On The Verge Of Next Leg Down In Bear Market

I think the past two weeks now clearly resolved the issue whether stock market wants to reach new highs or resume its bear market trend. The good-looking rally above MA200 was nothing more than a fake breakout, a classic for bear market tops. As I always say, any positive sign that is reversed, should be treated as double-bearish. Breakout failed, sported a distribution day, then market rallied for a week, before another big sell-off day kicked in. It now looks like indices are drawing some sort of triangle pattern, which in my opinion will break to the downside. Actually, any rally into MA200 or upper triangle line should be an excelent shorting opportunity. We'll look at a bigger picture of when and where this intermediate cycle should bottom when we get a confirmation that the next leg down is underway.


The main reason for weakness in stocks is the dollar, which rallied viciously above MA200. Actually, I believe that dollar should now enter a steep uptrend that should last at least three months and push stocks into new low ground.


Regarding gold, I don't believe that any commodity market will be able to rally in face of a strong dollar. I'm not sure whether gold will go below September's low or not, but I'm almost certain that the current rally is now over and that precious metals in general should be headed for another correction.


I think the following months will rip the stock market apart. I wouldn't be surprised if indices traded 30-40% lower two or three months from now. For quite some time I wasn't sure if the dollar is going to break down and push stocks and gold higher, or it will reverse and lead the next leg down in bear market in stocks. I'm quite glad that things finally crystalized as I expected from the beginning. From now on stocks and gold are on a SELL signal and any rally in stocks should be an opportunity to open some short positions.