more than two-thirds toward the zero axis. However, it could subsequently grind 3000-4000 points lower over the next seven or so years, when the Kondratiev deflationary winter is scheduled to bottom. There’s also the possibility that the Dow will collapse to 5424 and then grind sideways for an eternity. That would be the most optimistic scenario we could envision.
When to Back Up the Truck
The news is not so good for investors in gold shares, either, since it looks like the Gold Miners Index (GDX) will need to fall all the way to 14.24 to put in a durable low. Currently trading at 18.49, this popular ETF has already lost two-thirds of its value since peaking in March at 56.87. We’d back up the truck to buy ‘em if and when GDX hits the target, but any nibbling before then would be bucking the odds, as far as we’re concerned. If the gold price were to fall commensurately, it would imply a low somewhere around $600. However, Hidden Pivot analysis suggest that $676 (basis the December Comex contract) will be as bad as it gets. There, too, we would be tempted to back up the truck and load up on bullion. We’ve already shared our target for Comex Silver with subscribers, but if you don’t subscribe and would like to know the precise target as soon as possible, click here and get on Rick’s Picks’ mailing list.
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