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Michael J. Clark was born and raised in Sinclair, Wyoming. He is a poet, novelist, artist, historian, and market analyst. His fine arts portfolio can be found at the following address: His writing portfolio can be found at:... More
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Clark's Gate Timing System ©
    Aug 15, 2010 6:31 AM | about stocks: AXP, GS, AA, CAT, EA, VZ, SAP, AIG, JO, CGW, FXE, KOL, UHN, AMTD, ORCL
      FOR: 16 AUGUST 2010
    - MONDAY


    CGTS VIEW: Two weeks ago we proclaimed the 'end of the rally'.  It was a bit early.  We are repeating our call now.  We are seeing so many short-selling opportunities in the market now that we can't help but call this a market top.  We are providing charts below to illustrate this view.  Also see a long list of potential shortsales that showed up on the screen we ran using parameters outlined in this article.

    Is this a crash that is coming?  It's possible.  Most of the global markets we look at bear a striking resemblance.  All are topping; all are having tops confirmed.  The dollar is rallying.  The anti-dollar indexes and commodities are getting ready to go under again.

    From our numbers below, clearly momentum has broken down.

    Our key short-term momentum indicator -- numbers hitting +1 (positive) or -1 (negative) is now only 9% bullish.  189 issues are hitting -1 (bearish); only 19 are hitting +1 (bullish).

    The key intermediate-term Momentum Trend (those in the positive zone of 1-0 versus those in the negative zone of 0-negative 1) continues to lose ground, now only 62% bullish, down from nearly 90% last week.

    The Advance-Decline Line (most recent moves up or down) is at a very low 18% bullish, up from 10% bullish two days ago.

    Only 14 issues meet our criteria for a long trade (+1 M4 Sum Plus and Intermediate trend positive), while 74 meet our criteria for a short trade (-1 M4 Sum Plus and IT Trend negative).  This is only 16% bullish

    The intermediate-term trend of most issues are still positive (204, from 232 on Wednesday), but this is a lagging indicator.

    August 15, 2010
    Key Short-Term
    % Bullish
    Yesterday's Reading
    Key Long-Term
    % Bullish
    Yesterday's Reading
    % Bullish
    Yesterday's Reading
    % Bullish
    Yesterday's Reading
    % Bullish
    Intermediate-Term Trend
    Yesterday's Reading
    Yesterday's Reading
    Overbought 80-100; Oversold 20-0
    GSPC M4 Plus 21 Short-Term
    Yesterday's Reading
    1 bullish; 0 neutral; -1 bearish
    GSPC M4 Plus 21 Long-Term Trend:
    Yesterday's Reading
    1 bullish; 0 neutral; -1 bearish
    distance from
    GSPC Current price:
    New Low

    Comments on GSPC chart:

    The short-term momentum indicator (M2F Alt, Pane 3 from above, brown line) is oversold, so, short-term, we will be approaching an an attempted bottoming
    M4 Sum Plus (bottom pane, brown line) continues to reside at 0, having clicked down from +1: selling or a sidways market is likely until it clicks back up. This trend is negative at the moment and suggests selling continuing.
    M4 Sum Plus Trend (bottom pane, black line):  The intermediate Momentum Trend  is +1  -- positive.

    M5 3 Momentum (second pane from top, brown line) This key indicator has broken support and is suggesting we are at a major top and will have a substantial decline.  The difference between my call two weeks ago for the end to this rally and today is that two weeks ago M5 3 was not in a freefall.  Today it seems to be entering a freefall.  Time will tell.  It is breaking support, which usually means selling is coming.
    T5 Short-Term Trend (second pane from bottom, red line) is in a positive trajectory but a slightly negative pattern (lower low); but it has taken out overhead resistance, which is a positive.
    T11, Intermediate-Term Trend (second pane from the top, red line): negative.  It is hard to sustain a rally in the opposite direction of this trend line.
    Overall: negative at the moment.  A look at a couple more charts helps to explain the negativity.

    Watch the top pane, the black line, M5 3 Test Average.  This is a long-term overbought/oversold momentum indicator, moving between (about) +100 and -100 ranges.  Positive 50 is overbought; Negative 50 is oversold.  When this indicator is topping and is overbought, it is proclaiming a top.  Look below to the second pane from the top, at the black line, M4 Sum Plus: when this indicator is -1 for two days in a row (ignore spikes up or down), this confirms the sell signal.  The bottom pane has two other indicators that measure intermediate-term momentum.  The DJIA is giving a short-sell signal now.  We expect more selling.  The black line (top pane), to reach a bottom, must cross the corresponding brown line (M5 3 Avg Differential) AND M4 Sum Plus (Pane 2) must confirm the bottom with two days at +1.

    FCHI, French CAC Index (below): similar picture.  Top, prices heading lower.

    OEX, S&P 100 Index, also appears to be topping.

    FXE, Euro VS US Dollar ETF.  A stronger US Dollar now seems to be the bane of stocks -- and the weak stock rally over the last month has been 'fueled' (perhaps too strong a word, since the fuel was rather watered down) by a Dollar correction.  The Euro seems to be topping; and the Dollar seems to be bottoming.


    Felix Salmon wrote yesterday about an exchange between CNBC’s Rick Santelli unloaded today on Steve Ricchiuto of Mizuho. I quote from Felix Salmon's article:

    "The cause of the rant was a quote from Pimco’s Bill Gross, saying that he would only buy mortgages sans a government guarantee if first-time homebuyers were forced to make 30% down payments.

    "The immediate cause of the rant, however, was Ricchiuto, who was proposing that the government solve the problem that people can’t refinance their homes. “They’ve got to go out and change the ability to refinance,” he said, prompting Santelli to ask why. When Ricchiuto responds that it’s “because the banks won’t do it”, Santelli’s rant arrives:

    Banks won’t do it because the government has subsidized lending to a level no rational person — you wouldn’t, with your money, sir, let somebody buy a house with nothing down and basically a free ride to risk on an unsecured loan.

    "Richhiuto is game enough to respond, saying that government intervention is “the only way to get the housing market going.”

    "Santelli, however, is having none of it:

    Then the housing market’s no good, and we should let it seek its bottom. The government can’t fix it."

    Santelli is right. We don't 'need to get the housing market moving again.

    We need housing devaluation to continue, even more dramatically. The housing bubble pushed housing prices in to the stratosphere. We need them to come back to consumers' salary levels so they can become affordable again WITHOUT liar loans, cheater-loans, and guaranteed-to-default loans (0 down, unsecured loans). Our banks lost their integrity because the housing price appreciation moved housing purchases far out of the affordable range of most Americans -- the banks, to profit off this phenomenon, were 'saved' by Wall Street banks who created a mechanism for packaging guaranteed-to-default loans with other, more traditionally-packaged loans (ie, with borrowers who actually met the banks' qualification requirements) that would neutralize the cancerous loans....unless we bring housing prices back down to the level of American salaries, without the trick loans, the easy-default loans, there will be no stabilization of housing in America. Housing historically appreciates 2% or so a year, in life with American salary increases. In 2001-2007, housing in some areas appreciated 250%. We have to eliminate all that air in the cost of housing in America if we really want to stabilize the housing picture.

    Stocks have topped short-term.  We'll see if the buy-the-dips philosphy continues to work.  I believe stocks will seek a much lower bottom, based on an economy that can't be fixed, and a Fed Chair who has run out of ideas and ammunition.

    Some pictures tell a thousand stories -- this picture tells us two.  (1) Ben Bernnanke is running on empty. And (2) he is running out of time.


    We have a LOT of shortselling ideas today -- and one long position.

    The SAP chart below shows the system pretty clearly.  The black line in Pane One is the key indicator.  When it is overbought (positive) and declining, one has to pay attention.  Confirmation is made in Pane 2 by the black line M4 Sum Plus -- 2 days at -1 is bearish; 2 days at +1 is bulish.  How do we recognize a bottom using this system?  We want M5 3 Average (black line) in the top pane to be below zero and turning up.  It needs to go through its companion indicator, brown line, top pane AND it needs to be confirmed as a bottom by M4 Sum Plus in Pane 2.  The bottom pane have two other momentum indicators that also can be useful -- but they are secondary.

    How to read SAP.  Top in late July, significant decline but not near a bottom yet.  First sign of a bottom will be black line cutting through brown line (top pane); that hasn't happened yet.  SAP is right at support (44 roughly).  My prediction is that support will not hold.  I expect it to test May support at 40.95.

    VZ, Verizon Communications.  Appears to be making a top, BUT this has not yet been confirmed below.  However, juding from the three earlier tops, this confirmation is only a matter of time.  But, we're waiting.

    One of our readers wants to know if it's too early to buy more SYNA.  Yes, too early.  We can't guarantee it will go alot lower; our inclination is that it will go down to support -- which means a loss of at least 3 more points.  It may have small rallies in between now and its actual bottom (see earlier part of chart) -- but, for us to have an interest in SYNA long, the M5 3 average has to bottom in oversold territory and turn up and be confirmed below.

    BP, British Petroleum.  The BP top has not been confirmed by M4 Sum Plus below -- it HAS been confirmed by the 'cheater' M5/M5 Average Diff Asp indicator in the bottom pane, which usually gives readings earlier but is not always reliable.  It looks like a top and smells like a top and feels like a top -- but we need our confirmation.

    AXP, American Express: looks to be topping.

    AIG: looks to be making a top and should test 34.52 support.

    ORCL, Oracle, has already given up quite a bit of ground.  It has more ground to give up.

    KO, Coal ETF.  More selling coming; in fact, most of the commodity ETFs linked with an economic recovery (steel, industrial metals and materials, aluminum, copper) look bad.

    A lot of people LOVE Caterpiller.  Looks like it's time to take some profits.

    CGW, Global Water ETF: topping.  Should test 17.07 support; if that fails, then 16.48 support.

    CAAS, Chinese Auto Daily: This is actually a Bear Market chart picture: lower lows and lower highs.  If it takes out support at 15.88 and then at 14.75, the Bear Market picture is confirmed.

    The stock I, personally, love to hate, Goldman Sachs, is breaking down again.  It is, at the moment, not confirmed by M4 Sum Plus, but it is confirmed by the 'cheater' confirmation in the bottom pane.  Another day of M4 Sum Plus at -1 and this top will be confirmed.

    JO, Coffee ETF.  For those who say I am a perma-bear (I'm clearly NOT a perma-bear, or I would not have buy-signal parameters with this system), this issue looks like a buy and seems ready to take off.

    Ameritrade does not look so good, coming off a very weak rally.  Looks like it's going to be testing old lows.

    ERTS, Electronic Arts, one of my favorite whipping boys over the last two years: get out the whip again.  The rally was weak; and the rally has ended.  It's going lower.

    The oil-aggregate ETFs all look weak, including DBO.  More selling looks pretty much guaranteed in Heating Oil below.

    XRT, Retailers ETF.  Hold your hats.  This one looks to be coming down.  The economic news is just going to get worse and worse.

    AA, Aluminum Company of America, had a weak rally off May lows and now appears to be going down again.  This chart is a very bearish picture -- and becomes worse if the coming sell-off breaks below 10.


    Potential Shortsells Visual
    ^AORD_D 4,480.90
    ^BVSP_D 66,264.43
    ^DJI_D 10,303.15
    ^DJT_D 4,201.81
    ^FCHI_D 3,610.91
    ^GDAXI_D 6,110.41
    ^GSPC_D 1,079.25
    ^KS11_D 1,746.24
    ^NDX_D 1,818.80
    ^OEX_D 490.59
    ^SMSI_D 1,063.15
    ^XOI_D 977.596
    AA_D 10.64
    ACH_D 20.27
    ADBE_D 28.01
    AIG_D 36.67
    AMSC_D 17.4
    AMTD_D 15.415
    ARE_D 67.35
    ARO_D 67.35
    AXP_D 41.73
    BA_D 64.84
    BBL_D 60.54
    BBL_D 60.54
    BEAV_D 27.35
    BLK_D 151.58
    BWLD_D 40.18
    BWLD_D 40.18
    CAT_D 68.01
    CGW_D 17.6
    CGW_D 17.6
    CLI_D 30.83
    CLI_D 30.83
    COL_D 55.46
    CPA_D 49.79
    CRM_D 97.24
    CSCO_D 21.36
    CSUN_D 3.995
    DBO_D 24.02
    DBO_D 24.02
    DE_D 64.85
    DRYS_D 4.45
    ELNK_D 8.51
    ELNK_D 8.51
    ELY_D 6.41
    ELY_D 6.41
    ENP_D 18.6
    EOC_D 49.99
    EPP_D 39.31
    EQR_D 44.88
    ERTS_D 15.67
    ETFC_D 13.95
    EURCAD=X 1.328
    EURCNY=X 8.672
    EWG_D 20.13
    EWJ_D 9.44
    EWM_D 12.23
    EWP_D 37.62
    EWQ_D 21.64
    EWS_D 12
    F_D 12.15
    FIO_D 23.586
    FMCN_D 17.7
    FST_D 27.75
    FXA_D 89.41
    FXB_D 155.26
    FXE_D 127.08
    FXM_D 78.5
    GE_D 15.38
    GGB_D 14.13
    GGB_D 14.13
    GS_D 148.08
    GS_D 148.08
    HAL_D 28.1
    HAL_D 28.1
    HD_D 27.31
    HD_D 27.31
    HMA_D 6.65
    HME_D 48.57
    HME_D 48.57
    HOG_D 25.57
    HOG_D 25.57
    HON_D 41.32
    HURN_D 18.87
    IBM_D 127.87
    ICON_D 15.45
    IDX_D 75.24
    IO_D 4.08
    IYR_D 50.43
    IYR_D 50.43
    JCI_D 27.37
    JJM_D 37.47
    JJU_D 28.91
    KLAC_D 29.1
    KOL_D 32.99
    KOL_D 32.99
    KSU_D 34.44
    MGM_D 10.09
    MMM_D 84.01
    MSFT_D 24.4
    MTL_D 21.68
    MWW_D 11.67
    NFX_D 50.6
    NFX_D 50.6
    NKE_D 70.58
    NKE_D 70.58
    NZDUSD=X 0.706
    ORCL_D 22.66
    ORCL_D 22.6
    PDE_D 23.44
    PDLI_D 5.18
    POL_D 9.73
    PPA_D 16.46
    QCOM_D 37.95
    QQQQ_D 44.72
    RBS_D 14.6
    RHT_D 30.93
    RHT_D 30.93
    RIMM_D 53.4
    ROK_D 51.47
    ROK_D 51.47
    RS_D 38.36
    RSX_D 30.72
    RSX_D 30.72
    RY_D 49.15
    SAH_D 8.53
    SAH_D 8.53
    SAP_D 44.43
    SBUX_D 23.99
    SEA_D 26.83
    SLAFX_D 48.62
    SLG_D 57.02
    SLX_D 58.21
    STD_D 12.07
    TD_D 68.16
    TSLA_D 18.32
    TUR_D 59.53
    TUR_D 59.53
    TWX_D 30.81
    TWX_D 30.81
    TXN_D 24.28
    UDN_D 25.72
    UGA_D 31.91
    UHN_D 24.51
    UHN_D 24.51
    UPS_D 64.44
    UPS_D 64.44
    UTX_D 70.7
    UTX_D 70.7
    VALE_D 27.75
    VCI_D 31.17
    VNQ_D 49.78
    VNQ_D 49.78
    VZ_D watch
    WGC_D 25.84
    WMT_D 50.4
    X_D 45.1
    XES_D 26.64
    XES_D 26.64
    XHB_D 14.15
    XME_D 48.61
    XME_D 48.61
    XOM_D 59.91
    XOM_D 59.91
    XOP_D 40.23
    XRT_D 36.88

    More information on the CGTS systems can be found at:


    Clark's Gate Timing System
    Hanoi, Vietnam

    84 4 221 92210

    Disclosure: No positions to disclose.

    Disclosure: No positions.
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Comments (26)
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  • My thanks to you for this article. Out of curiosity, you would disagree with the Random Walk Hypothesis of stock price movement wouldn't you ?
    15 Aug 2010, 12:00 PM Reply Like
  • Sorry, I forgot to add the link.

    15 Aug 2010, 12:01 PM Reply Like
  • Author’s reply » I've never spent any time on the Random Walk theory. I believe in patterns and trends -- this doesn't really mean I think the market is predictable, but I do think it it follows certain principles of movements, days of filling up, followed by nights of emptying out -- the indicators I've developed are an attempt to quantify those patterns and notify when those patterns might be appearing again. Are they successful? Not 100%. But they are better than the ones I created ten years ago.
    15 Aug 2010, 01:02 PM Reply Like
  • Godwilling I will disprove this theorem should I do my Ph.D
    16 Aug 2010, 01:33 PM Reply Like
  • Author’s reply » Good luck.
    17 Aug 2010, 02:44 PM Reply Like
  • Ha, so you were wrong two weeks ago, and you are probably wrong again. The first thing I note is "the dollar is rallying." Hm, the yen hit a new high and may test the all-time high of 79 yen to a dollar. And how can the dollar rally is the central bank just promised it would pump more dollars into the economy?
    15 Aug 2010, 06:19 PM Reply Like
  • Author’s reply » It's not the first time I've been wrong -- and I will be wrong again.


    How CAN the dollar rally? It's a paradox, isn't it. Because the European contagion is going to rise up again. Because Japan knows that it has to buy dollars and sell yen or they can't compete in terms of exports.


    Take a look at the recent action in UUP, US Dollar Bullish ETF, and tell me it's not beginning a rally.



    All the currencies of the world are flawed -- but some are more flawed than others. And the Euro seems to be the most flawed at the moment, with such an ill-considered union pasted together with a naive approach to 'national/federal' interest rate policy.
    16 Aug 2010, 09:06 AM Reply Like
  • Oh, and as Warren Buffett says, "Buy when there is blood on the streets."
    15 Aug 2010, 06:33 PM Reply Like
  • Those who try to catch a falling knife also may bleed. Michael Clark gives some good perspectives in regard to being cautious.
    15 Aug 2010, 08:21 PM Reply Like
  • And why do you think it is a falling knife. Manufacturing seems to be improving. The auto industry is slowly coming back.


    Jobs naturally come later. Companies need money and an incentive to hire. Companies have a lot of cash. So the jobs should follow sooner or later.
    15 Aug 2010, 09:22 PM Reply Like
  • This time looks different to me. The jobs may follow but I am not sure they will all be on U.S. shores, just as cash for clunkers benefited foreign auto more than domestic. As history shows, manufacturing can be turned off in a week's time. How many people do you know who have bought a new car recently or intend to shortly?


    I do not believe that the market has priced in all the bad news yet as we are still wringing out the economy and the hits seem to keep coming. Volume remains low and the individual investor seems to have run out of cash. Even China's economy seems to be wanting a breather. Just my perspective.
    16 Aug 2010, 07:24 AM Reply Like
  • Sorry, but didn't they say that after the tech bubble? Times are not different. Humans will be humans. History will repeat itself. That's just reality.
    16 Aug 2010, 09:59 AM Reply Like
  • Well, both of my neighbors just bought a car. And just because they are a Toyota or a Honda, they are still made in the US. Honda has a plant in Kentucky. It is too expensive to ship a car from overseas, $2000 for a used car according to my uncle who is the president of Mitsubishi's used car division. Most of Ford cars are made in Mexico.
    16 Aug 2010, 10:06 AM Reply Like
  • Author’s reply » After the tech bubble Alan (Mister Magoo) Greenspan stepped in and pumped up the housing bubble to save the stock market -- of course, the housing bubble destroyed the global economy. After the housing bubble popped, Ben (Gentle Ben, Uncle Ben) Bernanke stepped in to pump up a commodities bubble, by further emasculating the US Dollar, and arranging free money for world bankers.


    It seems that all our leaders can do now is to try to blow bubbles, inside of which they tell us we can store our illusions about the world being a safe place, with growth and development of civilization guaranteed to expand for ever.


    Now Gentle Ben can't stop (Gentle Ben was a bear if I remember correctly). He's kind of a modern hood robbing the poor to give to the rich -- claiming that he's saving civilization for us. The rich have robbed the poor for ever -- and they have also claimed for ever that they were doing it to foster civilization.


    Humans don't change much. Corrupt white collar criminals don't change much either. The difference between bankers and mafiosos is that the mafioso is the banker at the BEGINNING of his career....
    16 Aug 2010, 10:31 AM Reply Like
  • Author’s reply » Toyota and Honda profits probably don't stay in the US however.
    16 Aug 2010, 10:34 AM Reply Like
  • No, but they create jobs for Americans if they have plants in Kentucky.
    16 Aug 2010, 12:00 PM Reply Like
  • I thought Greenspan served since 1987 and Ben came in 1 year before the housing bubble, appointed on February 1, 2006 . The bubble burst in 2007.
    16 Aug 2010, 12:04 PM Reply Like
  • Author’s reply » Tech bubble burst in 2001. Greenspan.


    Housing Bubble formed 2001-2007. Greenspan-Bernanke.


    Greenspan then went to work for John Paulson who made billions shorting the American Housing Bubble. Talk about rewarding the man who made you a billionaire.


    Commodities Bubble 2007-8. Bernanke.


    Failed Stock, Commodities and Housing Bubble, 2008-2010. Bernanke.
    16 Aug 2010, 12:24 PM Reply Like
  • Author’s reply » It would be nice if Americans were buying American cars and those plants in Kentucky and Tennessee and elsewhere employed Americans and provided profits to American corporations, wouldn't it?
    16 Aug 2010, 12:25 PM Reply Like
  • This recession is certainly different, it is a structural recession. The 2001 tech wreck was a garden variety tulip bulb craze for a sector of companies with no profits and some with even no revenues! The economy was strong then, the 6.5% unemployment rate was very manageable.
    Ask yourself these two questions and chew on them for a while.
    1) Can you name a dozen people who have lost their jobs since 2008?
    2) How many people do you know who have made a significant upward move in their career since 2008?


    My answers:
    1) Took less than half a minute for me to hit 15 people. I am betting most people can come up with a dozen easy. If you can't you need to get to know more people.
    2) One, maybe two people.
    16 Aug 2010, 01:20 PM Reply Like
  • Author’s reply » The 2001 'recession' can be seen in the NDX chart, tech stocks, Nasdaq Index. It made a top of 4099. It's trading now at 1818. What Greenspan cleverly did was flood the economy with cheap money, to short-circuit the collapse suggested by the NDX collapse (and symbolically suggested by the collapse of the Twin Towers).


    But Alan's move triggered a housing bubble that brought down the global economy. The 2001-2007 'expansion' was a debt-expansion, and now it all has to be paid back, through traditional repayment or through default and/or bankruptcy. There is no free lunch, not even on Wall Street -- as Wall Street will discover this also over the next decade.
    16 Aug 2010, 01:50 PM Reply Like
  • Didn't Greenspan said to stop raising rates when he left in 2006, but Ben kept raising them till 2007? 1% raise in the fed funds rate which determines the prime rate for mortgages is a lot of money for the average home buyer. Was that what caused many to foreclose?
    16 Aug 2010, 02:05 PM Reply Like
  • Yeah, but the reality is that most Ford cars are made in Mexico.
    16 Aug 2010, 12:47 PM Reply Like
  • Author’s reply » Yes. That's what is happening currently.
    16 Aug 2010, 01:24 PM Reply Like
  • Looks like it is starting. Economic news is terrible today and accelerating to the downside. Second quarter GDP is expected to be lowered to 1.5 to 1.8% in the next update on the 27th. That will be a big catalyst for a crash. Suspect slowing economics will trigger another financial crisis either here or in Europe. As GDP fades, revenues for sovereigns will fade causing defaults. Banks will have residential, commercial and sovereign risk to deal with. It has got to hurt corporate earnings as the consumer pulls back and corporations hunker down.
    19 Aug 2010, 10:26 AM Reply Like
  • Author’s reply » Wall Street likes the sugar-coating on the cake. But Wall Street won't like it when it finds that the whole cake is sugar-coating.
    19 Aug 2010, 12:09 PM Reply Like
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