Will the U.S. Stock Market Really Decline by 20%?
The reasons that Lear Capital clients give for investing in precious metals are as diverse as the investment stratgies used across the country. Some state inflation protection, others seek portfolio diversity while others pine for protections against economic collapse both domestic and international. One popular reason is a growing belief that the stock market currently is overvalued and due for a correction. How big will the correction be? That indeed is the $64,000 question, especially when other analyst are calling for the current cylical bull market to continue into 2015. However veteran stock trader, Mark Cook who successfully predicted the last 3 stock crashes sees a 20% correction happening in the near term and only growing larger as the market continues to surge forward.
The primary indicator that Cook uses is the “Cook Cumulative Tick,” a proprietary measure he created in 1986 that uses the NYSE Tick in conjunction with stock prices. His indicator alerted him to the 1987, 2000, and 2007 crashes. The indicator also helped to identify the beginning of a bull market in the first quarter of April 2009, when the CCT unexpectedly went up, turning Cook into a bull.
What does Cook see now?
“There have been only two instances when the NYSE Tick and stock prices diverged radically, and that was in the first quarter of 2000 and the third quarter of 2007. The third time was April of 2014,” Cook says.
In simple terms, as stock prices have gone higher, the NYSE Tick has moved lower. This divergence is an extremely negative signal, which is why Cook believes the market is losing energy.
In fact, the Tick is showing a bear market, which seems impossible considering how high the market is rising.
Unfortunately, Cook can’t say when this vulnerable market will crack. “The CCT is similar to the new-high, new-low indicator,” he explains. “As the market goes higher, fewer stocks make new highs. Some people might say it’s ‘different this time,’ but it’s never is. Could the market go higher? Yes, it could, but the extension of time will create an even greater divergence that has to be snapped back together.”