Is a Further Decline in Equities Markets Coming?
Online, September 2, 2010 (Newswire.com) - Noted financial advisor Dennis Tubbergen frequently discusses the U.S. and world financial markets in his economic blog and his Moving Markets monthly newsletter. According to Tubbergen, recent events are suggesting a further decline in the equities markets may be coming.
Tubbergen, who is CEO of USA Wealth Management, LLC, a federally-registered investment advisory company, gives several reasons for his gloomy prediction. "Based on what I've seen in the past couple of weeks, stock investors may want to be cautious," warns Tubbergen. "While markets rarely go straight up or straight down, I believe the evidence suggests that over the next few months, the overall trend may be down."
Reason number one: Since the April highs in U.S. equity markets, the market has been making lower lows and lower highs for the most part.
His second reason: A 'head-and-shoulders top' has formed in many U.S. equity markets. The pattern has three peaks: the first and third peaks are shoulders, and the second peak forms the head. The 'head-and-shoulders formation' is believed to be one of the most reliable trend-reversal patterns. The top formation is a bearish signal and indicates the possible beginning of a downward trend.
The third reason is that at the beginning of July, the 50-day moving average of market values on major U.S. indices passed below the 200-day moving average. Moving averages data are used by technical analysts to create charts that show whether a stock or indice's average price over a defined period of time is trending up or down. This crossover is an infrequent occurrence and often precedes decline.
"Fourth - the fundamentals are 'catching up' with equity market technicals," explains Tubbergen. "A Bloomberg report on August 21, 2010 reported that U.S. jobless claims are up and U.S. manufacturing activity is slumping."
Tubbergen's fifth reason is that talk about deflation is resurfacing. "While I've been saying for months that debt is by its very nature deflationary, mainstream media is now beginning to discuss the dreaded 'D' word," notes Tubbergen. He quotes an article in The Daily Caller from August 21, 2010: "With mortgage rates at record lows and Treasury rates at their lowest since March 2009 - when the S&P dropped all the way to its ominous 666 bottom - the markets aren't just hedging against the possibility of deflation; they're expecting it."
"While no one indicator is accurate all the time, nor is it necessarily wise to make investment decisions based on a small number of indicators, I believe a combination of these five factors may lead to lower equity markets over the next several months," concludes Tubbergen.
For more information on Dennis Tubbergen's views, visit www.dennistubbergen.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.