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Historical Patterns Can Help Guide Us Through the Coming Market Crash

 

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September 12, 2016

 

History has a way of repeating itself. King Solomon wrote, “That which has been is that which will be, and that which has been done is that which will be done. So there is nothing new under the sun (Ecclesiastes 1:9).

Solomon understood every event under heaven, which includes literally everything, happens at an appointed time and season (Ecclesiastes 3:1-8). That means nothing happens randomly or by chance, but right on schedule according to historical patterns, which are often referred to as cycles. Whether we realize it or not, these patterns are continually happening all around us in every area of our life. Examples include our daily sleep cycles, aging cycles, climate cycles, harvest cycles, economic cycles, solar cycles, lunar cycles, tidal cycles, war cycles, and on and on.

This article examines how historical patterns might be repeating right now in the equities market. History shows four of the biggest stock market crashes in the past hundred years all occurred during the Jewish holy days of Rosh Hashanah and Yom Kippur, including 1929, 1987, 2001, and 2008.

The odds of having so many crashes coinciding with these Jewish holy days is extremely remote. It appears to be another way God reveals Himself to the world as the one who is sovereign over the affairs of men. Only God could orchestrate the countless investment decisions made by millions of investors throughout the world to bring markets crashing down precisely on these dates, yet it has happened repeatedly.

Could it happen again in 2016?

If there is going to be a market crash in 2016 and if the historical pattern is repeated, the Jewish holy days are strong possibilities and they are coming soon. Rosh Hashanah 2016 is only three weeks away, starting at sunset on Sunday October 2 and ending at sunset on Tuesday October 4. Yom Kippur 2016 follows ten days later, starting at sunset on Tuesday October 11 and ending at sunset on Wednesday October 12.

The last major crash of the stock market started on Rosh Hashanah 2008. Now we are seeing some similarities between 2008 and 2016. As shown in the graph below, both years moved sideways in August and early September, then both showed a small drop in early September. Last Friday’s 394-point drop matches a similar drop 344-point drop on September 4 2008.

Aug Dec 2008 vs 2016 Dow

Seven Things To Expect if 2008 Pattern Repeats:
The following list shows seven things we might see happening over the next few weeks if the remainder of 2016 follows the pattern from 2008.

First, we would see a fast and full recovery from last Friday’s sharp drop (Note: I originally wrote this yesterday before seeing the today’s 239-point rally in the Dow). The drop continued this morning for a total of about 450 points. In 2008, the recovery only took two days. So we might see the Dow climbing back up another 175 points in the next day or two.

Second, immediately after recovering from the 450-point drop, we would see another similar drop, about the same size. In 2008, it was a one-day drop on the very next trading day, so that might happen around September 14-15.

Third, after dropping back down again, we would see another fast recovery. In 2008, it happened in two trading days, but only recovered about two-thirds of the drop, so we might see that on about September 15-16.

Fourth, immediately after those two smaller drops and recoveries, we would see a much larger drop, which I believe is the second hangman (see dream shared by Z3 contributor Jim Reeve), starting on about Monday September 19. In 2008, the Dow dropped 7.1% in three trading days. Assuming the drop begins at about 18,350 and drops by the same 7.1%, the Dow would reach 17,047, which would be about a 1,300-point drop.

17,047 is close to the Brexit low of 17,063 and a return to that level fits several prophetic insights, but as always it is subject to interpretation because we only see in part (1 Corinthians 13:9).

Personally, I have not seen any numbers for the second hangman, but I saw a graph showing an inverse EFT (UVXY) shooting straight up like a rocket after a period of sideways movement with some small bumps along the way. UVXY moved sideways during the month of August. It has become a little more volatile in September, but if we see the two drops listed above with recoveries from each of them, the net result would be more sideways movement for UVXY with some bumps along the way. So the 2008 historical pattern fits with what I saw.

Fifth, after the second hangman, we would see an immediate and full recovery beginning on about September 22. In 2008, the rebound happened in just two trading days. With a Fed meeting scheduled for September 21, the timing of this miraculous recovery would make them look like heroes. What a coincidence that would be!

A few months ago, Z3 contributor J M shared a prophetic dream in which he saw Fed Chairman Janet Yellen throwing a Whole Foods grocery bag over her shoulder. In other words, the Fed was carrying the market on their back. A rebound like this could be the fulfillment of what he saw.

Sixth, after the two-day recovery from the big drop, we would see the market drift virtually sideways for about a week before starting an even larger drop, which would be the start of the third hangman. If we see a similar one-week period of sideways movement this year, the drop would begin on about September 29. In 2008, the market dropped 7% (777 points) in one day, hitting bottom at 10,365. In 2016, a 7% drop starting at about 18,350 would hit bottom at 17,065, which is close to what I saw in a vision earlier this year. I saw a line graph dropping almost straight down. In the right axis I saw the number 16, which I interpreted to mean the Dow would drop below 17,000 before bouncing.

Seventh, following the steep 7% drop in 2008, the market dropped another 24% over the next two weeks, finally hitting bottom at 7,882 in intraday trading on October 10 2008. If we see a similar two-week drop, it would begin very close to Rosh Hashanah, which starts at sunset on October 2, and end a few days after Yom Kippur. If we see a similar size drop starting from the bottom of the previous drop (17,065), the Dow would hit bottom at 12,969. In a separate vision earlier this year, I saw a line graph showing a steep drop. In the right axis, I saw the number 11, which I interpreted to mean the Dow would drop below at least briefly below 12,000 into the 11,000 range. So perhaps the drop starts from a lower point, or it is larger than 7% on the first day, or it drop more than 24% during the following two weeks.

Conclusion:

For now, this is just a fun exercise speculating on what would happen if we repeat the sequence of events from 2008. This is not a word from God and definitely not a recommendation for investing. It is merely providing insights into historical patterns, so it is something to watch and see what happens.

If the first few steps listed above start happening, it would give more weight to the possibility that all seven steps might happen. In that scenario, this information would be a valuable guide for traders during the coming crash.

On the other hand, if the steps don’t happen, then 2016 might follow a different historical pattern. Another possibility is the timing of the 2016 crash might be triggered by Yom Kippur rather than Rosh Hashanah, which would push the dates back by a couple of weeks hitting bottom in late October. Another possibility is no market crash happens in 2016.

Historical patterns can be very helpful, but they are even better when confirmed by prophetic insights. The two working together provides a more complete picture.

Thanks to my friend Aaron Brickman for sharing this historical data with me. Aaron is a businessman and market investor who successfully traded the crashes in 2001 and 2008.


Beware of the UVXY Pop-Up Message!- October 5, 2016

 

(Meranda’s Note- Inverse ETF’s profit when the stock market does down.  So think of it as when the stock market tanks, those invested in Inverse ETF’s would make money)

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Last week, I shared an update regarding future price movements for UVXY, which is an inverse ETF based on the VIX volatility index. If you have not yet read that post, please read it before proceeding.

In that post, I shared a vision God gave me showing UVXY moving up to $25 then dropping very sharply and continuing down until the price reached zero. Then a message popped up stating my account funds were depleted with a long detailed explanation, which I was not able to read because I only saw it in a flash. I interpreted the vision as a warning the price would be going very low, but after further consideration, I believe there is more to it than that.

Two things concern me. First, the price dropped all the way to zero, which is impossible under normal trading conditions. If the price was only going low, I don’t believe it would have been shown to me as zero. So something else could be happening here. Second, the disturbing pop-up message also indicated something more was happening than just a low price.

So I dug into it and learned there are regulations in place requiring brokerage firms to halt trading for stocks showing extraordinary market volatility, which is explained as prices below the Lower Price Band or above the Upper Price Band for any National Market System (NMS) Stock. The National Market System is the whole stock trading system, which includes all of the exchanges and markets. This regulation comes from the Financial Industry Regulatory Authority (FINRA), as documented in Rule 6190. The following text was copied from their site:

(a) A member that is a trading center in an NMS Stock shall establish, maintain and enforce written policies and procedures that are reasonably designed to comply with the requirements of the Regulation NMS Plan to Address Extraordinary Market Volatility (Plan) and specifically to prevent:
 
(1) the execution of trades at prices that are below the Lower Price Band or above the Upper Price Band for an NMS Stock, except as permitted under the Plan;
(2) the display of offers below the Lower Price Band and bids above the Upper Price Band for an NMS Stock; and
(3) the execution of trades in an NMS Stock during a Trading Pause; however, bids and offers may be displayed during a Trading Pause, as permitted under the Plan.

The fast price movement of UVXY and SVXY is a double edged sword because it makes them attractive to traders, but it also puts them in danger of trading disruptions if the price gets too low or too high.

It has happened before. The following tweet was sent on June 20 2016 by Vance Harwood from Six Figure Investing.

“Both UVXY & TVIX tripped Regulatory Circuit Breakers today, FINRA Rule 6190. Rule intended to moderate flash crashes. Charts look normal.”

On June 20, UVXY traded at a high of $60.70 and a low of $56.05, which looks like a normal amount of movement. Since UVXY did a 5:1 reverse split on July 25, the actual prices on June 20 were a high of $12.14 and a low of $11.21. It is not clear to me why regulatory circuit breakers were tripped or what disruptions resulted, but the point is regulations are in place to stop trading and it has happened before.

Just like I saw in my vision, the risk of trading disruptions increases as the price approaches zero. Traders should beware of this added risk and should consider alternative inverse ETF’s, such as FAZ, SPXS, and SPXU. Alternatives for SVXY include FAS, UDOW, UPRO, and SPXL.

Since I saw the price moving up to $25, I have confidence UVXY will reach that price without any problems. I believe the vision gave me permission to trade up to that point, but seeing the price drop to zero could be a warning not to trade UVXY after that. If that is the right interpretation, then what I saw might not have shown how the actual price will behave after reaching $25.00 because UVXY could just as easily trigger a regulatory disruption by moving up too fast as it could by moving down too fast.

Two other Z3ers, Phanuel and Peachey, were specifically warned by God to stop trading UVXY, but they were not told the reason. I believe my vision confirms what they heard.

This updated interpretation also changes my understanding of the second hangman. It could be a bigger drop than I was thinking because I am no longer limiting it to UVXY peaking at $25.00. If God was only revealing a specific warning for UVXY, then I can only speculate about how the overall market might behave after UVXY reaches $25.00. One possible scenario is the market follows the pattern from the steep drop in September 2008, which I shared in a previous post. In that example, the market dropped sharply, then reversed back up, then reversed back down reaching new lows. That might explain why Phanuel saw FAZ reaching $46.56. What happens to UVXY after reaching $25.00 would be irrelevant since the warning makes it off limits for trading.

Regardless of what happens in the overall market, I hope we all avoid getting the dreadful UVXY pop-up message!


 

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More From James Bailey On Inverse ETF’s

 

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