scottvanv on February 25th, 2020

As usual, a big market drop got me interested in the market again. Above please find a very long term look at the Dow … since before the Great Depression (suggest clicking to enlarge). I drew the red line five years ago(!), and note how we’ve been bumping up against it recently. Also note how the green channel is intersecting it … for the longest time I thought we’d eventually keep following the green channel up through the red line, and we’d have a few more years until any sort of massive drop in the market because we’d be following the white channel. Now, I’m not so sure. I think there’s a possibility that we could drop to ~20,000, a 33% drop. If I were still trading, I’d be in cash.

Also, please note how I do this … I’m not whipsawing in and out of the market, but when the probability gets high that we could drop significantly, I recommend getting out. If the probabilities change, I’ll give an all clear. I’ve been right now since 2007 … every major turn. Would that it were that I had enough money to do this for a living …

scottvanv on June 25th, 2018

Pretty sure no one is using this blog for market timing, and no one should be.  I had meant to post for some time that the market hadn’t really firmed like I thought it was going to per my last post, so when the market dropped a lot today, I thought I should post again.  We’re still in a chop zone (sideways), and could be for some time.  If the Dow drops significantly below 23550 and stays there for a while, we’re likely due for a much larger correction.

scottvanv on May 21st, 2018

If I were still studying the market rigorously, the timings of these “get in, get out” posts would be much better.  With that said, if one had gotten out on my last post, you’d have mitigated a possible much larger decline, while still only losing out on around a 4% gain.  Looking a bit further out, I’ll go so far as to say a much larger correction is due right around the beginning of 2020 … big enough to be a symptom of a recession.

scottvanv on April 3rd, 2018

Without going into a lot of detail (simply due to the fact that I can’t spend a lot of time writing these anymore) … a larger decline is looking more and more likely based on some ugly charts.  Not a good time to be in equities.

scottvanv on February 8th, 2018

I know that all 2 of you that read this blog are cursing me for not getting you out of the market prior to this precipitous decline.  But, I’m not actively trading at the moment, so the market only really piques my interest when something crazy like these big drops occur, so this happened too fast for me to research and post something.  For various reasons, we were absolutely due for a correction, so this wasn’t too surprising to me (perhaps the speed of the decline was).  My best guess is that we’re either going to crazily go sideways for around a year, or we’ll quickly drop to around Dow 23,000.  From either option, we’ll likely head up to around  35,000 to 37,000, and then we’ll be due for a more substantial correction and a recession.  If we shortly drop significantly below 23,000, watch out below.

Here’s an interesting read on the value of the market relative to interest rates, written at the beginning of the year.

This tax bill is rather Bigly.  It drops the Fed corporate tax rate by 40%(!), which brings the S&P 500 PE Ratio to around 18.6 (including an average of tacked-on local taxes), not far above the long term average (gee, it’s almost like the market knew this was going to happen).  However, the Shiller PE (which is more in line with our economic cycles) drops only to around 23, still a bit high according to historical averages, but probably not too high when one considers our current extremely low interest rates that are around only 60% of their long term average.  So a back of the napkin calc would bring the Shiller PE down to around 14, right in line with its long term average.  The same back of the napkin analysis brings the plain PE to ~11, pretty undervalued according to long term averages.  And none of this includes what could be some tremendous growth in the economy due to these changes …

Bigly.  🙂

scottvanv on September 12th, 2017

Just based on the charts, as we come to new highs, looks like it’s safer to be in stocks right now than my last post suggested …

Please note that we’re at a pretty high valuation, so I’m pretty quick to pull the trigger on a go-to-cash recommendation.  Having said that, this bull market could continue for years.

I just try to keep my money safe, and trading in and out of cash every few months shouldn’t be too hard for someone who has even zero interest in trading.  It’s truly a big huge lie that you can’t time the market, brought to you by an industry that’s found out it can make more money on flat fees versus actually getting paid for performance.  They’ve chosen instead to take your fees, recommend buy-and-hold strategies, then hire an army of traders to trade against you to take more of your money …

scottvanv on August 10th, 2017

Just a short note to keep up my documented streak of calling market turns.  Today’s drop could portend a much larger drop.  There’s no harm in going to cash at the moment.

scottvanv on December 7th, 2016

A little over one year and three months ago, in my last post, I said, “…best case we’re probably just going to sideways for a couple years.”  Well, we’ve certainly hit my best case.  I’m posting now because my predicted upturn is coming a bit sooner than my prediction.  See chart just below … the blue lines are the same prediction, as still also seen in my last post, now overlaid with reality.  Also note that the market bottomed at 15,370 just after my last post, and I had said, “Short term, I expect the market to drop precipitously to around 15,225 (Green Arrow).”  To everyone who says you can’t predict the market, I say, “Pllhhhllllppppplll.”

If anyone who reads this post happens to know a hedge fund manager, I’d be happy to sell my services for, say, a million bucks a year.  Seriously.  And again, seriously.  If I had full time to do this … and enough money to make it worth my time to do this for real …

But I digress.

It’s time to start investing, time to get aggressive.  Invest in the market in general.  Invest in infrastructure (yay, Trump!).  Invest in tech.  Invest, invest, invest.  Hope has returned to the land …



So … this precipitous drop got me interested in the market again.  I’m still 100% cash, so I’ve only been monitoring in terms of what the economy is doing. But, I’m pretty confident in this post, so I may just start trading the general market next week. I’ll let you know if I get in, and what happens.

First, let me start with a picture, then I’ll explain it.

Weekly Dow Since the '08 Top

Weekly Dow Since the ’08 Top


This is a weekly picture of the Dow, annotated with Elliot Wave mark-ups.   As a refresher, since I haven’t posted in so long, Elliot Waves generally travel Up in 5 waves and Down in 3 waves, with Up being represented by numbers (12345), and Down represented by letters (ABC). The basic theory behind this is that the entire Universe is ruled by these types of efficient fractal type ratios, so there’s no reason why our own societal behavior shouldn’t follow the same rules. It’s far more complex than this, but I won’t go into that here, as I’ve posted plenty of links to books on the subject in the past.

On to the chart:  First, don’t panic. I really don’t think we’re going to go into a deflationary spiral depression.  I’ve also looked at the Nasdaq and the S&P, and they all seem to be showing that we entered what is a Wave 4 of a rather short-term sideways correction, not a huge downward Wave e of the very large abc correctional pattern that we began in 2000. In light blue on the chart, I’ve shown where I expect the market to go, short and long term. Short term, I expect the market to drop precipitously to around 15225 (Green Arrow), with maybe a relief rally on Monday or early next week, rather then the initial 14,400 I posted yesterday (which was a very quick back-of-napkin estimate). From there, we’ll likely go sideways along something like the pattern I’m showing through Mid 2017.  From there, we’ll be off to the races through 2022/3 to around Dow 22,000.

Why do I think this?  Because these patterns show up time and time and time again at different levels of Degree.  If you stare at charts long enough, like I have, you begin to recognize the beginning of each of these different types of patterns. What we’re living through longer term, right now, looks like a 13 year bullish wave beginning with the ’09 bottom.  Shorter term, it looks like we’re beginning a pattern called an “Expanding Flat” for Wave 4 which will end when it hits the bottom channel, labeled with the number 4.

Now, if the market drops though 15,225, we have a major problem, and this analysis is likely very wrong.  But I don’t expect that … it’s likely that the China panic will continue for a bit, but the central banks will step in and start printing more money to make sure that we don’t enter said spiral. There is no limit to how much money they can print so long as deflation is the dominate force, which it clearly is right now. This Wave 4 correction likely won’t even lead to a recession, as it’s just not at a Degree high enough to ’cause’ one as in ’01 or ’08.  A China slowdown might cause our economy to slow a bit, but probably not too much … I think we (primarily Silicon Valley and the Fed) will lead the world out of this very long period of uncertainty. All bets are off in 2022/3.

I still don’t think there’s ANY reason to have any money in equities right now … the risk is still there that we’ll drop through 15,225 to some god-awful lows and best case we’re probably just going to sideways for a couple years.

It’ll be interesting to see if I’m right.