Calling the Crash of 2020

“If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength and the greater his effort the heavier the world bore down upon his shoulders — what you tell him to do?

I… don’t know. What… could he do? What would you tell him?

To shrug.” – Ayn Rand, Atlas Shrugged

“In fact, all bubbles and financial manias end with a crash and not an orderly decline. This is due to the very large concentration of investments at the same time and the massive imbalance between buyers and sellers at the TIME of the turning point. My objective is to identify that time… well ahead of time.” – The Hit & Run Report, January 24, 2020

“A speculator is a man who observes the future and acts before it occurs.” – Bernard Baruch

The goal of my methodology is to analyze the psychology of market structure and timing without becoming swept up in that sentiment.

By so doing, I have remained true to my analysis and the results have been proven in our ability to identify these turning points.

So what I want to do here is highlight some of my comments made this year leading up to and through the Crash of 2020.

January 3: “The key will be the December Indicator. When the market drops below its December low in January/February, the December Indicator is triggered, pointing the way lower and a difficult year.”

Just 6 days off its all-time high, the SPX December low was violated on February 27 on trade through the 3070.49 December low.

It coincided with the first breakage of the 200 day moving average since May 2019.

January 6: “There was a ‘natural’ cycle that ties to the Declaration of Independence that hit in September 2008.

The same ‘natural’ cycle is potentially due to hit in 2020 — no later than this spring.”

January 7: “In late November, we got a VIX Volatility Explosion signal which saw the VIX leap with a sharp, short-lived shake-out in the market. Cycles suggest the next one will not be. There is a strong likelihood the VIX coming out will signal a sustained move to the downside.”

January 8: The January 2018 top was a tremor prior to the Oct-Dec 2018 decline. I think the Oct-Dec decline was another shot over the bow of the USS Stock Market –part of a sequence of tops in an unfolding Megaphone Pattern of successively higher highs. The 3rd peak will complete The Meg.”

January 9: “January is a significant time to look for a top as the DJIA topped in January 2000 on the 20 year cycle. Additionally, it was 45 years from the 1929 top to the 1974 low and another 45 years ties to this time frame for a possible High to Low to High Cycle.

January 10: “The last time things lined up like this in my work was July 2007 and before that was March 2020.

The question we have to ask ourselves is whether the Fed can fight the valuation, duration, technical and cycles forever?

We are in the strangest time on the planet since I have been here.

Anything can happen isn’t a loose statement. It is a given.

At major turns The Great Spiritus Mondi exerts its influence. I think things are about to get very interesting.”

January 13: In our report An Otherworldly Indifference I stated, “We are approaching an extremely rare moment in the stock market. One that, if played correctly, could hand investors life-changing profits.”

January 14: “90 days/degrees from the late July 2019 high is late October 2019, when the SPX accelerated to new all-time highs clearing the July peak. 180 days/degrees from late July is late January 2020.

January should mark a Buying Climax.”

From that point, I maintained that January was the primary high and that the nominal new high in February was a false new secondary high, much like the pattern from July to October 2007.

January 15: “I have found little value in my attempts to warn people of a time when it may be wise to employ caution.

Mother Nature owns investors when lengthy bull markets are in play.

History shows most folks begin to pay attention AFTER serious losses.”

January 16: “Investor frenzy implies that any top struck this month will be large. AAPL is the lead dog and is barking. It is more extended from its 200 day moving average than ever.

Sustained breakage below 200 opens the door to lower prices.”

January 17: “The Fed’s omnipotence may be questioned before the year is over. Make no mistake, this move is not normal and is not something which technically should be able to continue through February.

For those of you who were not trading during the melt-up in the first quarter of 2000, although historic parallels pale in the glare of the present, this is eerily similar,”

January 21: “The November breakout high was 2150. As long as a correction holds above 2150, the bull market remains intact. The lines in the sand are drawn.”

January 22: “Because the prior bear market from 2000 to 2009 was a complex A B C two-step structure, the Principle of Alternation suggests that the next bear market will play out in a more direct, line-drive manner.

The handwriting is on the wall: there is a vicious decline ahead.”

January 23: “We have carved out a textbook 90-100 day blow-off in keeping with the patterns of the pre-crash 1929 and 1927 tops.”

January 24: “Apparently the feeling is the Fed can also print away a deadly virus.

Thursday’s turnaround may be the height of complacency.

In the fullness of time, people will look back and say, ‘Didn’t it occur to investors that the Fed was panicking about SOMETHING?

It may seem illogical and even idiotic that this simple bromide — Don’t Fight The Fed — has been for so long, so much of what it seems to be ALL that investors really need to know. It may be that Don’t Fight The Fed has itself become a bubble.

Is it possible that belief in the Fed’s omnipotence will become the Achilles Heel of the market?

This Black Swan may be immune to being goosed by the Fed. This may prove to be one of those times when it pays to fight the Fed — if they open the kimono and the market doesn’t respond in kind as it has in the past, real panic will set in.”

January 27: In my article, The Elements of Panic Are Present, I stated, “We have rule number one for beating a panic: never underestimate its size. Don’t rely on the idea of what a ‘reasonable reaction’ is. In times of panic, one has to cease to be an investor and become a psychologist.”

January 28: “If the 50 day moving average is lost with authority, the SPX could panic in short order to the 3000 region and the 20 day 200 day m.a.

January 29: “The implication is a powerful leg down should result.”

January 30: “The month is almost over and the euphoric extrapolations by pundits about ‘how January goes, so goes the year’ are suspect: a monthly IWM shows what looks like a false breakout of a Rising Wedge.

This is potentially a big deal because it is on the monthly basis and comes from what may be a secondary top.”

January 31: “I think volatility is just coming out of hibernation. Intense swings should increase in the following months.

February 3: “When they raid the house, they take the Madam too, and AAPL left a large range Key Reversal Week last week.

The reversal came from a picture-perfect time/price square-out with 327 pointing to January 29.”

February 6: Back below the January 24 NAZ high is a yellow flag. Below its rising trendline at 9500 is a warning.”

February 12: “Long term, time and price are satisfied. Optimism in the stock market, the bond market and real estate dwarf historic episodes of such sentiment.

There is no fear now which is exemplified by what will surely be called in history, the Coronavirus Buy the Dip.”

February 18: “The market has been worshiping at the altar of liquidity to the exclusion of all else. Although a persistent perception of late, cycles have not been repealed — any more than the illusion that gravity has been.

That being said, when everybody knows something on The Street, it is seldom worth knowing.”

February 24: “Decisive breakage below January’s low may indicate something more pernicious is on the table.”

February 26: “If the DJIA extends with breakage below its inverse right shoulder around 25,400, a Blade Runner sell setup will be triggered. In other words, the right shoulder ‘blade’ of the bullish pattern will have been offset.

Fast moves come from failed patterns.

Arguably, this would imply a complete retracement to the December 2018 lows.

That is 5,000 points from here.

As offered at the beginning of the year, the price action this quarter will tell the tale for the rest of the year and I think for the next 2 to 3 years. The bear case will be clear to see on a decline below 3100 and then 3000 SPX.”

February 27: “There is nothing ‘normal’ about this market.

Expect the unexpected. Period.

Think the unthinkable.

While crashes are extremely unlikely at any given time, the possibility of that unlikely event is higher than normal.

This morning, the SPX is approaching the point of no return where the unlikely could happen.”

February 28: “For the last 6 months I have been warning of the 90 year cycle from 1929.

While the crash in 1929 occurred in October, the market is not a fine Swiss watch.

The market did a good job of getting the vast majority of market participants to jettison fear of Mother Nature at exactly the wrong time.”

March 2: “The fastest move to a 10% correction MAY represent a SHORT-TERM selling climax.

Ditto the most oversold reading in the McClellan Oscillator in 100 years.

However, my believe is that while these MAY indicate short-term capitulation, it is just that: short-term.

The swiftness of the move, the momentum, points the way lower.

While the bromide on Wall Street is that price is truth, in reality, momentum is truth.

The path of least resistance seems lower.”

March 4: “The SPX signaled a classic 3 month blow-off was over when it aborted back below a monthly trendline at 3025.”

March 6: “The market retraced the entire advance from October. What’s important is that this was an uninterrupted runaway advance. There has never been an advance in history where the market has retraced an entire length of a runaway advance other than at final tops. There is always a first time for everything, but the footprints in the snow of history, while not indelible, consult us.

Consequently, when you see huge footprints, you cannot dismiss the idea that Big Foot is on the scene.”

March 9: “This morning, the SPX is gapping down with authority below a 50% retrace of the December 2018 low to the February 2020 ATH.

Fittingly, this point of recognition is setting off a limit down circuit breaker in the futes.

As if the recent selloff hadn’t already powerfully validated our expectations for one of the most profound turning points in market history, this morning is making it abundantly clear for any who were still entertaining thoughts about a garden variety correction. When the wheels come off, fundamentals go out the window and technicals matter even more. Everyone become a cocktail table technician.”

March 12: “Alarmingly, as long time readers are well aware, the pattern of the drop has been a stunning echo of the crash of 1929.

The great crash of 1929 started after a one day turn up in the dailies.

That ties to Wednesday. That means today and the next 3 days are key.

Monday, March 16, sets up as a critical day.”

March 13: “Another close below 25t20 will warn that the SPX can continue to decline further perhaps reaching the 2140 to 2030 region.”

March 16: “Wall Street says the market is a random walk which holds that prices are not predictable. It asserts that markets move randomly and that there are no real underlying trends.

They do not have or know how to interpret cycles and our historic road map that predicted this crash and how to trade it.

For example, a week ago Friday, we let our subscribers get exercised in March 6 VXX calls entered at $1.52.

On the following Monday’s big down open, we locked in a net profit of $12.52 per contract.

Put another way, if you allocated the typical $10,000 positon size to this trade, you would have booked a profit of around $75,000 on this trade.”

Monday, March 18: “Today is day 55 from the SPX primary high on January 22.

The two great crashes of 1929 and 1987 occurred 55 calendar days from their respective highs.

Today was set to be another big down day.

Through this month, our expectation has been that there is potential to the 2140 region.

This represents a full wipeout of the Trump Advance.”

March 19: “On the below 10 min SPX I have shown the 2444 region which is where the SPX Yearly Swing Chart turned down on Wednesday. I guarantee you Mr. Market knows this number.”

March 20: “The futes were up 100 points an hour ago. Now they are up only 20. The market is infected by the Volatility Virus and it ain’t going away anytime soon.”

The Panic of 2020 illustrates how humans are hard-wired to respond to a mass form of progression and regression deep within the psyche in seemingly invisible but estimable ways.

That I have been able to define the path down this year is evidence that this progression of Jesse Livermore’s Line of Least Resistance is not as invisible as the vast majority may think.

I had no idea that it would be a pandemic that would be the match that lit the fuse to the 90 Year Cycle and prove me right in my call for a crash. What I do have is a tool kit that puts together the pieces of time, price and pattern to help us exploit the markets.

For example, even in the midst of this storm, we find upside setups to exploit: Thursday’s night report used AXSM as a long idea.

We took it long on Friday’s open at 48.10, selling half for a $3.70 gain, 1/43 for a $7.50 gain and ¼ for a $6.40 gain.

Conclusion. Today, the market is in the time window of an important potential landmark turning point to the topside.

Assuming the cycle will exert its influence, it could play out any day this week. Additionally, a further dive in the SPX puts it in the window of our 2140 projection.

The tension is on the tape.