We Know the Stock Market is Topping in a Big Way Right Now

The title above was put in quotes because they are the words of Dr. Robert McHugh to his paid subscribers in his weekend missive published in the wee hours of last night. Dr. McHugh’s service along with that of J. Michael Oliver and now John Murphy are indispensable to me as a non technical analyst. Oliver in particular, I find to be helpful on a day-by-day basis. His work using both momentum and structure analysis allow for an ongoing reading of the pulse of various markets that I find very helpful. I have only recently begun to partake of John Murphy’s work at Stockcharts.com and expect to pass along some of his insights from time to time as well. At the end of this article, please find the contact points for the work of these favorites of mine.

Dow-1It is my sense that we are at a major tipping point in the precious metals and financial markets and so I felt compelled to share a few of the ideas from Dr. McHugh and Michael Oliver in this missive. With reverence to the chart on your left, this is what Dr. McHugh wrote to his subscribers this morning.

“We know the stock market is topping in a big way right now. To try and pinpoint a possible upside price target for the top, we are always searching for patterns that identify possible price targets.

“In this weekend’s report, in the chart on page 32 (shown here on your left) we see a possible small Rising Bearish Wedge for the Industrials since May 1st, 2015. If this pattern is ruling the price path for the Industrials, then it is telling us the Industrials should top with a small throw-over above the upper boundary. That suggests the Industrials will top around 18,325 to 18,375ish. Further, the speed of this price pattern suggests a top could occur around our May 18th, 2015 phi mate turn date +/- a day or two. It suggests the Industrials may have another 2 to 4 days of price movement left to complete a major top, then should fall hard.

Dow-2“The larger Rising Bearish Wedge from October shown on page 31 (shown here on your left) allows for the Industrials to top around 18,500 in the Industrials, and around 2,150ish in the S&P 500, topping possibly around our May 18th, 2015 phi mate turn date. If things delay, the top could be pushed back to the major Bradley model turn date of June 9th.

“What is interesting about this Rising Bearish Wedge from October 2014, which is finishing now, 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 17,650 would suggest that the Rising Bearish Wedge is finished and that a powerful decline is starting.”

Regarding gold and gold stocks, here is more from Dr. McHugh.

goldGold rose again Friday, May 15th. It looks to us that a strong wave {3} up may have started, with Thursday and Friday’s rally progressing that wave higher. “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 Buy signal Tuesday, April 28th, and remains there Thursday. The HUI Demand Power / Supply Pressure Indicator generated an Enter Long Positions signal Tuesday, May 12th, 2015, and remains there Friday. On Friday, Demand Power fell 3 to 410, while Supply Pressure was flat at 393, telling us Friday’s move was weak.”

From a fundamental point of view, Dr. McHugh said this about his views on gold.

“Above we show the big picture for Gold. Gold bottomed July 20th, 1999, wave II’s bottom. Since then, wave III up has been one of the all-time greatest Bull Markets in Gold. The question this weekend is, is Gold’s big Bull market from the July 20th, 1999 low of 252.80 over? Gold remains in a well-defined rising trend-channel, and our Elliott Wave mapping analysis shown above says no, the Bull Market rally in Gold is not over. Wave III so far has taken Gold up 1,670 points tothe September 6th, 2011 all-time high of 1,923, which was a 761 percent gain in 12 years.

“There are many reasons we do not believe Gold has topped, and believe that Gold has much higher to go. Wave threes that are not part of a triangle pattern are impulsive, meaning they move the price vertically. These impulsive wave threes (in this case wave III) are made up of five subwaves. Above we can clearly see that wave III so far has only produced two subwaves. This means there has to be three more waves coming, two of them rally legs. In stocks, typically wave threes are the most dramatic.

“In precious metals, typically, wave fives are the most dramatic. Above we see that wave (3) up and wave (5)
up are still in the future. We believe the consolidation over the past three years has been a wave (2) pattern. It has been forming for 36 months, about a third of the time wave (1) up took, which is normalfor corrective moves. Once wave (2) down completes, which we believe has likely bottomed, Gold should head for a price target of 2,700 to 3,000 when the coming wave (3) up finishes. Monetary hyperinflation may eventually send Gold as highas $7,000 per troy ounce many years from now as wave V up takes shape.”

Contact Points for your editor’s favorite technical analysts

Dr. Robert McHugh’s “Technical Indicator Index” – https://www.technicalindicatorindex.com
J. Michale Oliver’s Momentum Structural Analysis – www.olivermsa.com
John Murphy’s work can be subscribed to at http://stockcharts.com

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.