“You tell lies thinking I can’t see
You can’t cry ‘cause your laughing at me” I’m Down, the Beatles
The stock market has never been more overvalued.
A combination of key financial metrics surpasses the extremes of 1929, 1966 and 1999, years that marked turns into the most important bear markets of the last century.
Most investors couldn’t be more complacent in the face of this record-breaking extreme.
Hence, volatility has virtually vanished from the stock market and hedge funds are aggressively shorting the VIX.
From the last cyclical bear market low in October 2022 we are in the last stages of a clean 5 Wave advance.
The higher stock prices go, and the more often and the quicker stocks salute the Buy the Dip mantra, the more tightly wound bullish psychology becomes.
The Buy The Dip mentality is playing out ever more quickly as the Great Peak crests.
Yesterday is another example.
Each pullback now not matter how deep, rebounds quickly.
The market is hyperventilating.
Despite the QQQ Breakaway Gap below the key 50 DMA on Tuesday it was bought.
It found low precisely at 90 degrees down from its all-time high.
559 is 90 degrees down from 583.
Interesting that 583 is 180 degrees straight across and opposite October 29. (1929 anniversary)
However the Q’s have a top in mid-August, 90 degrees from the May low mirroring the blow-offs in 1929 and 1987 which had May lows and 90 day + ramps.
So the bulls have their work cut out for them with the Q’s sporting what looks like a Head and Shoulders top.
A rebound into the open gap will be the bull/bear upside pivot.
If the 20 DMA should be recaptured as was the case in after the August 1st break, and the August 20th break, another rabbit will be pulled out of the hat.
Investors continually conjure up new ways to crawl further out on the ledge of risk.
For example leverage comes in many forms but a conventional measure speaks volumes: NYSE margin debt crossed $1trillion for the first time in June. In July it rose again to a new all-time high.
It is always important to keep in mind two key components of every bubble—excessive leveraging and extreme valuations: they go hand in hand like Thelma and Louise.
Everything is fine until it isn’t.
Using the above two metrics, this is the greatest bubble of all time.
The elevated ratio of margin debt relative to free credit balances show that speculators are leveraged to the hilt and doing so with an extremely small reserve of cash to rely upon in case of an unexpected decline.
Additionally, the elevated ratio of Market Capitalization to GDP shows that stocks could lose half of their current value and still be as pricy as at the top of the 2007-2009 downturn.
Hence, if the DJIA’s spike high of 45,757 on August 22, 2025 represents the top, then a decline to half that level (22,800) would still leave the index overvalued by historical standards!
Can stocks actually fall that far” Deleveraging cycles develop roughly every 19 years.
Remember our discussion yesterday of the Saros/Eclipse cycle of 19 yeas.
19 years back is 2004. Nothing much seemed to happen? Well 2004 was a subtle Rule of 4 Breakout over a trend line from the 2000 top.
How about another 19 years back or 38 years from 2025.
That gives us 1987. Of course we got Black Monday, Oct 19 in 1987.
Maybe something, maybe nothing but 38 on the Square of 9 Wheel is straight across and opposite October 29, the Great Crash in 1929.
That doesn’t mean we will necessarily get a crash on Oct 29 this year.
What it means to me in my use of the Sq of 9 Wheel is that 38 years from 2025 vibrates on an extreme panic.
The implication according to Mr. Wheel is that we see panic before 2025 is over.
As well, the year ‘1987’ on the Wheel also squares-out with October 29th.
We have a convergence of two vibrations which gets the hair on the back of my neck up.
Let’s look at it this way. If you had a Wheel in 1987 and saw the market rolling over in September, and anchored ‘Zero’ on the Wheel to the year 1987 you would have noticed that it squares-out with October 29th. You would have been on high alert for a potential crash and been able to capitalize on i
From 1929 to 1987 is 58 years.
Remarkably 58 squares-out with October 29 as well..
There were two convergences pointing to panic in 1987 vibrating from the Big Kahuna—1929.
Now we also have two convergences:
38 squares out with October 29th and 1987 (we are 38 years from 1987) squares out with October 29th.
Timing is everything. You can talk about all the conditions of complacency and excess leverage and valuation all you want.
When these factors exist and the market holds up and goes up further it just incites speculators to crawl further out on the branch of risk.
Timing is everything.
We are 96 years from 1929.
On the Square of 9 Wheel, 96 squares September 24.
We have a Solar Eclipse on September 21st which could act as a trigger for something.
The autumnal equinox in 2025 is on September 22.
Caution is warranted.
I will show all these sq of 9 images in tomorrow report…as I’m running late on this one.