Market technician’s bold prediction: Current stock market rally is ‘the bubble to end all bubbles’

According to the Wall Street Journal, it may be “the bearish call to end all bearish calls.” United-ICAP chief market technician Walter Zimmerman believes 2014 will be the year of “major reversals,” with the Dow Jones Industrial Average beginning a two-year decline that could cause a dip to below 5,000.

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“[This is] a guy who we used to talk to a lot at Fox,” Glenn said of Zimmerman on radio this morning. “He would come on the air with us just to do technical stuff. And he would say, ‘Glenn, you are a little extreme on what you are willing to say on the air… I see the same direction, but I’m not really sure that it’s as bad as you think it is.’ This is the guy who has just made this call: I believe that the Dow Jones is going to start a two-year decline which could eventually take it down more than 70%.”

In a letter to his clients, Zimmerman predicted the Dow could very well rally another 4% or so – reaching a high of around 17,150 – before the great reversal begins.

“Based on our longer-term time cycles the present stock market rally must be considered the bubble to end all bubbles,” Zimmerman wrote.

“The Dow Jones hasn’t seen those levels since 1995. If the Dow does this, it’s going to wipe out the savings pretty much of everybody who is elderly,” Glenn said. “I mean what’s going to happen? You have saved your money. You put it in stocks. What’s going to happen to you now?”

While Social Security was supposed to offer a safety net of sorts for senior citizens, Glenn questioned what people would be left with if the stock market crashes and the U.S. dollar is completely devalued.

“The reason why we have Social Security is because we were told that the stock market is so unstable… So you have to have the government to stand in,” Glenn concluded. “Well, what happens when the dollar has been so devalued by our government? Now nothing is worth anything.”

Front page image courtesy of the AP

  • Sam Fisher

    I can see it happening seeing how the only thing propping up the economy is the government.

    • Michael David Sugg

      And the gov’t is about to discontinue the 95 billion dollars a month QE. Let the props fall…..

  • WASP

    I’m as poor as a church mouse anyway. I won’t even notice it.

  • Draxx

    They have already jacked us all up by Spending Money In The Names Of Children Who Aren’t Even Born Yet….!!! Where’s the guarantee of repayment???

    • landofaahs

      It can only end in hyper inflation or default or a combination of the two. The defaults can take many forms and be 50 or even 90%. Of course war is the usual result.

      • Mike Smithy

        I am torn as to whether the pending collapse will be the result of hyper-inflation or a deflationary collapse. Only time will tell.

    • landofaahs

      It must collapse. It’s only to be determined how that collapse comes and in what order. That will determine who will come out with something to build on.

  • Anonymous

    Ugh. This guy again?

    Do you homework, people.

  • Anonymous

    Obama is constantly using his lying skills to attack free market principles and business. If the economy was doing well he wouldn’t be asking for an extension of unemployment benefits now going past two years. People would be working.
    What Obama does like is crony capitalism where big business and government form a partnership to control and dominate every aspect of the American economy and life.

    • Guest

      All politicians like crony capitalism no matter what side of the aisle they sit on

      • Anonymous

        That is true but there is a very distinct difference between the two Parties. Democrats are implementing “economic Fascism” which is excessive rules, regulations. and taxes to acquire total control of business and private property as opposed to ownership under communism. Obama has virtually declared war on all business except for the chosen ones. With crony capitalism certain large corporations conspire with government to gain control over a sector to monopolize it in an attempt to cripple free market competition for financial gain and power. Bureaucrats gain insider trading knowledge and political donations. In the case of the Democrat Party they use the suppression of business and the economy to create a government dominated welfare society of victims who will keep them in perpetual power.

    • Anonymous

      Here is another difference between the two Parties. A Republican is asking for a vote to audit the FED and a Democrat is stopping the vote from ever happening.

      “The younger Paul (Rand) introduced the ‘Audit the Fed’ bill in the Senate and
      pushed Senate Majority Leader Harry Reid to bring it to the floor,
      promising to delay Yellen’s confirmation vote if he did not acquiesce.
      Reid refused.”

  • Anonymous

    The crash may come this year or we may have one more year to prepare for it. The market crashed in 2001 and again in 2008 – 7 years in between – and it could be that God will allow us one more year to prepare before the next one perhaps in 2015? When it comes though, it will be the last one – the money, the markets, the EU, Asia, the Middle East – absolutely everything will be shaken. We all have to choose whether God or Gov wll be “provider, redeemer, healer, savior, sustainer, protector, etc…” – choose wisely!!!

    • landofaahs

      Definition of Debt. The amount equal to future pain.

    • Anonymous

      Thank you for your very cogent observation. The US was hit by disaster in 2001 and again in 2008. As you said, a 7 year gap. As soon as the Jewish people settled in the Holy Land they began to observe the Shemitah. The Shemitah meant that every 7 years, all debts would be forgiven, slaves were to be set free and the land was to rest. The Shemitah year symbolized Israel’s total dependence on God. If the Shemitah was not kept, a series of judgments would take place, each one worse than the last. These were warnings to return to God and His commandments. The next Shemitah happens to begin on Sept. 25, 2014 and goes through Sept. 13, 2015. Read Jonathan Cahn’s book, “The Harbinger.”.

      • Anonymous

        Thanks for your post, I appreciate the info. I just finished “The Harbinger” and wasn’t sure when the next Shemitah began. Seeing that it begins this year, we may not have that extra year. Any way that I look at it though, time is short!

  • landofaahs

    We are at $17trillion in national debt and climbing. We have student debt at $1 Trillion. This does not take into account all the State, county, municipal and personal debts. This is coming at a time when the baby boomers are retiring and causing a huge strain on social security and medi-care expenditures. Since the consumer has been responsible for 70% of GDP, how does that continue with the poor job prospects for those young people who are drowning in debt and are the new consumers to drive the economy. We also have every major country swimming in national debt, even the emerging countries have debt problems and will only worsen with reduced spending on their products. So please someone tell me where the growth in earnings for these companies that rely on consumer spending comes from, especially when the likes of Warren Buffett, George Soros and other are dumping their U.S. consumer driven stocks?

  • Anonymous

    I certainly wouldn’t put my confidence in Zimmerman. I believe the market’s overvalued due to the Fed money party on Wall Street, HOWEVER, some of the bullishness is real. Companies are actually turning profits from being more productive. Fundamentals of many top performers are sound.

    • Anonymous

      That’s what Jim Cramer says on CNBC – that some of the market move up is due to earnings. There has been some recovery and companies are making some money. The last downturn was in August of 2010 during the European money crisis. What bad news could affect this market?

      • Anonymous

        Some thoughts: Fed tapering will reduce the froth on the market. Solid companies will work to prevent a crash. Congress failing to extending unemployment and high medical costs will lower demand for products. My biggest fear for the economy is that foreign investors decide that China and India are better places to invest than America. Low American education scores compared globally spells long term doom for America.

        • Mike Smithy

          Are you referring to Obama’s shovel ready projects that were far from being shovel ready.

          • Anonymous

            It’s better for the country to have people paid to work than paid to not work.

          • Mike Smithy

            For a capitalistic system to work efficiently, labor must provide a service that satisfies a need that ultimately leads to productivity, growth and profitability. Would it be beneficial for the country if Obama were to hire a person to dig a hole in the ground and another to fill the hole back up? I suppose you could argue that 2 more people are receiving a salary. However, nothing was achieved.

          • Anonymous

            No, digging a hole and filling it would be as useless as paying people to sit home and watch Oprah. But, in recessions, the government paying people to work on infrastructure is an investment that pays off.

    • Mike Smithy

      Just wait until the Obamacare employer mandate kicks in. I am not convinced that these businesses can remain profitable.

      • Anonymous

        Why? The vast majority of companies that employ over 50 people already offer healthcare plans.

        • Mike Smithy

          Many companies supplement their full time labor force with part time laborers for a myriad of reasons. For example, many retailers will hire part time labor to coincide with peak sales activity around the x-mas holiday. Once the employer mandate kicks in, these employers whom did not receive an exemption from Obummer will have to provide medical benefits to part timers working in excess of 29 hours or face a $2,000 fine per worker.

          • Anonymous

            I totally disagree with forcing employers to pay for medical benefits at all. I would like to see that rule amended. I’d also like to see more encouragement of catastrophic plans. I’ve been an employer in a union state for a long time and I could go on.

  • Charles Hurst

    I’ve been following this as an investor for a long time with the Agora people who believe the same thing. What was disturbing is they predicted 2008 as well—back in 2006 when everyone said they were a bunch of pessimists and the DOW was over 14,000.
    The market is a false inflation. It isn’t real. We have a debt the size of the continent we owe. And our government continues to not only ignore the debt but adds to it–daily and massively. Trying to believe that everything will be fine is much like dropping a pencil and hoping gravity doesn’t work that day. Same with the laws of economics. You don’t have to have a Masters in the subject–third grade math will do.
    The problem isn’t economic. Beck addresses the real problem all of the time. It is moral. Everything collapsed in 2008 due to inherent dishonesty. In the market, in the housing market and in the banking systems. We don’t have an economic problem, we have a moral problem. In my fiction I based the collapse of society on an idea stemming from economic collapse–based on history–of other fallen empires. Russia had a moral problem as well in 1917–they believed the state should support the man. They believed in anti individual which leads to anti God.
    Mormons get this. That’s why you never see a Mormon without a job. It’s a moral character of their church. Idleness is not looked upon well.We need to take serious example from them if we are to come back.

    I fear my fiction will be a reality–and I think it is approaching sooner than we think.

    Charles Hurst. Author of THE SECOND FALL. An offbeat story of Armageddon. And creator of THE RUNNINGWOLF EZINE

    • Terry Cooper

      Ayn Rand said “Anything that can’t go on forever,…….Won’t.”

  • Anonymous

    Just an FYI – Research Walter Zimmerman. He is a nearly a perma bear thus he is right now and then. Even back in 2010 he was talking about how:

    “…Zimmermann explains his bearishness by citing his technical belief that we are not in a double-dip recession, but a “triple-dip recession.””

    Further in that same article from 2010 Zimmermann’s insights “Zimmermann suggests there may be a repeat of the congested, go-nowhere market of 1965 to 1985″

    News for those that do not track the markets but just take what they are told as truth, well here is some truth about 1965 to 1985 “go-nowhere” market as Zimmermann calls it.

    Counting dividends reinvested, from 1965 to 1985 the “market” via the DJIA was up 902%. I’ll take that “go-nowhere” market.

    Some more food for thought, of all the 20 year rolling periods for the DJIA from 1958 until 2012, the worst period was 1992 which, counting dividends reinvested, returned 527%. Why would he not use an even worse performing period? Maybe because even 527% in twenty years is real close to the market average of 10% compounded annually per year.

    Further, to show how ignorant Zimmermann is of the data, there are five other twenty year rolling periods that the 1965 to 1985 period outperformed, even a few that were quite significant. All five of the other rolling twenty year periods that under performed his supposed example of a “go-nowhere” market all happened before the article printed in 2010 that I quoted from. You can search “Is it time for individual Investors to Evacuate the Market”, article by CNN.

    Google him and add search modifiers such as + 2010 market (change the year as desired.

    For a market analyst he seems to be stuck in the negative bias mindset. Take what he says with a grain of salt as his examples of poor markets are not even close to true and the opportunity cost of following his advice regarding the market over the last four or five years would have had you missing around a 100% return just using market index funds, i.e. S&P 500 or the DJIA.

    • Anonymous

      Brilliant post, sir

    • Anonymous

      Keep in mind though that quantitative easing was a wild card that is the mother of manipulation that no one expected or even been done at this point. Had there been no scheme like that then Zimmerman would of been correct. And will probably still be correct…

      • Mike Smithy

        You are spot on in stating that QE is the wild card. It has created the new normal in which bad news is good news and vice versa. It has created a parallel economic universe whereby market fundamentals are now irrelevant. Although the stock market is being artificially levitated, we are all in agreement that this is going to end very badly. The shadow banksters will implode this thing at a time of their own choosing. I am hedging my bets and going long of guns, ammo, food, shelter, farm land and physical silver.

    • LibertyDwells

      Also keep in mind that 5, 10 and 20 year periods are beyond most investors. These massive long term gains work well for those…some of those…who have big money to start with and stay in the came come hell or high water. For the majority of “investors” what you say is true…but completely irrelevant. The short term slide is what they care about. It’s what wipes them out. This is going to be a BIG wipe, when it comes.

      It’s also important to note that nothing lasts forever. We’re in a different world right now and the Mighty Magic Dollar is barely even a paper tiger anymore. When the wheels fall off, whether it’s this year or in five years, it’s going to be a lot different than the past. Almost certainly a lot uglier for those of marginal assets than perhaps ever before.

  • Fat Lip

    My fellow trees put down great roots .

  • Anonymous

    Bursting in 2015; 7 years after 2008, which was 7 years after 2001. Seven year cycles. Harbingers.

  • CarnactheMagnificent

    But… but… but…. The liberal mantra is… obama’s shining star is the dow is climbing!!!

  • Anonymous

    I have read in several places (seeking alpha/ yahoo finance) that the reason why the stock market is going up is because the Fed is printing money. Money is made available to the banks for lending; but instead of lending the banks somehow direct the money into the stock market. I have never learned the exact mechanism of how this does work. So what happens when the Fed eventually/inevitably has to stop printing money?

  • Deana Stacy Warner

    There are two other factors coming into play that will greatly affect not only the market but the value of our dollar and the rate of inflation that the nation will experience over the next few years. Currently, the Treasury is making the nation’s interest payments by simply printing more and more dollars. It can do this as long as the dollar is the basis of exchange in the world market. There is a strong and growing movement to change the basis of the currency exchange market to another currency or to some other basis and many countries have already stopped accepting the U.S. dollar as payment for their goods. Once this happens, the value of the dollar will plummet and we will no longer be able to print more money to make our interest payments as printing more money will just make the value of each dollar less. The nation will suddenly experience extremely high inflation rates as the dollar will now purchase much less.

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