U.S. Stock Market - Monthly Chart Sell Signals !

Effective at Friday’s close, August 30^th, monthly chart sell signals were triggered by my computer-based trading system in both the Dow Jones Industrial Average and the Dow Jones Transportation Average. Please see charts below. Weekly chart sell signals were also triggered in the S&P 500 Index, the Nasdaq Composite Index, and the Russell 2000 Index effective on the same date.

Despite the fact that the Dow Jones Industrial Average was down 4.4% in August, the cover of this weekend’s Barron’s Magazine says “THE BULL’S IN CHARGE” and that Wall Street’s top strategists see the market headed higher, with stocks rising 20% or more over the next 18 months. It may be an understatement for me to write that I don’t think this optimism is justified! In fact, based upon my computer-based trading program, I actually think a 20% decline is much more probable, and I would not be surprised to see a 40% decline in several major stock market indices, top to bottom, at one point along the way over the next 18 months.

Bottom Line: In my view, cash is king right now! A major stock market correction has begun, and we may even be in the early stages of a fairly significant bear market. Because I believe there will be at least one major liquidity scare at one point over the next several months, there are very few places to hide for most conservative investors right now. I don’t even want to own Gold/Silver mining shares at current valuations, even though this sector was my favorite over the last four months. Longer-term Treasury Bonds will probably offer positive investment returns over the next year, but the volatility and potential downside risks in this sector may not justify the modest investment returns expected here. Sometimes, a sideline stance is the best stance! Preservation of capital should be the driving force of all investment decisions right now, which means CASH IS KING !

Dow Jones Industrial Average with Computer-generated Buy and Sell Signals

 

Dow Jones Transportation Average with Computer-generated Buy and Sell Signals