On July 6th I posted this chart with a secondary count S&P price target of 1400. At the time I thought the index could reach that level by the FIB ending date of July 20th.
The market breached the 1400 level today; pushed by the Federal Reserve 600 million repo. The current market environment which sees all news as favorable for stocks, is typical of all topping markets in history.
Can the FED and ECB reshape financial markets so to never lose, always win, no matter how overvalued, and without short shares, volume, and fundamental support?
Seventy percent of the US economy is consumer spending. The US consumer is now 50 million on food stamps, 100 million no longer in the labor force and the biggest tax paying base, the aging baby boomers, looking to withdraw from the system.
The baby boomers children are still paying their student loans and their kids, the grandchildren of baby boomers have over 1 Trillion in student debt-with NO FULL TIME JOBS AVAILABLE.
What about Fundamentals? Amazon is the number one retailer and should be the measure stick since 70% of the economy is retail.
Amazon currently trades between 90 and 250 times earnings, current and forward looking. Amazon projected earnings growth rate is MINUS 6% and on paper, considering all factors, the stock has an actual value of $20 per share.
The next chart is a big picture S&P view-3.5 years of bull market. The chart has a clear 5 wave higher pattern into calculated Fib price resistance zones.
My point is this: The FED based on money printing alone will have to push stocks higher-to the most expensive in history levels-in order to get another 3.5 year Bull market-5 wave pattern.
Stocks are too expensive, the general public is broke, the % of shorts are at all time lows, there is no trading volume, and the world financial system is imploding; despite QE1, 2, 3, TWIST 1, TWIST 2, REPO 1 REPO 2, etc, etc.
I do not believe the math adds up and there is no way to get around LIQUIDATION-despite the best efforts of central planners around the world. The black debt hole is just too large; insolvent banks like Bank of America, RBS, and Citi, will simply have to be liquidated and their debt holders will have to write of the debts.
The next few charts are comparisons of topping patterns. The top of each chart is current 2012, the bottom half is topping charts for the years 1983, 2007 and 2011.
These previous tops are road maps to what the 2012 top will look like. The second option is- I am dead wrong and the FED will be able to send the stock market to 100xs earnings, with a financial collapse in the real economy, $10 gas at the pump and no jobs.
This first 2012 chart is market with the time from the June low. Currently 60 days and September will be 90 days. We are looking for the market to exhaust into a final high into one of these time frames.
The 1st chart compares the top pattern to 1983 top. Our current location is marked at number 2.
Second chart compares 2012 with last year, 2011, also marked at the number 2 spot. Both 1983 and 2011 made lower highs. The difference in the two is the speed of the decline after the final distribution top was completed.
The next comparison is 2012 to the 2007 top. This top pattern is the highest probability because of the similar circumstances. Presidential election cycle, along with collapsing fundamentals that are ignored by the markets.
Our current location I have marked with the number 3. In this scenario, we will make a marginal new high into the 90 day time period, a fast collapse, a fast recover into the November election time frame, then the first wave lower of a 2 year bear market begins.
Does buy low and sell high matter anymore? Is this time truly different? Can the stock market for the first time in history, never lose, and have infinite upward valuations?
I got some Tulip Bulbs and a bridge in Brooklyn to sell to anyone who thinks so.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.