Bubble Getting Bigger

About two weeks ago Harry S. Dent Jr., Senior editor of Economy & Markets, pointed out the severity of the Chinese stock crash and the crash in the oil market as signs of the next generational bust. Which is basically a part of the pattern of the market where the bubble finally bursts, and like Harry had said before, all bubbles burst. His point is that the signs that we are observing in the market currently are similar to those that have led to generational bursts in the past. But are the similarities significant enough for you one to be concerned. Harry thinks so and here is why.

Harry believes in the down jones megaphone pattern. This pattern basically states that the bubble is going to continue to take the market to new heights before the burst. And recently each year has shown growth however the recession phases have been getting progressively worse signifying the growing tension in the bubble. The way that the megaphone pattern works where brokers advice doesn’t is that the broker is going to tell you not to worry, and that the stocks will always come back. Well he wouldn’t be entirely wrong, however lets look at the most recent bursts in American history. The last two bubble bursts of ’29 and 68’ took about a quarter of a century for both to return to the levels when the bubble was at its height.

The below graph is an example of the Dow Jones Megaphone pattern. As you can see the pattern of new highs on the peaks, and the new lows during the valleys. Both valleys and peaks reach new highs and new lows. This graph is predicting the new low in the coming years, which is supported by the falling oil prices which have triggered the current junk bond collapse.

Nother major sign supporting the Megaphone pattern is the movement of small-cap stocks into the bear market phase AFTER falling 26% recently. This consistent under perfoirmance of typical stocks, is a sign of a major top, which has already occurred in 2000 and 2007, this is also displayed on the graph.

Basically the “new-low” is still on its way. Don’t let empty promises of rallying stocks lul you into a sense of security in regards to the markets current state. Take everything with a grain of salt and stay safe with your assets before youre sorry. To make sure your assets are in a secure place in this volatile time during the market, call Ortiz World Wealth your registered investment advisor representative today.