How Far Can Stocks Fall?

Ian Gordon called me just prior to a recent radio show to tell me that based on the work of W.D. Gann, he thinks odds favor Friday, Nov. 13, 2009, being the peak of this “B” wave higher.  I sent an e-mail to Dr. Robert McHugh to see if he was familiar with Gann. He returned the following answer to me via email:

Hi Jay:  No, I do not follow Gann. But Friday is pretty close to our Nov 9th phi mate turn and Bradley Model turn date, so maybe he’ll be right. Best, Bob

Dr. McHugh wrote the following:

“Stocks are up moderately mid-day Friday, November 13th. Stocks did not hit new intraday highs Friday for the rally from March 2009, so the rise is either a continuation of the final wave c-up of (E) or a corrective bounce at the start of (C) down. Pinpointing the precise wave path very short term is nearly impossible at this juncture, however we are convinced a major top is in process. The decline from a major top can start out slow, almost anesthetizing investors. Tops are typically rounded and bottoms are typically spikes.

“Consumer Sentiment worsened in November according to a Reuters/University of Michigan poll. Wall Street may be happy with the Central Planners stimulus, but Main Street has been left out in the cold. This grave policy error will fuel catastrophic wave (C) down over the next several years.

“This weekend’s report will study an amazing array of time and price confluences coming due now. Because markets seek order, this could mean the major top we are watching for is imminent. Don’t miss this report.

“Mid-day Friday, the HUI bounced 15, Gold is up 9.9, Silver is up 0.12, Oil is down 0.35 and the Dollar is down 0.25.

 “We just added China’s Shanghai Index to our international markets coverage in the Australia Weekend report, which is now available at www.technicalindicatorindex.com   Included in this report are mid-day Friday updated charts for the S&P 500, Industrials, and Canada’s TSX, as well as coverage of London’s FTSE, Gemany’s DAX, Japan’s NIKK, Hong-Kong’s HSI, China’s SSEC, as well as Australia’s SPASX200.

 “Best regards, Robert McHugh, Ph.D.”

Ian Gordon and Robert McHugh both are calling for a market high materializing soon even though they use some different sources and methods. The DOW is hanging around at the same level as the previous week which gives credence to a “rounded top” that McHugh says happens at the top of the market. We caution you to be very careful with your investments in this market. We remain convinced that a major decline will happen and will probably take down all sectors, although the price of physical gold should remain less exposed. 

Jay Taylor
Gold Investor