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THE
MAGNIFICENT SEVEN Background:
You say the French go their on way and do not follow the American lead anymore. In 1960 the European nations led by a French President started to remove the glut of US dollars in their banks by exchanging them for gold from the US Treasury. By the early 1970s this forced devaluations in the US Dollar. This action forced the US Government off the gold standard because it did not have enough gold left in its vaults. “Well, Mr Charles, I am not sure the French have any such choices today. Take a look at this French napkin I found in the old hotel kitchen. What do you make of it? The Old Wild West: Charts 1 presents one of the largest cycles in the Magnificent Seven as it looks riding thru the CAC from 1990 to the present day. This 333-week cycle is present in all the world indices. It strongly suggests the CAC is making a “top” or “right shoulder” of a large formation beginning in 1995. Charts 2 presents how this cycle matches up with the actual detrended closing prices in the CAC from 1990. The CAC makes a top in its market near the top pf this cycle. The absolute top in CAC also occurred about the same time as the top in the NASDAQ in 2000. The CAC is currently completing the “right shoulder” formation. All the major world markets are completing a “right shoulder” formation and breaking-down. Chart 3 depicts another large cycle in the CAC which is a 233-week cycle (also present in the other world major indices). This cycle will be completing its top by July 2005 and starting downward. This is similar to many other results in world major market indices. It is another confirmation that these world markets are going to “crash”. The Shootout at the OK Corral: Charts 4 shows the Magnificent Seven as they look riding thru the CAC from 1990-2007. It shows the CAC dropping and making a final minor top of a channel in Nov 2005. The CAC may drop faster than the S&P 500 and is already breaking-down. Avoid foreign markets is the message and get out of Dodge. It is believed we maybe currently witnessing the formation of the “right shoulder” of these major indices (i.e., a huge Head and Shoulders formation that started in 1995). This “one-act play” has been seen before in 1987 and 1999. The sudden deceleration of M3 forming the “right shoulder” and the coming acceleration in the 176-week M3 cycle and 266-week M3 cycle to pump the 233-week cycle and 333-week cycle in the markets to their final tops – now it becomes a dangerous game. It is not clear that the Fed has enough horsepower left in M3 to complete this game [create a mini-bull market into 2005]. The coming downside waveforms are probably just part of a mega-wave downside move possibly propagating well into 2010 before it finally bottoms (see prior articles for other indices on Financial Sense). This is becoming is a full-blown Secular (Mayan) Bear. The final tops will be very chaotic and impossible to really time. If the Central Banks cannot successfully pump the 176-week and 266-week cycles much beyond Nov 2004, the markets may start to break down rapidly. I have never seen anything like this before. This situation will require monitoring as the ominous “weather front” continues to develop and approach worldwide. This situation represents a “Code Red” in this type of analysis from past experience. Whether you understand the information being presented or not or totally disagree with it, this is not a drill – give serious consideration to protecting your major mutual fund and 401(k) investments now. Avoid foreign markets at the present time – very dangerous markets. You can stay if you want to partner, but as for me, where is that stagecoach to Purgatory? “Old French Prophecy - 1524” “……… When the entire world, and in a special way France, and in France especially the provinces of the North, of the East, and above all Lorraine and Champagne, shall have been laid waste by the greatest miseries and trials, then the provinces shall be comforted by a Prince who had been exiled in his youth, and who shall recover the Crown of the Lilies. This Prince [riding a white horse] shall extend his dominion over the total universe.” Ghost Riders in the Sky”
DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.
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The
Magnificent Seven is also chronicle about the adventures of
Seven Weekly Cycles who rode onto the western scene many
decades.
