Another crash analysis - handle with care - we are still in inning 4 for the big picture

Below, the analysis of a very good chartist Bill McLaren- since we are pretty much on the same bottom line to the current situation, I have not had a lot to add here in principle. Let me only remind you in my crash analysis of 1929, I described that the first big leg down had a magnitude of 48%, which seems to be a good measure for this type of capitulations. Hence, I do expect from a area around 800 (770-830) SPX a severe rally for the next 3-4 months up to 1200 SPX (50% roughly -maybe a bit longer). But finally, we will go into a even more disastrous crash (the total magnitude of 1929-32 crash was a loss of 90%), which will at least have the same magnitude as 1929. This upcoming rally is your last exit to get out of stocks. More on that this weekend. The example 0f 1974, which is used below, I did not use because it might bring you on the wrong track, since from there we recovered all losses within a few years and on top started the biggest rally ever for 30 years. The characteristics are very parallel though - since a bearmarket ends with a crash leg.

That we recover all losses going forward is not the perspective from here. We are in a similar situation comparing the underlying fundamentals like the "great depression" or Japan from 1989. I will explain that in more details in the upcoming posts.

I do disagree on the timing of the upcoming low though, it will be pretty much early November around the election. We need basically 3 lower weekly closes from a technical point of view and next week might be an upweek anyway. Plus, what is not technical but as reliable, especially if you use it parallel, is the exact opposition of Saturn to Uranus on election day (Nov. 4th). Next week has a good chance for a brief rally due to technical reasons and again astrological ones, since Mercury retrogade motion ends on October 15th and that was what kicked us into the higher gear of the crash with a full moon. Now, we have again a full moon with the retrgade motion ending almost the same day. So, a brief but sharp rally for a few days (wave 4 of 3) and then we enter the hopefully final part of this downleg to roughly 800 SPX.

Excerpt form the McLaren Report:

http://www.mclarenreport.net.au/articles/articles/194/1/October-10-2008-CNBC-SquawkBox-Europe/Page1.html

LET’S LOOK AT THE DOW JONES INDEX 1969/1970 SAME CHART WE LOOKED AT LAST WEEK

I’ve been reporting there were two roadmaps this index is following and when this bear trend is complete it will resemble something between the 1969/1970 bear campaign or the 1973/1974 campaign. This bear campaign 1969/1970 gave up 37%. Keep this chart in mind.

NOW LET’S LOOK AT THE 1973/1974 BEAR CAMPAIGN

The last leg down was a whopping 37% (the equivalent of 828) and the entire trend gave up 47% of the high price. The last leg was also a 75% extension of the trend. There was retest of the low 9 weeks later. Please keep this chart in mind.

NOW LET’S LOOK AT THE CURRENT S&P 500 INDEX



This is the last leg down, which is easy to see when viewing the two previous charts. The window in price is between a 37% decline and a 47% decline. With a measurement from 1974 at a 75%, extension as a possible low. We don’t have enough time on the show to explain how I’ve calculated the time factor for early next week but it is just a repeat of the past. Here are some very important caveats related to “time.” If the index has found a low yesterday and rallies up into Tuesday and turns down, it could indicate the low will extend out to the 28^th. But for now I’m staying with the forecast of the low for the bear campaign Monday or just a few days more. At a price of 880, 823 or even 780. Mutual funds saw $36 billion in redemptions yesterday, the entire month of September saw only $15 billion. There is now forced liquidation going on and that is how lows are made.

As I’ve been saying on this show for a year, the fundamental reason for this crisis are exactly the same as 1929, exactly the same. Securitization of debt occurred in the late 1920s exactly as it occurred in this decade-exactly. The reason we have these problems is that Congress allows the banks to underwrite securities and their greed for underwriting profits caused them to lower lending standards and created the toxic securities that are now burying the financial system. No matter how much they want to change history with propaganda that is the reason for the crisis. And everything the Federal Reserve and ECB have down so far is only making the situation worse. In fact the actions of the Federal Reserve & Treasury are nothing short of stupid and that is sugar coating my words.