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Do You Exit Now, or On Borrowed Time?

Is the bull market about to come crashing down, or will we have to wait until autumn when such disasters traditionally occur? I’m a traditionalist myself and expect the bear that’s looming to usher in America’s umpteenth panic and sixth full-blown depression. The hard times ahead will see the collapse of private and public pension systems, the triaging of Medicare, relentless waves of bankruptcies, and the rewriting of most mortgages so that the current occupants can stay on as tenants or sharecroppers.  The dollar will be very strong, but not in a good way, since debtors will have to make payments unto death in hard currency. All of this is unavoidable no matter what you read; it is only a question of when.

There will always be optimists who think the bull market is never going to end, but they are obviously not paying attention.  They have much in common with delusionists who still think the COVID “vaccine” was a blessing even though it has killed millions and continues to stop athletes in particular dead in their tracks.  Many still adore the pathological liar Fauci, and Facebook’s Zuckerberg, who financed enough ballot harvesting in 2020 to subvert the election. The true believers are so crazy they probably believe that Nvidia, having achieved a $3 trillion valuation, is about to double again in the next 12 months.

Wave Theorists ‘Divided’

So why do we think the bull market begun in 2009 still has a ways to go?  For one, although Elliott Wave experts seem divided on whether the top is already in, some of the better ones (Walter Murphy, for one) have noted that market breadth — the percentage of stocks participating in the rally — has not gone sufficiently out-of-whack to set up the haymaker. Concerning seasonality, there was an interesting note posted in the Rick’s Picks chat room last week. It turns out that although investors are well-advised to “go away in May,” this isn’t because U.S. stocks are likely to collapse in the summer, which they have never done, but because they tend to turn sullen when the Masters of the Universe head for the Hamptons.

There is also the chart comparison we featured here recently between AI superstar Nvidia and RCA, investors’ must-own fave during the Roaring Twenties. Although the latter made a sensational high in the spring of 1929, it was the slightly higher high in October that mutated into disaster. To replicate this, NVDA would have to recede to around $900 from last week’s rabid leap to $1065, then rally to a marginal new all-time high in August/ September. IBM traced out a similar course in 2008, as a chart published here a few weeks ago showed. The point was that second-wind rallies to marginal new heights are not only seductive enough to cause bulls to go all-in, but also to create feverish short-covering spikes that are unlikely to be surpassed.

Bottom line: Even if the first scenario gives investors a few months to prepare for the worst, there are no guarantees. You must act now or face the possibility of getting trapped with no chance of escape. The alternative, grazing with the permabulls, does not look like a winning plan with the federal deficit growing by a trillion dollars every 100 days, every penny of which must eventually be repaid with interest. We keep hearing about how “strong” the economy is, but it would need to be growing at 10% a year to keep us from drowning in debt.

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