At the beginning of 2015 I wrote the LONE BEAR LETTER on 1/23/2015 with the Dow:17,672; NASDAQ 4757: S&P 500 2,051. In August the market made our first stated downside objective and fell to lows as follows: Dow 15,351, NASDAQ 4292 and S&P 500 1,867. Since then the markets have rallied back to approximately the same levels they were when the LONE BEAR LETTER was written, with the NASDAQ 10% higher. World markets have not fared as well, with the Chinese market with a 2015 high 28,443, a low of 20,557 and is now at 22,479. The European DAX index with a high of 12,375 a low of 9.334 and is presently at 11,190. Emerging nations stocks have recovered very little since the August. Likewise certain sections of the US market have not fared well including the Russell 2000 index the Dow transportation index and energy stocks. Deutsche Bank is at a yearly low, probably because of the VW scandal.

However, generally speaking the markets have done much better than I expected. Slowing in China did not spill out causing a catastrophe in developing nations and China’s currency has been added to selected basket of RESERVE currencies, known as special drawing rights by the International Monetary Fund. In addition, although oil prices fell to as low as $35 a barrel and are now at about $40 a barrel, disasters did not occur in oil-producing nations like Brazil and Russian, or oil-producing companies like Exxon. Likewise, there appears to be no disaster in Europe even though their economy is flat and may have been stung by terrorist acts and overwhelmed by immigrants. As a matter-of-fact, the Bank of England just declared an end to years of financial crisis saying that British banks are now healthy. The European Central Banks continue to buy $64 billion of bonds or months under is qualitative easing program. However many European bonds have a negative you and do not qualify for purchase. I still believe we have a deflationary scenario worldwide and that’s why yields are negative in Europe. Our banks in the US continue to appear healthy on the outside, while possibly vulnerable because of low quality loans and a portfolio of bonds that may start decreasing in value as the Fed raises interest rates. So, “so far so good!”  the man said  while falling  at the 20th story of a 50 story building.

Why the stock market rally? As I said once before ‘It’s three men in a tub, rub a dub dub, nobody wants to pull the plug. There is talk, the Fed wants to delay increasing interest rates because of an unsure economy. Monetary policy, in my opinion, seems useless. The only thing, I believe can save this economic bear market scenario, is a progressive fiscal policy. This under current conditions will be impossible to execute.

In spite of the markets dodging a bullet in 2015, I continue to see corporate earnings as weak, the bond market as dangerous, banks as a house of cards, and international emerging market growth as negative and my Bear Market deflation scenario is delayed, but on track.

 Current Dow NASDAQ S&P 500
17,730 5,123 2,079
Short Term UP UP UP
Int. Term UP UP UP
Foretasted Trend DJIA NASDAQ S&P 500
Short Term Down Down Down
Int. Term Down Down Down
Long Term Bear Market? Bear Market? Bear Market?
Breakout Points DJIA NASDAQ S&P 500
Short Term Up (Resistance) 17,919 5,156 2,110
Short Term Down (Support) 15,881/ 15,651 4487//4506 1879/1867
Int. Term Up (Resistance) 18,352 5,231 2,134
Int. Term Down (Support)       15,651/

/15,370 /14,688/ 13,377

4,506//4,116/ 3,986/3294 1,867/ /1,560
Long Term Up (Resistance) 18,352 5,231 2,134
Long Term Down Fibonacci Support 50%12,000  62% 10,750     50%2,958  62% 2,555 50%1,390 62% 1,177
 10Treasury 2.18% Gold 1,053 Oil 40.12