I Have Never Seen the Stock Market Do This Before and Neither has Anyone Else - Mike Swanson (08/10/2016)
The gold price chart is up this morning and is going to keep going up, but I have something else to show you today. You see something is happening with the S&P 500, DOW, and Nasdaq that I have never seen before and I do not think anyone else has ever seen before either.
And what is crazy is no one is talking about it.
Yahoo Finance isn't.
And Michael Santoli (the CNBC guy who drinks coffee all day and supervises market commentary and rants on twitter) just tweeted that he is on vacation.
And Jim Cramer didn't say a word about it last night - NOT ONE.
So CNBC viewers have no clue to what is about to happen and have fallen asleep at the wheel again.
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So take a look at this chart of the S&P 500 and the 20-day Bollinger Bands.
What Bollinger Bands measure are the real price volatility in a chart. A big move in price makes the Bollinger Bands go wide apart from one another, but when the moves get small and the daily moves get consistently smaller than the Bollinger Bands get closer together.
Periods of such low volatility lead to periods of high volatility.
This can happen when a market pauses for a few weeks after a big rally before another big rally begins or at a market top.
Last year in August the Bollinger Band width indicator for the 20-day Bollinger Bands fell below 2.5.
It had only gotten that low three times in all of the years I have been trading the markets and suggests that a big move was about to start that would shock people.
And so the market fell in a flash crap drop that did smash a lot of people.
I actually warned a big drop was about to happen and unfortunately I also knew people that were on margin who refused to pair their positions.
At least one of these people no longer trades the markets anymore.
He got wiped out.
That's how serious it is when the Bollinger Bands get this narrow.
So yesterday the Bollinger Band width indicator got below 1.50.
This is probably the lowest reading in decades.
My data on stockcharts goes back to the mid 1990's and I can't find a reading for the S&P 500 this low.
What does this mean?
For one thing everyone is bullish on the market and many people are predicting a giant rally to start now that will go into the end of the year.
If you are watching CNBC you are seeing these predictions.
If these people are right the market needs to start to go up in a big way NOW.
And it needs to rally huge into Labor Day.
If the market does not do that then what we are witnessing is a big top much like the way gold stocks topped out in 2011.
If you were following mining stocks back then they were in a giant range that year marked by low volatility and whenever they made a new high they would just go up a few percent and then top out and fall again until they finally collapsed.
Breakouts simply led to nowhere.
And there were warning signs that it was a massive top that Jordon Roy-Byrne, Dave Skarica, and myself all pointed out in 2011.
Such as the fact that silver doubled in a few months and the silver mining stocks did not follow.
And now the internals in the stock market are weakening this month and weakened yesterday.
But just like the silver bugs ignored the danger signs of 2011 all stock market bubble bulls refuse to acknowledge today's warning signs.
Fake breakouts were the name of the game for gold and silver stocks in 2011.
And the same thing happened with the stock market over and over again in 2015.
And really this is the first new high the market has made in almost two years and it hasn't gone anywhere yet.
The market may just start to dump before the week is over like it did last August.
Or it could just drift a little more into the end of the month and then go down.
You cannot predict exactly what will happen, but the important point is that if the bulls do not generate a strong rally soon then it will be a sign that the big rally that began in February is finished just like all the ones before led to nothing but a drop back down.
People who are fully invested in the market would have to reduce risks and their exposure to stocks.
People on margin MUST GET off of it!
Of course people diversified and not simply owning only the S&P 500 and mainstream Wall Street funds that own gold and junior mining stocks can smile.
Money is being made now in gold and gold stocks. They were up again yesterday and up this morning again and are the hottest things now in the world markets. No one can doubt the power of gold except the most foolish of the foolish.
Gold stocks made me more money yesterday. Hopefully they did the same for you. If not then you need to buy!
The problem is no matter how much I have done to get the word out on the metals and gold mining stocks very few Americans own any of them at all, because CNBC and Jim Cramer doesn't talk about them and so people are scared to buy without their permission.
And that is what I worry about.
So you must watch the stock market carefully here. Do not fall asleep.
What the market is doing right now with the Bollinger Bands is something I have never seen before and no one else has either.
We are on the edge of something big starting.
It's like a glacier and we just heard a cracking sound.
Will it just dump or do the bulls have a few moments of fun for a few weeks first?
Well, you can't take your eye off the ball and you gotta stay alert to know.
It's like the old Kenny Rogers song.
Sometimes you gotta know when it is time to cash in.
Listen to his song today, because it could be the best thing you can do to think about your stocks if you are all-in the S&P 500 or DOW or Apple and Facebooks. For goodness sakes if you own Apple sell it, because it has been a dead stock for over year now and is not going to go anywhere for you! Sell it and move that money in gold and reduce your risks and make money!
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