It’s Red Alert for Stocks According to Dr. Robert McHugh

After the market closed on Wednesday of this week, Dr. Robert McHugh issued the following Red Alert Warning to his subscribers which I feel compelled to pass along to you:

NYAD-SPX“We start out tonight’s report with a Red Alert!! for the stock market. A key development we have been watching for, a condition in the market that is a necessary precursor to most major (major with a capital M) stock market tops is now in place. This means that all systems are go for a major stock market top here in 2015. This major top can occur at any time, from a few months from now to tomorrow, but without this condition, it could be argued that any top would merely be a top that is followed by a higher top down the road. However, with this condition in place, it is now evident that a final major top in the stock market that will not be exceeded for many years is fast approaching.

“This condition tonight is a Bearish divergence between the cumulative NYSE Advance/Decline Line and the stock market. If you look at the charts (on your left), we show this important divergence. This divergence is clearly evident, and is now a month old.

“There is another extremely Bearish development occurring now. The Dow Transportation average has formed a lengthy and substantial Bearish divergence with the Dow Industrials, since the beginning of December 2014 (see charts below). This plays into the ever increasing possibility of a Dow Theory primary trend Sell signal. This is a major non-confirmation under Dow Theory, a necessary pre-condition for a Dow Theory Sell signal. Trannies got crushed Wednesday, May 20th, falling 170 points. Trouble is well underway, the economic situation is worsening fast, and we expect the stock market to soon confirm this underlying deterioration. Using the Noah metaphor, clouds are overhead and we can feel some sprinkles.

“Stocks ended mixed and flat again Wednesday, May 20th. We continue to watch for a top here. We can count the patterns we have been watching as complete tonight. It is possible that the stock market top is in. Wednesday’s internals were weak. Volume was down. The final wave {c} up leg within wave {e} up of the Rising Bearis h Wedge we have been showing the past few weeks can be counted as complete (see chart on page 26). It remains possible some variant pattern will emerge and stocks climb further, in which case the Bradley model turn date in early June could also be a candidate for a top. The chart on page 24 allows for another 200 point rally in the Industrials before a top arrives should stocks want to extend a bit further, although the charts on pages 25 and 26 argue that the top is imminent. New Sell signals in our key trend-finder indicators will confirm when an important top has arrived to the stock market. Stocks are very overbought.

TRAN-INDU-HUI“On Wednesday, our short-term Key Trend-finder Indicator remains on a Buy Signal. Our Blue Chip 10 day average Advance / Decline Line Indicator also remains on a Buy signal. Our intermediate term Secondary Trend Indicator remains on a Buy Signal, rising 4 points (out of a possible maximum 9 points) to positive + 9. Demand Power fell 1 Wednesday while Supply Pressure also fell 1, telling us Wednesday’s move was weak.

“There was a very small change in the McClellan Oscillator Wednesday, rising only 0.43, suggesting a large price move is likely over the next few days.

“The Industrials and S&P 500 are finishing a Rising Bearish Wedge from October 2014, and in the most Bullish case are about 90 percent of the way through the final wave {e} up for this five wave pattern, which could even be fully complete tonight. What is interesting about the Rising Bearish Wedge from October 2014 is that it provides us with an initial downside price target for the ensuing decline of 16,000ish, the first leg of what could be a massive drop in stock prices, which we believe will include a stock market crash later this year. A decisive decline below 17,750 would suggest that the Rising Bearish Wedge is finished and that a powerful decline is starting.

On Gold & Gold Shares

McHugh continues to believe that we are not only near a bottom but that we are going to see a substantail rise in the price of gold before the end of this year. Here is what he said to his subscribers this past week after the Wednesday, May 20th market close: “Gold rose a hair Wednesday, May 20th, inside wave {3} up. Gold and Mining stocks are oversold Wednesday.

“Big picture, Gold looks to have finished a Declining Wedge since May 2013. These patterns are termination bottom patterns, and it means Gold is headed much higher during the last 8 months of 2015, headed toward a minimum of 1,425ish by year end. It means that Gold could see a 15 to 20 percent additional rise this year. This means large degree wave (3) up has started, and within that rally, which is in progress.

Our short-term key trend-finder indicators for the HUI Mining stocks, which also points out trends for Gold and Silver, moved to a new Sideways signal Tuesday, May 19th, and remain there Wednesday. The HUI Demand Power / Supply Pressure Indicator generated an Exit Long Positions signal Tuesday, May 19th, 2015. On Wednesday, Demand Power fell 2 to 397, while Supply Pressure was flat at 403, telling us Wednesday’s move was weak.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.