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MARKET RALLIES:

I DIDN’T EXPECT TO MAKE MY 2016 DOW LOW OF 14,688 ALL IN ONE MONTH!

I am widening my 2016 projections lower. If the Dow Indu and the NASDAQ can hold above their August lows for the next couple of weeks, markets could once again begin going higher for a little while. However, I believe risks for a big drop are higher this year than last year and I am widening my downside projections as follows: My forecasts for 2016 call for the Dow Jones Industrial average to be as low as 14,688 to 12,000, the NASDAQ to be as low as 4,506 to 3,000 and the S&P 500 to be as low as 1,560 to 1,400 because of two factors.

  • If oil prices continue lower, as the charts show, countries like Russia, Venezuela, Brazil, Mexico , etc. and even Saudi Arabia could have problems with their sovereign debt. In addition, approximately 10% of the S&P 500 are made up of companies that depend upon higher energy prices and natural resource prices. These corporations have issued hundreds of billion dollars of debt, which may default, if oil prices and commodity prices stay at these levels. The banks hold these bonds and more speculative derivatives than ever. , I believe the Canary in the mine are bank stocks, particularly  Deutsches Bank (DB),now, below 19 dollars a share, down from a high of 52.  Deutsches Bank has approximately $7 billion of sub-prime automobile loans, many on Volkswagen. Bad debt, in my opinion, will lead to a banking crisis larger than we had 2008. That is because in 2008, the government was willing to bail out the banks with trillions of dollars of taxpayer money. This time, Congress is in no mood or politically structured to save the banks and the Fed is out of bullets and hold trillions of dollars of high-yield bonds that they purchased during quantitative easing.

 

  • For the last twenty years all the income growth has gone to the top 1% in the US and in the World only eighty people own 50% of the wealth (they won’t stop until they get the other 50%). I concluded that on a worldwide basis, a consumer oriented and market oriented economy was unsustainable under these circumstances. Those that have an ideology of a libertarian and are saying they are pro-business, free markets, less taxes and less regulation, I believe are naturally motivated by greed and are causing  unstabilizing forces between capital and labor. Richard Fink, chief strategist for the Koch’s family, was quoted in a recent article in the New Yorker Magazine saying, “We want to decrease regulations so we can make more profits. We want to cut government spending so we pay lower taxes.” In my opinion, corporations are not individuals. If they are, they are sociopaths! I conclude, that the balance between capital and labor has been tilted in such a way, that it is unstabilizing US and world economies  and that all boats could sink.

 

 Current Dow NASDAQ S&P 500
16,138 4,560 1,899
Short Term DOWN DOWN DOWN
Int. Term DOWN DOWN DOWN
Long Term SIDEWAYS? SIDEWAYS? SIDEWAYS?
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) 16,912 5,057 2,062
Short Term Down (Support) 15,484/15,370 4,328/4,116 1816
Int. Term Up (Resistance) 18,352 5,231 2,134
Int. Term Down (Support)     /15,370 /14,688/ 13,377  3,986/3294  1,560
Long Term Up (Resistance) 18,352 5,231 2,134
Long Term Down Fibonacci Support 50%12,000

62%10,750

2008 LOW 6,627

50% 3,000

62% 2,555

2008 LOW 1,204

50%1,400

62% 1,177

2008 LOW 666

 10 Treasury 2.01% Gold 1,118 Oil 26.59low now 31.44

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
Mr Birkelbach does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Mr.Birkelbach , his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information. CarlBis@aol.com

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