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Get Out Of Stocks! (TZA, GLD, FAZ, SPXU, SDS, VXX, RWM)

January 30th, 2012

Dominique de Kevelioc de Bailleul: Suddenly the Baltic Dry Index (BDI), a key index that economist watch for signs of expansion or trouble ahead for the world economy, has collapsed.  Because two previous steep declines in the BDI foretold stock market crashes, one may not want to wait too long for confirmation of the dreaded Hindenburg Omen to go short stocks and long booze, cigarettes and ammunition.

“Today, the BDI is on the verge of making headlines once again, being that is plummeting like a wingless 747 into the swampy mire of what I believe will soon be historical lows,” regular zerohedge.com contributor Brandon Smith of Alt-Market.com wrote. Get my next ALERT 100% FREE

Since the inception of the BDI in 1985, economist and traders alike use the index to assess global shipping rates of dry bulk goods, a leading indicator of demand for raw materials from manufactures of finished products.


Therefore, a rise in the index suggests production managers foresee a strong economy and customer demand for its goods, while shippers raise rates to optimize revenue during the good times.  The reverse, of course, takes place as shippers cut rates to keep its carriers operating at close to full capacity as possible.

According to Smith’s research on the correlation between the BSI and equity markets, he suggests big trouble for stocks lie in the months ahead.  See chart, below.

According to the Smith, the danger zone for stocks follow a decline in the BDI  below 800.  The 1987 stock market crash, Asia currency crisis, the popping of the Nasdaq bubble, and the Lehman collapse, took place as the index was dropping toward the 800 level (quickly, in the case of Lehman), began recovering after reaching 800, or remained close to that level, as in the case of the Asian currency crisis of 2008.

A continuation of the chart, below, shows the BDI again plunging suddenly as the new year rang in.  The BDI has once again dropped into the danger zone.  A stock crash warning has triggered.

Adding to the gloom and doom comes the notorious and legendary market timer Joseph Granville, who told Bloomberg last week that the Dow is headed for a fall of 4,000 points by year end.

Granville, 88, said, “Volume precedes prices … You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.”

Presently trading at a dividend yield of 2.5 percent, a drop of 4,000 points off the Dow equates to a 31 percent haircut from today’s 12,600 level and a higher dividend yield of 3.7 percent.

Granville expects the carnage in stock to reach a climax some time during the summer months.

And if that isn’t bad enough, another pair of trusted eyes sees a lot of trouble for stocks as well.

In mid-December, another octogenarian of the stock market, Richard Russell, of Dow Theory Letter, told his subscribers to bailout of stocks and hold onto gold.  Today, stocks are very vulnerable and appear to be repeating a chart pattern of the post-1929 stock market crash period of 1929-33, according to Russell.

Russell wrote:

The great bear market rally is now about over, following a very long period of deceptive distribution.  I am warning all my subscribers again that we are back in the grip of a vicious and ruthless bear.  The bear has been held back for almost two years, due to the so-called quantitative easing of an anxious and ignorant Fed.  There’s no bear angrier than a frustrated bear.  As a result, I believe we’re going to see a brutal stock market that will shock the Fed and the bulls and the public — and all who insist on remaining in this bear market.

I think we’ll see selling of gold to cover losses (particular losses by the short sellers), but ultimately gold will be the last man standing.  But most important — GET OUT OF STOCKS.

With the BDI reaching near all-time lows and Granville and Russell warning their subscribers of a post-1929 crash replay, the remaining question is: when will traders hear that the Hindenburg Omen just triggered a warning signal?

Related: SPDR  Gold Trust (NYSEArca:GLD), Direxion Daily Small Cap Bear 3X Shares ETF (NYSEArca:TZA), ProShares UltraShort S&P 500 ETF (NYSEArca:SDS),  iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX), ProShares UltraPro Short S&P 500 ETF (NYSEArca:SPXU), ProShares Short Russell 2000 ETF (NYSEArca:RWM), Direxion Daily Financial Bear 3X Shares ETF (NYSEArca:FAZ).

By Dominique de Kevelioc de Bailleul From Beacon Equity Research

BeaconEquity.com is committed to producing the highest-quality insight and  analysis of small-cap  stocks, emerging technology stocks, hot penny stocks and helping investors make  informed decisions. Our focus is primarily OTC stocks in the stock  market today, which have traditionally been shunned by Wall Street.  We have particular expertise with renewable energy stocks, biotech stocks, oil   stocks, green energy stocks and internet stocks. There are many hot penny stock opportunities present in the OTC market everyday and we seek   to exploit these hot stock gains for our members before the average daytrader is aware of them.

 


NYSE:FAZ, NYSE:GLD, NYSE:RWM, NYSE:SDS, NYSE:SPXU, NYSE:TZA, NYSE:VXX


 

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