Three Forces That End A Bull Stock Market

Jerry Welch, Commodity Insite!
Call me at 406 -682 -5010
Ennis, Montana 59729

Below is my weekly newspaper column from October 5, entitled, "Three Forces That End A Bull Stock Market." Hope you enjoy it.

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Three Forces That End A Bull Stock Market


When it was announced this morning by the Labor Department that the September jobs pegged the U.S. unemployment rate at its lowest level since 1969, nearly 50 years ago, stocks and bonds did a nose dive. Bond prices fell to their lowest levels in 4 years with mortgage rates hitting a new, 7 year high. It was a rough week for stocks and bonds and the bulls as investors and traders are coming to grips with the fact that higher rates are coming and the era of cheap money is over.


At one point this week, the Nasdaq, the darling of Wall Street fell sharply to a level not seen since the first days of August. But the most damage done to the Dow Jones was to slip to a 3 week low. However, here is some food for thought. In the early August, the Dow was trading around the 25,300 level compared to where it closed today around 26,300. In other words, based on the Nasdaq, the upside leader in the world of equities and the darling of Wall Street, is hinting loudly the Dow is 1,000 points overvalued. At the least.


By any measure, this week was flat-out bearish stocks and bonds. But investors looking to make a play with cannabis( also known as marijuana) rushed to buy the stock of India Globalization Capital Inc., or IGC. In early August, stock of IGC was trading around $.50 a share but this week, rose to well over $14 a share. While stocks and bonds are now suffering due to higher interest rates, shares and stock of IGC rallied 1000% in three months.


Moving forward and regardless of cannabis stocks, history shows clearly that there are 3 forces that can turn a bull stock market into a bear. They are; a war, a recession, or, higher interest rates. But as I stated in my column from last week. When are interest rates, too high and become a problem for stocks? And to repeat what I stated last week, there is no simple or clear answer to that question.


In my column from last week, entitled, Its About Time I had the following thoughts about the stock market: The day after it was announced that consumer confidence hit an 18 year high, CBS news published an article with this headline. Executives are selling off their company's stock at a record pace. CBS news stated, Corporate insiders are dumping stock in their companies at a rate not seen in 10 years. With September not yet over, stock sales by company executives reached $5.7 billion, according to data from TrimTabs Investment Research -- the highest September in a decade. August's $10.3 billion in insider sales also reached a 10-year record.

History shows that when, insiders, a.k.a, smart money are selling stocks it is a sign that those in the know want out of the market. They fear that stock values are as high as they will go for the time being and want to cash out while the getting is good.

There is no doubt in my mind that the heavy selling with stocks and bonds this week was by insiders and smart money. They have been on the sell side of the ledger for weeks and in some cases months. And based on the September Employment rate that estimates the unemployment rate in the US at a 49 year low, insiders and smart money investors will continue to cash out of all paper markets while the getting is still good.

From Market Watch with a headline of, A $20 trillion bond index is on track for its second-worst year in history. The Bloomberg Barclays U.S. Aggregate Bond index, linked to trillions of dollars of fixed-income, is on track to post its second-worst showing in history.


The index is one of the most widely used barometers for bond-fund managers, and is associated with more than $20 trillion of assets. Its poor performance underscores how fixed-income markets have struggled amid a strengthening U.S. economic backdrop, which has prompted the Federal Reserve to continue to raise rates and consequently driven bond prices lower and yields to multiyear highs.

History shows there are 3 forces that can morph the stock market from a bull to a bear. A war. A recession. Or, higher interest rates. If you doubt that for one moment, check it out by going to www.commodityinsite.com.

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The time is 7:31 a.m.Chicago, October 20















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