Well, it's early Sunday morning, my entire family is still asleep, and I'm more interested in making a fruit crisp for breakfast than I am going through charts right now (after all, something has to be done with all these pears). So I'm going to do a quick, lazy post and recap where I think things are heading for the next year and a half……..going backwards:
- + I believe the equity markets will bottom (for a while, at least) in early February 2013 after a worldwide and devastating financial meltdown. My target is for the Dow to reach its nadir at about 5,750 – – a greater-than 50% drop from present levels. Obviously many individual stocks will be hit much harder than that in such a scenario.
- + As a predicate, 2012 will be an historic year on many dimensions – – financial, political, and social. As of this writing, there doesn't appear to be any candidate that has a chance at beating Obama, and frankly it really doesn't matter to my charts, but I wouldn't be surprised if someone that isn't even on the political radar right now wins the election. Again, it is immaterial to my financial projections, but it would make sense for Obama to be a one-termer in the face of what I believe will be a calamitous 2012.
- + Before such a gigantic plunge begins, I think there will be one last desperate and massive measure by the world's bankers and central planners. It would need to be measured in the trillions of dollars, and it would, in my opinion, lay the final groundwork for what will, in the end, be a catastrophic failure of the worldwide markets as well as a complete restructuring of nations and their form.
- + Shorter-term, I believe we could be positioned for a "mini-crash" in October, taking us to a target of about 1030 or so on the S&P 500. This event, I believe, will give the Powers That Be just the excuse they need to shove a multi-trillion dollar "solution" down the world's throat. At that time, I think it will make sense to cover my short positions and, for a while, work with a bullish bias (except for Treasury Bonds) and wait for the aforementioned apocalyptic fall.
So, in sum – – – a fall to about 1030, a rise to as high as 1300, and then a fall into oblivion. Of course, real-time conditions may compel me to utterly change my mind about all this, but my belief in the above scenario is fairly deeply-rooted. If this plays out roughly as I've described, I think early 2013 will provide bargains that haven't been seen since the early 1980s.
For now, I can say that I'm positioned entirely short with a 60% commitment, and I have a mountain of interesting short candidates waiting in the wings. If we are breaking beneath the range established over the past six weeks, the bears are going to do great, and I want to be fully on board for that. The key, though, is to break that range.
It is entirely possible I could be in over 100 positions and fully committed early this week, but I'm going to let the direction of the Euro and ES guide me.