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Market Timing

Thursday, January 07 2016

"Topping" is when the big guys are selling at a market top over a 12-15 month period; and when they have offloaded most of their huge long positions, they start shorting and driving the market through the floor.

The way this works is that an institutional investor decides to dump, say, 200 million shares of GE.  Every week or so, they sell their GE position all the way down between $28 to $23/share, and they depend on the little guys to "buy on the dip" and drive the stock price back up from $23 to $28/share, over-and-over again.

The process ends when the big guys have sold most of the long positions that they wanted to unload.  And, when the process does end, the market crashes (down 45-60%).  

See the last two crashes below (2000 and 2008) and beware. Please see that the bars in the graph below are monthly bars, so the topping process took 12-14 months in these two years.  Looks like the same is happening in 2015-16.

There is no reason to panic, mainly because once these shrinking markets start dropping, they take at least 12-18 months to run their course (i.e., for the Dow to drop like 7,500 points).  We just need to wait until MIPS sees the big crash actually happening and takes us to cash and then short.

Of course, this crazy market could turn around and roar back up...

Stay tuned !!!

Posted by: Dr. G. Paul Distefano AT 06:05 pm   |  Permalink   |  Email

MIPS Timing Systems
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