“In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.” - Friedrich Nietzsche
Today was a seemingly uneventful day in the stock market with the DJIA closing up 18.82 points to a closing all-time high of 16,943.10 on relatively light trading volume. Yet, there's a possibility that today will prove to have involved one of the most important events in human history: the all-time top in the U.S. stock market and, in turn, the effective peak of Western Civilization. Here's why I think so.
As noted in Sunday's blog, "Is The Greatest Turning Point In Human History Near-At-Hand?", at the end of last week Robert Prechter of Elliott Wave International released an alert that "there is a strong probability that the last all-time high in the Dow for years to come will register today". While Prechter may have been early in making his call, I believe the final piece of the puzzle came together today to mark the final top in the stock market.
In my Master's Thesis, "Manic Depressive Man", I posit that our species suffers from a "creative genius syndrome" known in psychiatry as a "bipolar disorder". This form of collective insanity manifests as large-scale historical swings between mass manias of creative human activity and social depressions involving prolonged economic stagnation, general despair and destructive human activity. A simple example of this cyclical historical pattern of social behavior occurred between the 1920s and 1940s. The "Roaring Twenties" involved a period of rapid technological and economic development that peaked in 1929. This top was followed by the October '29 Great Crash on Wall Street, the 1930s Great Depression and then the Second World War.
Thus, while reigning market theories of the day are fixated on the rationality of man and efficiency of markets, the historical reality is the opposite, i.e., human irrationality and recurrent bipolar waves of market instability are the rule. (This is because the current leading financial and economic theorists are caught up in the collective insanity and their extraordinary popular delusions serve to reinforce the overall self-destructive trend.)
In the context of my 'manic depressive man thesis', my diagnosis highlights the importance of watching for bipolar "Elliott Waves" movements in stock prices, contrarianism and utilizing indicators of mass mood extremes to ascertain historical turning points and, lastly, topping patterns at psychologically significant thousand levels in major stock indices like the DJIA. As for Elliott Wave patterns and psychological indicators of mass mood extremes, Robert Prechter's Elliott Wave International keeps timely track of historical conditions. So rather than reworking the wheel on these elements, I invite readers to go to ElliottWave.com where, as of the time of this writing, a two-week free trial is available for anyone who wants a thorough update on where the world currently stands. Robert Prechter is offering free access to his work at this time because he understands, as I, that we likely have just completed or are about to complete the run-up in stock prices and associated mass mood from the extreme low reached in March of 2009 in association with the global financial panic and economic breakdown into that historical juncture. In the broad Elliott Wave context and as noted in my weekend blog, this means the final top in U.S. stock prices likely forever.
What Elliott Wave International does not highlight is the role of psychologically important thousand marks in determining major historical turning points, and it is to this element that I'd like to now turn your attention.
As readers of my blog and viewers of my videos have long been exposed to, I pay close attention to when the stock market reaches and reverses from key thousand mark levels in widely watched U.S. and international stock indices. This is because such junctures not only mark key turning points in financial trends, they also tend to coincide with major historical "shocks" that set in motion major trend reversals. These shocks can be completely "exogenous" (a fallacious term) to financial markets and the economy, e.g., geopolitical crises, outbreaks of war, etc.
Here's three notable historical examples I often cite.
Between 1966 and 1982, the DJIA went up to the psychologically important "Magic 1000" barrier and reversed course multiple times. Each major reversal off Dow 1000 involved significant bear markets with the stock market falling 20%+ five times. Each of these bear markets involved all kinds of negative historical events and trends from the Vietnam War to oil shocks to Watergate. This included the major reversal in the autumn of 1973 associated with that year's Yom Kippur Arab-Israeli War and the subsequent OPEC oil embargo which drove the DJIA down by 40%+ in a year's time and precipitated the worst economic downturn since the Great Depression up to that point.
Likewise, in the summer of 1990 the DJIA reversed from the psychologically important 3000 mark (reaching a closing all-time high that year of 2999.75 on July 16th and July 17th) and fell by 25% by October of that year. This trend reversal took the form of Iraq's invasion of Kuwait, a significant oil-shock and the 1990 Gulf Crisis which pushed the economy into a recession.
A final profound example occurred in the autumn of 2001 when, just after the DJIA reversed below the psychologically important 10000 mark on September 6th of that year, Wall Street broke hard with the 9/11 terror attacks on the World Trade Center towers and Pentagon:
As for the current juncture, this afternoon the DJIA came within 30 points of the psychologically important 17000 mark: