Start of a bear market - DJIA January 2018
We have a spectacular breakaway gap on Jan 30th. My read on the market: the 26th ended normally. A discussion happened over the weekend, possibly resulting an old-money divorce. Trust was violated and a family heirloom of important stock was sold Monday morning. This is another reason aren't the thing to watch. The trust/heirloom consisted of DJIA stocks themselves, along with some S&P 500's. Insiders knew that stock was never to be sold, unless a massive violation had occurred.
Word got around that morning and old money players sold like crazy. That set off buy programs, as usual, and the morning ended unchanged. After lunch, word got around and they changed their minds. Overnight, word spread resulting in the gap down on Jan 30th. That is a breakaway from prior market conditions. We have an entirely new market driven by fundamentals and a different financial structure. Old assumptions are gone. The so-called PPT no longer has an unlimited line of credit. Also, they can't rely on the same structural support.
This market will not correct until a 1930's type of return to solid value occurs. This is a great unwinding of all financial and monetary manipulations as we return focus to cash flow and real goods sold/exported.
My guess, is Toshiba's example might be followed. In 2015, 8 executives resigned citing $1.2 billion in accounting issues ( aka fraud). Some of those executives had been with Toshiba since the 1970's. They seppuku'd themselves and may have done so early enough to avoid criminal prosecution. Time will tell, but at least they did something right showing a semblance of doing the right thing, if not showing remorse. Given the excesses of the 1980's, leading up to the dot com bust of 2000, we have over 30 years of financial manipulation to work through at an individual corporation by corporation basis. While I see brand/corporation surviving, with a total replacement of all board members and executives. Gen-X is tired (I am one of them), so the offers better be kind. Millennials lack experience, but will be assistive in this generational transfer. Back to the point: companies and audits are forthcoming. Don't underestimate the significance of recent Pentagon discoveries. Arthur Anderson went under in 2001, I believe, and auditing will make a comeback.
These corporate numbers represent people's jobs and , as well as natural resources and efficient use thereof, while directing them toward quality exports. Americans will have to own up to their marketing and provide value to the world.
Near term I see $180 DIA as a breathing place for support. Fundamentals will be reviewed and I think $140 is likely within a year or two, on the outside. I'd like to see things happen more quickly, as the age of the internet has made communication much faster. There is a time required for emotional integration, and work, however, even with instant information.
How long this bear market lasts and how deep it goes is up to us.
Position: Neutral. I do not advise shorting stocks (manipulation, accounting, etc.) Speculators should focus on ETF's and minis. That will clarify and allow the experts to fix the problems.