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U.S. Market: These Monthly Stock Charts Say It All

January 19th, 2016 · Chris Vermeulen · 4 Comments

Since mid-2014, the US stock market has been showing signs of the underlying market weakening. During the last quarter of 2015, the stock market had its first major bout of distribution selling, which confirmed our analysis that the bull market is nearly over. If you have been following my articles for a while, then you may be tired of my warnings of the bear market, which is on the verge of starting. In fact, the TSX Toronto stock exchange, US Transportation index and the Russell 2000 small-cap index have all been in bull blown bear markets for six months already.

I won’t say we are in a full-fledged bear market until we see the large cap indexes breakdown. Until the S&P500, Dow Jones, and NASDAQ fall below critical support the US stock market is still in an uptrend.

Instead of talking about the all the manufactured strong earning numbers created by share buyback programs, sales being way down for most companies, shipping companies struggling for products to ship, and products and service prices being reduced to help generate sales (deflation), let me share with you some monthly charts that I think paint a simple and clear picture of what is happing in the US stock market.

Monthly SP500 Index Trend Chart

The chart speaks for its self, but if you don’t know what you are looking at let me elaborate. Price action in 2015 shows increased volatility, heavy volume selling of shares, few stocks are trending higher each week and now this index is on the verge of breaking through critical support.

If the price falls any lower it will trigger an event that will take years to recover from. The event being a bear market that could make the 2001 and 2008 bear markets look not that bad.

What should an investor do?

You have three choices:

  • Do nothing and suffer the consequences
  • Move all your investment capital to cash and just sit on the sidelines for a year or two and let price drop so you can re-enter when prices are at bargain levels dividends are high.
  • Employ a strategy to profit from the falling market and possibly double your investment capital within a year or two with a few well-timed trades. This is what I do and share with subscribers of my newsletter.

spx monthly chart

Monthly Microsoft Chart:

I find it interesting that Microsoft shares have been on fire to make near all-time highs during a time with Apple loses its product creator and fails to come out with anything new and exciting.

A couple months ago I talked about Apple setting up for a big drop when the price was at $122.xx. Today it’s trading at $97 a 21% drop and it looks like we could see another 20% drop from here.

monthly microsoft chart

Monthly Toyota Chart:

Toyota shares are just one of the hundreds of stocks setting up for a huge drop. I like this example as it’s a massive double top from 2007 high and has a bearish head & shoulders pattern testing its breakdown level.

toyota monthly chart

Monthly Tesla Chart:

This was and still is the best stock in the world to many traders, investors and those unique Tesla owners. I say that because I know two men who have Tesla’s and it’s like they are in a cult with their electric cars and think ICE cars are old school (ICE – Internal Combustion Engine). Maybe I am a little jealous because I just bought and ICE car off a Tesla owner in my town and I had the privilege to take it for a drive – WOW it’s weird but AWESOME!

tesla monthly chart

Trading the Stock Market Conclusion:

In short, I fell 2016 is going to be nasty for those holding stocks in their portfolios. There are many ways to take advantage and profit from falling prices and that is exactly what myself and those who follow my forecasts and trades will do.

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.  Chris’ mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility. Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for multiple newsletter publications. Through years of research, trading and helping thousands of individual investorsaround the world. He designed an automated algorithmic trading software for the S&P500 index, which solves his client’s biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market. He is the author of the popular book “Technical Trading Mastery – 7 Steps To Win With Logic”. He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven, The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. 
You can reach Chris at: chris@thetechnicaltraders.com.


4 responses so far ↓

  • 1 lachlan // Jan 20, 2016 at 7:46 pm

    There we go Biker, even Chris is headed for cash. I remember for years he said stocks were going to keep rallying while so many others kept losing their shirts on short positions.

  • 2 Biker // Jan 21, 2016 at 8:19 am

    Chris: “Move all your investment capital to cash and just sit on the sidelines for a year or two and let price drop so you can re-enter when prices are at bargain levels dividends are high. ”

    Well yes, Lachlan… In the few weeks or so since we switched, the move has already saved my wife’s most active Super account quite a bundle… and she has picked up a small gain as well.

    As you’re aware, we’ve both done this before. Where we always seem to err, on the conservative side, is re-entry. My kids both enjoy telling me this (after the event) and attribute our good fortune entirely down to _luck_ … which it is!~

  • 3 lachlan // Mar 5, 2016 at 6:24 am

    My old positions are still in tact BP, not going anywhere… except one that went out the backdoor ha ha. However I have cash and continue to accumulate cash using direct debits weekly. I use them to manage personal savings and also tax. If the markets have a spasm then I might be able to score some large caps way down low. Hey they already are really. I can remember my father trading bhp at these prices thirty years ago in higher valued (real) auds. Continuing to invest in my business and the commercial lot is going to be overcapitalised no doubt. Then I just need my grazing block and a 750K fishing shack. All covered old mate 🙂

  • 4 Biker // Mar 7, 2016 at 8:03 pm

    Lachlan: “Then I just need my grazing block and a 750K fishing shack.” Just returned from a four-day long weekend fishing trip off Mandurah, an hour south of Perth, Lachlan. L-o-n-g queues of boats exiting the Dawesville Cut… and our Canadian visitors ogling the $2 mil fishing shacks lining The Cut, as we headed out to sea.

    No idea where this market is headed, Lachlan, but we’re still happy that we moved Goldilock’s fifth industry fund investment to *cash* when we did. Three of the others can ride the market. The fifth (actually the first) is a guaranteed return They don’t offer that kind of deal any more!

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