Random Musings-Stock Market Crash or Stock Market Crap

Is the stock market going to crash?

Is the stock market going to crash like it did in 1929; let’s examine the Dow and Nasdaq quickly

History is replete with Naysayers stating that the world is going to end. Even after one of the most horrific crashes in modern history, the Market Crash of 1929, the financial system recovered and the market soared to new highs.  In the long term, as long as Fiat is in play, a stock market crash should be viewed as a buying opportunity. The Tactical Investor would never focus on the “Is the stock market going to crash?” scenario. Instead, we would focus What happens when the stock market crashes?  What happens is the astute investor backs up the truck and buys all the top quality stocks for pennies on the dollar.

What are the Dow and Nasdaq saying in terms of a Stock Market Crash 

The Dow is overbought on the weekly charts but still, has room to run on the monthly charts.  As you can see below the Dow is extremely overbought and looking for any reason to let out some steam. In our opinion, this would be a positive development. Never listen to the Drs of Doom for they make it look like they know exactly when a stock market crash is likely to occur.

If they knew this, they would not be screaming; they would be silently opening up short positions in anticipation of locking in massive gains.  As they have no idea of when this market will crash, they need to peddle nonsense as that is the only way these penguins can make a buck. They need gullible cows to sell this rubbish too, and it seems that the world is full of these lemmings.  A Stock Market Crash  is always a buying opportunity as long as the trend is up and the crowd is in panic mode.

Do not fixate on the “Is the stock market going to crash?” question, focus on the opportunity instead. 

Is the stock market going to crash?; your guess is a good as that of any expert. 

Is the stock market going to crash?; your guess is a good as that of any expert.

The overall trend is still up (and this is based on our proprietary trend indicator), and thus all sharp pullbacks need to be viewed through a bullish lens.  The Nasdaq is also trading in the extremely overbought ranges on the weekly charts, but what is interesting is that on the monthly charts there is plenty of room for the Nasdaq to run before it hits the overbought ranges. We could have a nice tug of war here.  The NASDAQ could have a limiting effect on any correction or we could witness a divergence.

The Dow and SPX correct firmly while the NASDAQ experiences a minor correction. Until the trend changes,  do not focus on the “Will the stock market crash” scenario but on the trend. All sharp corrections have to be viewed through a bullish lens.

Should you listen to Naysayers warnings of a Looming Stock Market Crash

Nasdaq is the strongest Index and should outperform Dow and SPX

A stock market crash is unlikely at least for the time being.  The Nasdaq is in a strong uptrend and until the trend turns negative the odds of a stock market crash are not that high. It, therefore, makes no sense to focus on the  will the stock market crash scenario. If you are going to do this you might as well focus on the what if leave the house and get hit by a truck scenario.

The NASDAQ is going to outperform the Dow and this usually tends to occur in the last phases of a bull market. However, we could also be witnessing something new here as we are in the era of hot money. The entire world is lowering rates. Despite the misery, Brazil is facing it lowered rates once again.  Can the trend change and favour higher Interest rates? Yes, it can, but until it does, we are not going to jump on the high-interest rate bandwagon.

The US, for now, is the only nation that has raised rates twice.  If hot money continues to power this market than we could have an irrational exuberance phase that lasts for a long time; it is too early to dig into this topic now;  we will save it for another day.

The Nasdaq broke past 5,000 for the first time in 15 years in 2016, hence stock market crash is unlikely at this stage.

It took the Nasdaq 15 years to test its old highs and trade past them, but until July of 2016, it was unable to hold above 5K for any period. On an inflation adjusted basis it would need to trade to the 6600-6900 ranges to trade on par with its 2000 highs.  The bull market for the NASDAQ has just started; it has the potential to trade to 10K. Again this is a topic for another date.

We do not like discussing extreme targets until certain key turning points are touched. The 1st point to keep your eyes on is 6200. A monthly close above this level will signal a move to the 6900 ranges and beyond.  The Nasdaq indicates that the “Is the stock market going to crash?” question, for now, is a silly question.

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Is the stock market going to crash?; a stupid question that does not deserve an answer