This chart will keep you awake at night…
Here it is in all its glory: the 10-year Dow Industrial Chart.
Every candlestick equals a month. The moving averages are 36 months and 12 months, respectively.
If there is one chart pattern you should know, it’s the doji candlestick.
Dojis were developed more than 1,000 years ago by traders on the Japanese rice markets. They act as powerful reversal signals, like stock ninjas.
A candlestick is a visual representation of a trading session. You have an open, a close, a high price, and a low price.
If the candlestick is white, it closed higher than it opened. If it is red, it closed lower than it opened. The vertical legs represent the highs and lows.
A doji candlestick, however, is black, meaning it closed at or near where it opened.
In other words, dojis are formed when the candlestick opens and closes at the same level, implying the fight between the bulls and the bears is at loggerheads. Dojis signal turning points. They are the proverbial bell ringing at the top (or bottom) of a market.
They look like a cross. Think of them as flags planted at the top of a mountain.
In December, we got one on top of the Dow Jones Industrial Average…
Followed by a bearish engulfing candlestick in January.
We are well above our three-year moving average. The DJIA has seen a 7,500-point run over the last five years, and we could easily lose a thousand points without much trouble.
Heck, that wouldn’t even be a 10% correction.
Low Volume
What is really strange about that chart is that there is no volume. How can a market go straight up for five years when volume falls continuously?
Well, one way is for the Fed to give free money to the banks, which invest off the market in unregulated trades called dark pools.
Dark pools are where the big boys trade large blocks of shares to each other without any of us peons knowing what’s going on. That means they can dump shares before a stock hits the NYSE or is incorporated into the DJIA.
Anecdotal evidence suggests that they have started selling last month. It’s not hard to see why…
Janet Yellen and the Federal Reserve have stopped giving away free money and even — I know, this is laughable — said they will make the money supply tighter in the second half of 2015.
I know Yellen is a regular riot. I want to party with Janet.
To the right is her yearbook picture. Not only is she hot, but she whistled Dixie in history class.
According to Reuters:
The Federal Reserve on Wednesday said the U.S. economy was expanding “at a solid pace” with strong job gains in a signal that the central bank remains on track with its plans to raise interest rates this year.
She must be drinking or doing liquid eye acid or something — because here is the Civilian Labor Force Participation Rate put out by the very same Fed that Yellen works for:
Just look at those strong job gains…
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Burn, Baby, Burn
Meanwhile, the rest of the world is burning down.
The Japanese are old, the Europeans have run out of other people’s money, the Chinese have built all the ghost towns they need, and Canada is about to get a rude awakening in the form of real estate.
Every leading economy is printing money and adding liquidity to the markets. They want inflation and get deflation. The central banks preach stability and sow instability.
We’ve seen this all before and yet never learn. You can’t print your way out of a debt crisis.
The solution to debt isn’t more debt. But I guess they don’t teach that at Yale in History 2.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
