Terry Kinder

On July 29, 2020 I posted that the DJIA would reach 23,200 before or by August 19, 2020 at the latest. Why did I believe this to be true?

Note: Before we dive into the post, know that I'm writing this post on July 29, 2020 - the same day of the original post. The post is a scheduled one and won't publish until after the market close of August 19, 2020. My intention is not to change / edit this post after today unless I forget to mention something important or need to clarify some thought. Should I do so, I will append an update at the end of this post with the date of the update.

OK, enough of that. What led me to believe that the DJIA would reach 23,200 on or before August 19, 2020?

• Cycles / Levels: First off, within the context of cycles and levels of the Dow Jones Industrial Average, I believe the price is trending lower. I posted about this in DJIA: The In Between:

One of things to note is that there is a gap of 250 in between 26,713 and 26,963. The other thing you may have noticed is that each of the levels reduces (sums to) a Modulo 9 number. For instance, 28,963...

2+8+9+6+3 = 28

2+8 = 10

10 (drop the zero) = 1

The cynical might view this as some kind of numerology. It is not. In fact, utilizing Modulo 9 numbers is central to my method of predicting future prices along with powers and imaginary numbers.

There is real and psychological resistance near the 27,000 level.

• Square of Time and Price: Another reason I believed that the DJIA would reach 23,200 on or before August 19, 2020 was because of an approximation of the square between time and price. It's not really a true square of time and price. What I looked at leans heavily on an understanding about where the DJIA is within the cycle (trending lower). 

The basic idea here was to take the numbered days of the year - January 1, 2020 equals day 1. Day 366 equals December 31, 2020 since this year was a Leap Year and February had 29 days instead of 28 days. Each numbered (1-366) day was multiplied  by 10, 100 and 1000. Those numbers could be used to line up with DJIA price levels on certain days of the year. 23,200 resulted from day 232 (8-19-2020) x 100 = 23,200. That effectively created a square of day 232 or 23,200 (232 x100) and the DJIA price level of 23,200.

A further supporting point behind this was that July 29, 2020 was day 211. 21,100 = 211 x 100. If we take a level of around 26,560 (the trading day of July 29, 2020 isn't yet over as this is being written) then we can divide 26,560 / 21,100 = 1.25 (rounded down). If we are trying to square time and price then we want to arrive at the number one where the price level is equivalent with the day number. So for 1.25 I assumed that each .01 drop was equal to one day. To drop .25 was equal to 25 days. Advancing 25 days from July 29, 2020 resulted in August 19, 2020 (day 232 ==> 232 x 100 = 23,320).

• Spreadsheet Calculations: I keep a spreadsheet which is based on my idea that numbers act as a programming language. This spreadsheet allows me to see when prices are about to turn and also does calculations that point to important dates where the trend tends to change. One of those dates on my spreadsheet just so happened to be August 19, 2020. While some may believe in random walks and coincidence, the longer I have studied numbers the less I believe that anything is truly random or coincidental. I believe that numbers act in an equivalent matter to a programming language. Whether true in actual fact or not they are, effectively, what programs everything. So, when my spreadsheet calculates August 19, 2020 as an important date and it also shows up in another set of calculations I take that seriously and don't just look at it as a random curiosity.

Essentially, the above represented my thinking on why the DJIA would reach 23,200 by August 19, 2020. As a side note, I maintain some regular intervals within my spreadsheet that also tend to indicate when prices have reached interim peaks or lows. An interim peak at 26,625.46 was noted on July 27, 2020. Because this is an interim type of high, it's duration could be just a few days or less. However, when combined with the general downward trend in the cycle, the real and psychological resistance near the 27,000 level, and the gap between 26,713 and 26,963 as outlined in DJIA: The In Between, these all point to a DJIA that has run into resistance and has been making a series of lower highs. None of these things supports the idea of a DJIA moving to 30K or above. To the contrary, the price action has generally been fairly sluggish on the Dow.

Now all I can do is wait and see what happens. Whether I prove to be right or wrong, rest assured, the financial media will have some single reason they focus on for why the DJIA moved the way it did. In something as complex as stock markets, I simply don't believe anyone can point to a single reason for anything happening the vast majority of the time. Instead, I believe that numbers as a programming language give us the ability to understand when markets will move and which direction they are headed.

Update 8-18-20

Tomorrow 8-19-20 is the deadline for this prediction. Today, 8-18-20, the market closed at 27,778.10 which is above the 26,963 to 26,713 gap posted in the blog post above. 

It is as close to nearly certain as possible that this blog post will be wrong. I would never say 100%, but it's close.

At this point, it appears that I am again too early. This is pretty typical of me. I tend to be very early. If I have to re-assess (and I do), then my evaluation would be that the DJIA is nearing an interim peak with tomorrow being a potential peak. These sometimes happen within a day or two afterwards.

The next two days I have on my radar are September 23rd and September 29th. The 23rd is something new I'm trying so I am not as confident that this will represent an important date or turn date. September 29th is more likely to be an interim turn date.

Given that the 29th is an interim turn date I would expect we go generally lower on the DJIA from tomorrow or soon after and continue mostly down through September.

The fact that the DJIA has not been able to break 30K gives me confidence that the resistance at that level remains pretty strong and the market needs to shake out the bulls once again  (at least) before it will be able to build up enough energy to break that level and continue higher on a sustainable basis.

In summary, my prediction was way, way off. I did not anticipate the ability of the market to remain more or less in a trading range despite the economic blow dealt by the lockdowns. Cyclically, I believe we're getting close to topping. From a narrative perspective, in the midst of the 2020 presidential election, the more interesting narrative would be to have the stock market move down into the election. Interesting narrative often turns out to be the best way to forecast what will come next. 

One last brief note - August 26th, after the close, I will be able to project the next move for the DJIA more effectively.

Update 8-24-20

I was obviously way too early to the party on this to say the least. However, I would like to add that I believe that we're setting up for the 26th of August to be a potential turn lower for the DJIA - if we're ever to see such a thing again. I have been riding a short horse until the poor thing is half dead. While the Dow Jones has managed to levitate despite the damage wrought be the virus shutdowns, I still think that the market requires at least one more run lower before it can gather enough steam to challenge 30K and possibly much higher.

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On June 8, 2020 the DJIA reached an interim high of 27,580.21. After that it had two down days before gapping down at the opening and then ending the day at 25,128.17. Since then it has largely been capped under $27K with a few exceptions.

For reference I would suggest reading the following posts:

DJIA Fails at the GAP

DJIA the In Between

I wrote in DJIA Fails at the Gap:

There may still be some who expect a V-Shaped Recovery and Dow 30,000 right around the corner. I'm not one of them. My expectation is that with continuing economic strain caused by renewed COVID-19 hot spots, current and future lock-downs, escalating tensions with China, and the 2020 election not in the bag for President Trump the highest probability move, in my opinion, is lower for the markets - especially the DJIA which is tied to the more traditional brick and mortar economy.

Beyond merely asserting that the DJIA isn't likely to get to $30K soon, I have climbed out on a limb to state that by August 19, 2020 the DJIA will reach 23,200. I'm not stating my reasons for now, but on the same day that I predicted 23,200 by 8-19-20, I had already written and scheduled a post for that same date with the reasons why I believe it will happen.

On the one hand, the DJIA hasn't really done anything to support the idea of moving down to 23,200. On the other hand, I believe The Momentum Heuristic lends credence to the idea that the DJIA by not moving strongly up is effectively moving backwards:

Given the shark-like nature of U.S. Stock Markets - keep moving or die - a lack of momentum or very weak upside bias can be thought to equal moving backwards or going lower in terms of price. It is a very imprecise way of looking at markets, but I find it to be a useful shortcut in light of the thousands of inconsistent and almost nonsensical bits of information that news and financial media bombard the public with daily.

Whether or not this is exactly a heuristic or not, perhaps someone will tell me, but one way of looking at markets is through momentum. Given the shark-like nature of U.S. Stock Markets - keep moving or die - a lack of momentum or very weak upside bias can be thought to equal moving backwards or going lower in terms of price. It is a very imprecise way of looking at markets, but I find it to be a useful shortcut in light of the thousands of inconsistent and almost nonsensical bits of information that news and financial media bombard the public with daily.

We live in an economy requiring growth. Any pause in growth, or Heaven forbid reversal of growth, is life-threatening to markets and the largely consumer-based U.S. Economy. Unfortunately, COVID-19 and its mismanagement by all levels of government has resulted in shutdowns, closing large sectors of the U.S. Economy and threatening whole sectors for potentially years to come. It is necessary that retail sales, GDP, employment, manufacturing, the stock market, etc. all continue to grow or at least that there is the perception of growth. In my opinion, even small gains - such as the 0.44% increase in the DJIA today - aren't sufficient to push the Dow up to 30,000 and beyond.

We are living through a very strange time with pandemics, strange weather, increased volcanic activity, earthquakes, etc. all coming together to create an apocalyptic pale over society and markets. None of this inspires confidence in the public. The inadequate response by government at all levels and the very lack of real political leadership in our age provide the opposite of confidence for society to move forward confident that the challenges we face will be met by a competent / adequate response. While the DJIA has weirdly bounced, then hovered between 25,000 to 27,000, this does not represent momentum so much as a shark slowly becoming less and less active and eventually become oxygen deprived.

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I'm going to make this simple - I expect the DJIA to hit 23,200 before or by August 19, 2020 at the latest.

Further, I won't explain how I reached this conclusion today. Instead, I'm going to write a post (probably today) and put it on to publish after the close on 8-19-2020.

That post will explain how I reached my conclusion. 

Let's see what happens.

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In some sense viewing any and all combinations of pairs, e.g., cryptocurrency / Dow, gold / Dow, cryptocurrency / gold and U.S. Dollar / gold is a dated way of thinking. Some view pairs such as gold and Dow (stock markets) as moving in opposite directions by definition. This is also outdated and untrue. Rather than reopen some old debates, or advocate for one instrument or the other I'm more interested if looking at all of them together can tell us anything about where we are headed - not only in terms of the DJIA (which you could view differently based on whether you price it in the USD, gold or Bitcoin), but overall geopolitically. What follows isn't intended to be comprehensive or well-documented so consider it on that basis.

I have been wondering recently if developments in the cryptocurrency space, particularly decentralized finance (DeFi), say anything about the future of the stock market. Obviously, the stock markets of the world are orders of magnitude larger than cryptocurrencies and even larger compared to DeFi. One aspect of this is purely speculative. People can choose where to put their money. A small, but growing portion has decided to invest in cryptocurrency. A subset of that group has decided to invest in Decentralized Finance. DeFi can get pretty complicated and I don't want to get bogged down in too many confusing details. Basically, DeFi offers a way for holders of cryptocurrency to speculate in various ways. They can earn interest on their cryptocurrency. They can "stake" cryptocurrency - locking it in for a certain time period and earn interest or tokens that can be sold for fiat currency, held, traded for other cryptocurrencies, etc. This is sometimes tied to the rising Stablecoins - 

A stablecoin is a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both world’s—the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.

Some Stablecoins attempt to maintain their value (essentially a peg) to the U.S. Dollar. One mechanism for doing so is to offer interest to those who will lock their Stablecoin up. Interestingly, you don't have to lock your Stablecoin up for days, weeks, or months. There are services which allow you to lock up your Stablecoins for whatever period you want. The drawback is that there are often costs to moving your Stablecoins in and out so it isn't always practical to move out too quickly as this can result in losing value.

While cryptocurrency overall has remained too technical for many to use and trust there is a growing number of people who are using it to hold stored value / wealth outside the traditional finance system. DeFi is offering some of those same people the opportunity to speculate outside the traditional stock markets, currency trading markets (Forex), and futures markets. While the United States continues to be more restrictive, there are also places where you can trade synthetic contracts for a mix of anything from currencies to indices and from cryptocurrencies valued in foreign currencies to precious metals. These are not big markets yet, but they crack open the door for the value currently stored in fiat currencies to potentially flow out of nations and traditional markets.

For years, some have considered gold to be necessary for the monetary system to be anchored to something of value. The United States has been part of a floating exchange rate system for decades. Martin Armstrong's perspective, if I am characterizing it correctly, is that the value of the U.S. Dollar hinges on the productive capacity of the American people and in the level of confidence that all holders of the USD have in it and the U.S. Government vs. private institutions. Personally, I am not someone who believes that reverting back to a gold standard is practical or desirable. The Roman Empire and many other previous empires have demonstrated that even gold and silver coins can be debased so, in the end, it all goes back to what confidence or faith holders of money have in the issuer. What that money is made of, backed by, or if it is virtual doesn't matter. If people don't believe the money is good it will eventually fail.

A similar situation exists where some portion of the advocates of gold as the basis for the monetary system view cryptocurrencies as having no real value. I tend to disagree. My Dad once said to me that a thing is worth what someone is willing to pay for it. Markets aggregate that value. So a cryptocurrency is worth what the market says it is worth. You can disagree, but that's the value. It's the same for gold, stocks, financial instruments or whatever else. Speculators can place bets that the current price of gold, the USD, stocks, cryptocurrencies, etc. is going to change based on technical or fundamental analysis. But disagreeing with the market value doesn't make that value wrong. For me, that is one of the fundamental errors that some supporters of gold make. They believe the market largely misprices gold. Some also believe that what backs a currency is the most important factor. I believe that the combination of who runs the system and whether or not people have confidence in those people - aka the system - is more important.

The U.S. Stock Market is often measured against gold, the USD, cryptocurrencies, other markets, etc. One of the points that Martin Armstrong has wisely pointed out time and time again is that you have to look at markets in context of the flow of capital around the world. So, while we are looking at cryptocurrency, gold, the USD and the Dow, we also must somehow consider all of them in context of how money is moving around the world. For example, if we just look at US markets, we might conclude that our economy and political system are a mess, therefore the price of the DJIA should eventually drop. On the other hand, we can't just look at the United States a though it is isolated. Capital - aka money - can move around the world in an instant. The stored value of money doesn't just have to sit in a bank account in Germany, the UK, France, etc. If a person thinks their money will earn more in the U.S. they can invest in the U.S. through markets. So, the US political system and economy might look like a mess to me but to someone in Europe our economy could look better than their economy. An influx of foreign money can make the U.S. Stock Market rise. So, it isn't as simple as comparing the U.S. Stock Market to some other alternative U.S. investment. Every investment is competing against every other investment everywhere.

Let's say we agree that all investments compete against all other investments everywhere. You still might not be convinced that the relatively small cryptocurrency market poses a significant threat to the U.S. Stock Market or USD. But, what if a foreign government were to start its own cryptocurrency to circumvent the current international finance system, make it easier to move money, avoid sanctions, and attract capital? We don't have to wonder because that is exactly what China is doing with the e-RMB. While it is only in the testing stages currently, China's effort to create an electronic version of the Renminbi could offer them a way to settle international payments without using the USD. Over time, that could reduce international use of the USD and undermine it as the global reserve currency. At the same time the e-RMB would allow China to sidestep the IMF, SWIFT and the U.S., making the enforcement of international monetary sanctions difficult to impossible.

Going back to our original idea of the various pairs and comparing them, e.g. cryptocurrencies vs. the USD or gold vs. the Dow, they aren't useful comparisons, in my opinion, because they don't represent fixed correlations. In some circumstances gold and the Dow can move up together. At other times the stock market can drop and gold can rise. This simply demonstrates that what Armstrong has said about looking at markets within a larger context applies at all levels. You can't simply look at the U.S. markets in isolation from the rest of the world. Within the U.S., in turn, you can't just look at one instrument vs. another. Everything moves within the context of the entire world. While some in the U.S. are debating about the value of the Dow relative to gold or whether cryptocurrencies could be the nail in the coffin for the USD, China is testing the e-RMB which could ultimately supplant the USD, competing cryptocurrencies and - over time - tilt the balance of power away from the U.S. and toward China. As we consider the value of the DJIA and whether or not it moves upward to 30,000 and beyond or tests the recent 18K+ lows, we can't effectively do that without considering the broader context of what is happening around the world.

The competition between China and the U.S. has intensified over the years and it appears this trend will only continue into the future. There has been speculation that the U.S. might not be able to hold together in its current form and might eventually split up. China has a history of looking outward and turning back inward, sometimes in response to internal struggles. What will happen in the future in either country is not yet known. Humans often tend to simplify and engage in either-or kind of thinking. We sometimes focus on one thing as the root cause of something else that happened. For example, the news might say the DJIA dropped in price today because of increased U.S. - China trade tensions - as if the news knows with some degree of certainty why hundreds upon thousands of stocks moved in a given day. What we can understand is that broad systems and interactions influence what happens. There are going to be moments when one or a few factors will account for much or most of the change. But we live in a very complex world. Even if we think we know all of the important elements in a system and how they work, more than likely there will be something we have missed. However, if we attempt to widen our field of vision we can see the broader picture and may even discover something new we hadn't thought of previously. That new thing might just be the thing that helps us make a better decision.

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