FOR: 15 SEPTEMBER 2010
CGTS VIEW: The rally is still alive and momentum is still rather positive. Below you will find a whole series of reasons I think this is a sideways market with a heavy gravity that will keep it from taking off. The reasons I present for this viewpoint are mostly philosphical in nature that you will find below.
A. MARKET MOMENTUM
- Our key Short-Term Momentum Indicator -- numbers hitting +1 (positive) or -1 (negative). OVERBOUGHT: OVER 80% BULLISH; OVERSOLD: UNDER 20% BULLISH. CURRENT READING: 68% 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). OVERBOUGHT: OVER 75% BULLISH; OVERSOLD: UNDER 25% BULLISH. CURRENT READING: 80% BULLISH.
- The Advance-Decline Line (most recent moves are either up or down). OVERBOUGHT: OVER 75% BULLISH; OVERSOLD: UNDER 25% BULLISH. CURRENT READING: 67% BULLISH.
- Criteria for a Long Trade (+1 M4 Sum Plus and Intermediate trend positive), down from 36 on Thursday. CURENTLY 47% OF ISSUES MEET THESE BUY CONDITIONS.
- The Intermediate-Term Trend positive instead of negative. CURRENTLY: 67% IT TREND POSITIVE.
- The key Long-Term Momentum Indicator (measures distance between M5 3 Indicator and M5 3 Average) -- when above 0 (indicator above its average), bullish; when below 0 (indicator below its average), bearish. CURRENT READING: 80% BULLISH.
Overall: positive short-term. Prices may be getting a bit overextended as GSPC approaches resistance (1129.24). M5 3 Average (black line, Top Pane) is still below M5 3 (brown line) and climbing. This is a good sign for more appreciation. M4 Sum Plus (Pane Two, black line) is still in the positive zone (zero to 1). The M5/M5 Average Differential (bottom pane, black line) is a bit toppy. When it breaks down below zero (meaning the M5 3 Average is greater than M5 3), the brown line in the same pane will break down below zero also. This will be a sign that selling has gained strength.
HGX, Housing Index. Seems to be hitting resistance. Note that M5 3 (Momentum) is trying to top out (Top Pane, brown line). Also note that M5 3/M5 3 Average Diff (black line, Bottom Pane) is trying to turn down.
THOUGHTS ON THE MARKET
Besides all the particulars -- the specific details -- that point to negative behaviors in the markets and in the economy for the near future -- I won't focus on these micros issues and datapoints today -- there is a philosophical reason to be negative when looking at the financial world through a macro lens also.
I began work on a book about the financial crisis, Turn Out the Lights, in 2008. To my amazement, I began to piece together a puzzle unveiling, to me at least, a cyclical logic governing economic expansions and economic contractions -- which now appear to me as 'laws' of nature, immutable, inescapable -- which was quite astounding.
America appeared to go through discrete periods of expansion (lasting 18 years) -- I call them Day-Cycles -- and discrete periods of contraction (lasting 18 years) -- I call these Night-Cycles. I began tracing American history backwards through time and found American financial crises, depressions, contractions, almost all precipitated by banking catastrophes, every 36 years of American history.
Anyone wishing to investigate these ideas more deeply can look at my manuscript 'in process' at the following web site:
This philosophy is not new, it is based on the very old philosophy which dominated ancient cultures: using Nature's cycles (the four seasons, day-night cycles, moon cycles) as a structure for this understanding.
A diagrammatic rendering of this structure emerged that resembled both a 12-petalled flower opening and also a pictorial structure of the atom.
*See note below.
In this picture, History has a Day-Cycle of light, expansion, activity, science, causality inevitably followed by a Night-Cycle of darkness, contraction, inactivity, mysticism, dream (reality by metaphor). This picture of History spiralling through space conforms to our clock (our understanding of Time) and also to the Four Seasons. The Day-Cycle peaks at Noon (Summer Solstice) and bottoms out at Midnight (Winter Solstice). The Night Cycle follows a reverse pattern, weakest at Noon, strongest at Midnight. The ascent of light is followed by the descent of light.
My understanding of this structure suggests that we are, now, as we speak, in August 2010, at about 6:25 PM, just entering the night. The light has been weakening since 2001. At Dusk, light and darkness are at equal strength (as they are at Autumn Equinox -- days and nights last the same length of time) -- but Darkness will now 'win' for the next 9 years. What does this mean for the bulls on Wall Street? It does not automatically mean catastrophe. But it doesn't mean progress either -- stalemate at best. When we go to sleep at Night, the world does not revert to the distant past as we lose contact with it while we dream. The world of daylight that we leave behind at Dusk is quite similar to the world we wake up to at Dawn the next morning. We are different. We are refreshed. We have more energy. We have a desire to carry out the next day of our life -- evolution happens during the Day-Cycles; de-evolution happens during the Night-Cycles, de-construction, after the construction of reality that takes place in the preceding Day-Cycle. Social discontent is a big part of this deconstruction energy (when we sleep we de-construct our waking world; when we awaken, we re-construct the waking world, in our minds at least -- and I would argue that Light itself plays a huge part in this. Light, Day-Light, Sun-Light, is cohesive and constructive to our mental energy, is building-energy. Think of what Day-Light means to growth in the Plant Kingdom.
2010 is the Evening, the Dusk, if this structure of thought has any merit, which connects it back to two other periods of history in Twentieth Century America. A descent into Night occurred in 1974-1983 and in 1938-1947. Both of these periods were pretty horrific times in American history -- good and bad, of course -- but both teeming with the Spirit of Deconstruction -- or anti-matter -- involving a fairly heavy destruction of social and political and physical constructs (realities).
What happened to the stock market during these periods? Each period had rallies and declines, of course. Day-Cycles (Bull Markets) have declines and rallies also. But Night-Cycles (Bear Markets) have very little real upward momentum. The trend is down or sideways (at best). Does history bear this out? Yes.
If we look at charts of the periods 1938-1947 and 1974-1983, we see a picture of range-trading and side-ways stagnation. Holding the Dow from 1938 - 1947 would have netted an investor a gain of 4% annually, not terrible for the times, considering all that went on during that 'decade' rife with deconstruction. Holding the Dow from 1974-1983 a 2.6% annual gain. Not really so good -- but a gain anyway.
This is the kind of market we are probably entering in 2010: a sidways market with a chance to 'trade' one's way to reasonable gains if one is very light on his feet. But about 2-4% annual returns for those who buy and hold -- and that isn't really very exciting, considering inflation's restless adherents in power today.
If we look at the full Night-Cycles in question, the picture is much worse. Let me say one thing about my terminology: a real Night-Cycle runs from Dusk to Dawn -- the way I'm unsing the terms "Night-Cycle" and "Day-Cycle" are a bit misleading. My Night-Cycle is running from Noon to Midnight; my Day-Cycle is running from Midnight to Noon. At Noon, the Light begins to weaken, and continues to weaken continually until Midnight, when the the Light is both absolutely defeated and also reborn again as a seed. From Midnight to Noon, the Light begins to grow and strengthen until it as absolutely dominant again at Noon.
The monthly chart below shows quite clearly the sideways nature of investment during the Night-Cycle. The Day-Cycle is about expansion, about growth; the Night-Cycle is about rest. And economy CANNOT grow during a Night-Cycle. And investors will be challenged to grow their investment account also.
An investor buying the Dow in 1929 and holding until 1947 would have LOST about 5 1/2% annually. An investor buying the Dow 1965 and holding until 1983 would have GAINED about 1.06% each year of that period.
Night-Cycles are the end of progress and the beginning of regress, rest, anti-magic. The plant no lower grows; the plant collapses in fact (in the Autumn-Winter scenario). Economies stop growing. Social cohesion based on a shared group of assumptions about common good begins to disintegrate. Class distinction grows more volatile as a political idea. The Day-Cycle has led to a wider separation of wealth in the society and wider differences in class -- and to an arrogance associated with wealth and power. The plant of progress, of evolution, of arrogance -- of Time in fact -- is being readied for deconstruction.
Class warfare is not the exclusive province of the Night-Cycle however; during the Day-Cycle the rich win the class war; during the Night-Cycle, the poor begin to get even or at least make an attempt to try to even out the playing field a bit. This can go as far as revolution, civil war, which is a kind of total destruction of the plant. Foreign wars are also liklely -- clearly foreign wars dominated the political scenery of 1929-1947 and 1965-1974, at least from America's view.
The City is the emblem of the Day-Cycle, Evolution, Global Progress, Individual Will, Time -- Time in the sense of the period of the 'day' when the society gets its work done, when it 'uses its energy to build'. The building of the Tower of Babel happens during the Day-Cycle. The deconstruction of the Tower of Babel happens in the Night-Cycle -- in fact, the deconstruction of the Twin Towers marked the beginning of our current Night-Cycle, 2001.
There are small Night-Cycles and large Night-Cycles. The Dark Ages in Europe, following the fall of Rome, was a rather large-scale Night-Cycle. Clearly the eighteen year cycles I write about are much shorter and less devastating than this was.
During the Night-Cycle, the Principle of Light shrinks almost to nothing. Think of the monasteries in Europe during the Dark Ages, small centers of learning, surrounded by the dark forces of chaos, of Nature dominating Man (rural dominating urban), periods of amorphous 'history' (History goes with Man, not Nature), unyielding devolution. Think also of the 1960's -- our most recent Night-Cycle, minus this current one -- and the 'Back to Nature' movement, the abhorrance of commercialism, corporations, and dangerous, dark, lawless cities, many of them burning...the popularity of communal living, 'new' religous ideas -- orthodox religion was part of the corrupt 'establishment' and Day-Cycle materialism which was destroying the Earth.
Day-Cycles are dominated by the quest to gain Power and gain Knowledge. Night-Cycles are characterized and motivated by the quest to gain Love. Falling in Love is a province of Night-Cycles. Love distracts us from our empire-building, and dillutes our will to power -- and leads us deeper into sleep. Getting married and starting a family is the province of the Day-Cycle. The first love I mentioned, the Night-Cycle love, is romantic, almost always doomed to fail, and quite often a love not sanctioned by the society. The second love, the Day-Cycle love, is pragmatic, sober, carefully planned: almost a business transaction. Romantic love leads one deeper into the Night-Cycle. Marital love leads one deeper into the Day-Cycle. The Evening Star saves one from the arid suffocating habitualisms of civilization; the Morning Star rescues one from the frothy, emotional ocean of Nature and too much Tragedy folded into the Darkness.
Druing Night-Cycles the forces of Anti-Matter dominate, forces that deconstruct civilization. During Day-Cycles, the forces of Matter (Light is Matter) domininate, forces that re-construct civilization. Forces of Anti-Matter? Forces of Anti-Matter in the 1929-1947 Night-Cycle were the fascists; forces of Anti-Matter in the 1965-1983 Night-Cycle were the communists. And who are the forces of Anti-Matter in this Night-Cycle? Which thunder marked the end of the 1983-2001 Day-Cycle? The attack on the Twin Towers and the Pentagon and the White House were a remarkable symbolism for one seeking to read reality through its symbols. The force of Anti-Matter in this Night-Cycle appears to be Islam, which is, again, a form of fascism.
I'll leave you with one more diagram using the Moon Cycles as the key metaphor. There are four players in this Time Drama I'm sketching: Spring (Dawn) is the Renaissance Man, re-born light, moving away from Darkness -- both Religious and Scientific -- moving in to the Light and determined to protect Civilization; to raise Humanity up from the dirt closer to God. He is the genius who appeared in late-Medieval European society, artist-scientist-diplomat-statesman-poet. This man also appear in America at the founding of our country. The second player is the White King, the rationalist, the empiricist, the scientist/businessman who is divorced from religion, who rules the Earth as a lord, with advanced military technology and soulless concern for power over the Earth. This man is Noon (Summer). This man is the Sun King, a kind of fertility god, bringing wealth to the world, a wealth which fruits at the peak of the Day Cycle. Think of Rome. Think of America today. The third figure is the mirror-image of the first: a whole man, both scientist and poet, philosopher and theologian, but one who is moving away from Civilization, now corrupt, decaying, for it is now Autumn. This man is the Romantic, the rebel, he who deifies Nature and who hates Man and Man's creations. He longs for the solitude of Nature, and wishes to escape from the dangerous, cluttered, profane City that his mirror-image was so instrumental in building. This Romantic/Revolutionary leads his society back towards its source, Nature, Water, the prospect of re-birth, a better version of reality. Winter (Midnight) is where the Black King lives, the anti-matter King, the Fourth Player in our drama: the Dragon of Chaos if you will, the mystical Soul that curses matter, materialism, the loss of spirit and purity. The Black King wants to punish the Earth (it is God's will that the unclean Earth be punished) and Man is now the instrument of God's will.
Each of us has all four of these 'characters' inside us, plus others as well, each appearing when they are needed (some appearing when they are not wanted).
The diagram below uses the Moon Cycles and the Tides as metaphorical guides -- Full Moon is the White King; New Moon is the Black King -- both Full and New Moon correspond to High Tides; Emptying Half-Moon is the Low Tide during which all the Sins and the Crimes of the White King are fully revealed; and the Rising, Filling Half-Moon is the LowTide during which all the Sins and the Crimes of the Black King are fully exposed. The Rising, Filling Half-Moon is, of course, the Dawn/Spring, and marks the Renaissance Man's appearance; the Declining, Emptying Half-Moon is, of course, the Dusk/Autumn, and marks the appearance of the Romantic Man, the Prodigal Son, journeying away from the Father, away from the City, away from Man, back toward his Shadow, the Black King.
Three shortsale ideas: Sony (NYSE:SNE), Petrohawk Energy (NYSE:HK), International Gaming Technology (NYSE:IGT). Each has participated in this recent rally, each weakly. None of these issues has been able, druing this weak rally, to turn their trends back to the positive side. They are all short-term overbought. They could go higher -- but they are struggling, as is shown by the M5 3/M5 3 Average Indicator (Bottom Pane, black line), which seems in each case to be running out of gas. Of the three, HK looks the most ready for a pullback.
More information on the CGTS systems can be found at:
MICHAEL J CLARK
Clark's Gate Timing System
84 4 221 92210*Note: Numerical oddities in the Time Wheel diagram above. All dates connected to the dominant North-South and East-West years (red in the diagram), when added together as single digits, add up to 3. 2001 is 2 + 1 = 3 (as is 2010, of course). 2019 is 12 is 1 +2 =3. 1929 is 21; again 3. 1857 is 21. The first secondary axis (yellow in the diagram) sum to 6. 2004 = 6. 1932 = 15 = 6. 1941 = 15 = 6. The next secondary axis (blue in the diagram) all add up to 9. 2016 = 9. 1935 = 18 = 9. The mystery of numbers. Plato, echoing Pythagoras, once wrote that Numbers were Entities, by and through which the gods created and organized the world. I'm beginning to think that the gods are, themselves, numbers.
Disclosure: No positions to disclose.
Disclosure: Nothing to disclose.