US stock markets have fallen strongly over the last week completing the topping process that has lasted for many long months. Stock markets are expected to move down to the 15855 level basis DJIA (S&P500 1820) and lower. Our predictions while slow to come to fruition are right on track. It is important to understand that time and prices do not move in a linear mutual fashion.
Stocks, once bottomed below 15855 (1820) will begin a counter rally. The nature of the counter rally is important and will determine the direction of stock markets and economic activity in general for many years to come.
Should US stocks fail to make a new high over the next 3-9 months will confirm a major downturn and a long term bear market. (More on that later). If it does however make new high it has the potential to run on as asset inflation leads stocks and other asset classes into a final frenzy of asset buying. The amount of money printing over the last years could force an exponential rise in asset classes if we see stock markets recover well. History repeats itself and Gold in 1980, the Tulip Craze of 1636-1637 and the South Sea Bubble of 1720.
We at Emerging Events consider that path to be a lower probability. The potential for stock markets to rebound and rollover to begin a new downward move is very high. We hold this view is supported by long term Austrian Business Cycle Theory, and the fact that the world is not producing enough income to service the amount of debt that exists (both public and private).
However we are not paid to make guesses and so now we wait and watch carefully. We will update and advise as soon as the picture clarifies.