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Countdown to Armageddon

(September 3, 2001) - Six Trading Days Prior to the Events of September 11th and one of the greatest one-week declines in Stock Market History

Please note that since the following article was written on September 3, 2001, some of the information or links contained herein may be outdated. 

Call it a desperate attempt to be dramatic.  Call it insane.  But what I am about to write is a prelude to one of the greatest stock market crashes in financial history.  It also reflects my inner-most feelings at this time - at approximately 3am on Labor Day, September 3, 2001.

"The [Holy] Spirit clearly says that in later times some will abandon the faith and follow deceiving spirits and things taught by demons" (1 Timothy 4:1, NIV).

Rewind to March 10, 2000 - the day that Nasdaq peaked on an intra-day basis at approximately 5,100.  The masses were delusional.  This is not just a mere speculation gone wrong.  I have said this before and I will emphasize this once again.  Spring 2000 brought us to the peak of the greatest stock market mania of all-time.  Greater so than the Tulipomania of the 1630's and the South Sea Bubble in 1720.  1987 does not even register and 1929 is merely just a blip on the radar screen.  To me, this is a prelude to the greatest bear market in history - a sign of extremely speculative excesses and mass delusion on a worldwide scale.  "What has the world come to?" I asked on that day.  Certainly, greed and money do not mix.

"Satan himself transforms himself into an angel of light. Therefore it is no great thing if his ministers also transform themselves into ministers of righteousness" (2 Corinthians 11:14-15, NKJV).

Never has Wall Street been so successful on that fateful day in spring 2000.  The trap has been set and virtually every human being acted for the market on that day.  The agents of Merrill Lynch and Goldman, Fidelity, Janus, Putnam, etc., were praised and were made household names, not unsimilar to the agents of the Rothschilds and the Morgans before them.

It was time to let the market crash, and so it did.

And they have chosen to "let it" once again.  We are now, again, at the edge of the abyss.  Only this time, the magnitude of the slaughter of the masses will be greater.

Are the agents of Wall Street the ministers of Satan?  Is the current bear market a sign of the upcoming Armageddon?  I have chosen not to answer these questions.  I merely ask the reader to consider these couple of questions.  If I have offended anyone, I apologize.  If you think I am a lunatic, go ahead and margin yourself in U.S. equities or call options.  I will be in my chair listening to the following song as your "portfolio" proceeds to be decimated.

http://www.twistedtunes.com/player/playMain.asp?ID=334

As I am writing this, the Nikkei is doing what it has done best over the last decade or so.  The Nikkei closed down 303 points to another 17-year low at 10,409.68.  Recall that it peaked at over 39,000 in 1989.  I wonder which will reach 9,000 first?  The Nikkei or the Dow?  Hmmm...  Hong Kong is under 11,000 at a 30-month low.  Same with the FTSE 100 in the U.K.  Germany is at a 24-month low.  All the world's major stock market indices have the ugliest charts I have ever seen.

The Dow is now sitting at 9,949.75.  Both Thursday's and Friday's closes were very ominous closes since they were both under previous support at 9,965 set earlier in April.  All recently rallies have had no follow-throughs.  The situation is downright ugly.  Numerous market strategists are now very bullish based on technical indicators such as the smart money index, the put/call ratios, the Fed, and more importantly the

TRIN:

http://stockcharts.com/education/Resources/Glossary/ArmsTrin.html

For example, the TRIN has not been above 2.0 for two consecutive days since October 19, 1987, when the Dow lost >22% in one day.  This happened last week.  There were seven or eight occasions when the 10-day MA of the TRIN surpassed 1.5 and in all cases, the Dow was significantly higher during the next few months.  The last time this signal flashed was on March 22, 2001 (the Dow went from 9,100 to 11,300) soon afterwards.  This happened again last week.

Then there is always the Fed.  Prior to its latest cut, the Fed has only gone to a very aggressive easing cycle five times since its inception.  On every occasion the Fed has done this, the market rose significantly in the months afterwards.

http://www.bearmarketcentral.com/priorchart.htm

The only occasion when the Fed failed was during 1930.  The Dow ultimately bottomed in 1932 after losing an unprecedented 87% from its peak in 1929.

So what does this all mean?  I believe it means we are in uncharted territory.  I believe the direction is down - not up.  The signals that I have just cited are NOT WORKING.  That means we are certainly in one of greatest bear markets of all-time.  The fact that numerous credible market strategists are on the long side does not bode well either.  The "smart money" may be incorrect this time (which they were not in spring of last year), and if they are, they will be incorrect in a large way.

Also note that MZM and M3 growth has flattened during the last few weeks.

http://www.stls.frb.org/images/publications/usfd/page3.gif

http://www.federalreserve.gov/releases/H6/Current/

Prior to last month, both of these figures were growing at an unprecedented rate.  Something in the order of a 25% annualized rate at their respective peaks.  Mutual fund redemptions have also been unprecedented.  The market is running out of liquidity.

The second quarter GDP growth has just been revised from 0.7% to 0.2% last week.  It is due for another revision later this month and I believe the recession will be official at that time.  Any high school student with an intro to macro course and with a little bit of common sense can tell you we are in a recession already.  Statistics from the government have always been meaningless and always will be.

The Bear is hungry.  It has never been this hungry since the South Sea Bubble in England in 1720.  From 1720 to the bottom in 1722, over 80% of the issues on the London Stock Exchange were delisted and the remaining 20% or so declined an average of 80%.  If history is to repeat itself, the Dow would eventually close at or near 400 (notice that I covered myself since I mentioned <5,000 by fall 2003 earlier).

I maintain the Dow would reach 8,000 or so on an intra-day basis by the end of this year.  Possibly within the next few weeks if we do not get a meaningful rally soon.  I have already placed my bets.  Either way, the upcoming crash will be taken as a sign of a prelude to Armageddon by many in the near future.

Henry To

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