If you are a student of stock market history, you know that what we're now witnessing is a disturbing correlation between the stock price charts of the late 1920's through early 1930's stock market and today's stock market.  History is repeating itself.

If you look at a stock market price chart comparison, you can see that the huge bear market of the late1920's and early 1930's closely resembles our current markets. 

Back in the 1930's, an approximate 3 year bounce / stock market rally took place before the next large leg down.  We are also seeing extremely overbought S&P 500 MONTHLY stochastics, which are strongly turned down, as well as the extremely high volume during the last big sell off in August, 2011, indicating aggressive short selling.

 

The price rally from March, 2009 has just completed (hitting stiff resistance / supply in the 1,400 area on the S&P 500), which - the odds favor - will lead to at least another test of the 2002 and 2009 lows in all major US markets – perhaps even lower than these previous price lows.

As for the fundamentals: Many parallels to the late 1920's / early 1930's

Core durable goods orders (which do NOT include defense and transportation spending) experienced declines in both March and April of this year! 

Also, the Baltic Dry Index, which is an excellent measure of global commerce, had fallen from 2,250 in October, 2011 down to 670 in early February, 2012.

 

This key index is currently sitting at 1,000 and is about to sell off again (weekly Stochastics are overbought and turning over to the downside and are stalling at the 20 Week Exponential Moving Average) – this is very negative for global commerce!

Needless to say, as the US economy slows, this adversely effects international markets – we are witnessing the markets of Australia, Brazil, Canada, China, India, Western Europe (the list just goes on and on), tumbling as of late.  This is going to get much worse before it gets better.

 

Due to this and other factors, the odds favor extremely weak U.S. gross domestic product (GDP) numbers for the second quarter!  On top of that, we're seeing that jobs growth has slowed in the last two unemployment reports due to a contraction of corporate spending on hiring and capital equipment purchases - indicating no traction in economic growth.

There has been no structural or productivity improvement in the economic growth of corporate America.  This stock bear market rally (since March, 2009) has been artificially sustained by very low interest rates, incredible government spending, and rampant money printing. You cannot have sustained economic growth on just these three factors!

 

There is no U.S. economic growth and no new bull market in stocks. Since March, 2009, we have simply been experiencing a bear market rally "contained" within a {big picture} secular bear market.

 

Once again, this is essentially the same pattern that followed the stock market crash of the early 1930s.

The majority of investors will see their stock portfolios decimated, however those who prepare for the next major stock market downturn will prosper immensely.

 

Relatively new financial vehicles, such as inverse Exchange Traded Funds as well as put options, allow traders and investors to make HUGE profits from ALL GLOBAL market downturns.

Trader Screen clients have profited from the major market crashes of 2000 and 2008 – and we're going to do it once again!

For full article & charts, see:

http://www.traderscreen.net/Pages/ReturnoftheGlobalBearMarket.aspx

http://www.traderscreen.net/Pages/CollapseoftheEuro.aspx

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