U.S. Stock Market - The Perfect Storm !

Dow Jones Industrial Average     16,000

S&P 500 Index                                  1,800

Nasdaq Composite Index               4,000

With today's intra-day high in the Nasdaq Composite at 4,007, all three of the above major U.S. stock indexes have now experienced upside breakouts above key "psychological" round number resistance levels over the last three trading sessions. And many uninformed Wall Street pundits are now predicting that the logical next upside targets are 20,000 for the DJIA, 2,000 for the S&P 500, and 5,000 for the Nasdaq Composite before any meaningful correction. 

The bullish case is simple and compelling: DON'T FIGHT THE FED !

As the new Fed Chairman early next year, Janet Yellen is expected to continue on the path of easy monetary policy as so ably executed over the last five years by the current Fed Chairman Ben Bernanke. With short-term interest rates near zero and longer term interest rates still less than 4%, is the U.S. Stock Market THE ONLY GAME IN TOWN? The bulls say yes, of course, but I still believe that the "perfect bearish storm" is now on the immediate horizon.

When we are 25% lower on all the major U.S. stock market averages three months from now, many will look back at today's peaks (DJIA above 16,000, S&P 500 above 1,800, and Nasdaq Composite above 4,000) and wonder why they didn't see the inevitability of this correction. 

Valuation analysts could point to the fact that the Shiller Cyclically Adjusted P/E is now 25, which is more than 50% above its long-term average of 16.5 and now at its highest level since December 2007. Technical analysts could point to the plethora of worrisome overbought signals, contrary sentiment indicators, and negative investor cash reserve variables. Momentum traders could focus on the recent loss of leadership in high flyers like FaceBook, NetSuite, and Tesla Motors, among others.

And some of the braver Wall Street analysts are in fact sounding the alarms, but few are listening after five years of rising prices and no apparent threat to the one constant overriding support to this great bull market --- easy U.S. and Global Central Bank Monetary Policies. Most late-stage buyers mistakenly believe that they will surely know when the music is about to stop. Easier said than done! Unfortunately, no one rings a bell to signal the top in stock prices! And significant corrections can quickly unfold, without warning!!

In my computer trading system, daily chart sell signals were triggered at today's close in Colgate, Disney, GE, and UPS, all important bellwether stocks for the overall market. Intel has been especially weak over the last few sessions, and Cisco Systems has been crushed. 

In the interest of full disclosure, for my managed accounts I am currently long the double-short S&P 500 SDS ETF. And over the last three days I have re-entered the precious metals mining sector with fairly large purchases of the following Gold/Silver mining stocks: First Majestic (AG), Endeavour Silver (EXK), Primero Gold (PPP), and Goldcorp (GG). These stocks now represent 15% of total assets under management from 0% early last week. In my computer trading system, buy signals were triggered at today's close in the following Gold/Silver Mining Stocks: AG, AUY, CDE, EXK, FSM, GLD, and HL.