A Map to Turn Fear into Profit

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Last Monday, I shared a chart with Money Map Report subscribers and suggested they may want to batten down the hatches because I saw a 30- to 40-point drop happening by the end of the week.

Now I want to share that same chart with you plus a new one – and encourage you to do the same thing.

The shellacking the markets took last Thursday is the most powerful warning sign we've seen yet that things are not what they seem in the financial markets. For lack of a better term, it's a bearish omen, despite Monday's recovery.

Today I want to talk about what that means for your money and what you can do about it in the name of protecting your money and, more importantly, the pursuit of profits.

Contrary to what you might believe, not all bears are bad news.

Let's start with the chart….

The Real Reason Black Monday Still Resonates So Clearly

I find the old adage that a picture is worth a thousand words is really true, especially when you look carefully at market charts over widely disparate time frames. That's because you can easily see similarities that are otherwise not apparent.

This helps you prepare ahead of time for contingencies that others will not see until it's too late.

For example, many people have convinced themselves that things are different today in our post-financial crisis world. They cite everything from the "brave new world" we live in to the "rapidly changing technology" and even the Fed's "innovative financial policies" as rationale. Things, they say, are different this time.

So why is it that today's bull market is eerily similar to another famous bull market? And why are traders worried that we'll have a repeat of Black Monday in 1987 a month from now?

Short version… because the charts point to very similar dynamics over almost identical time frames.

Even if investors don't recall the data, they recall the angst from Black Monday 27 years ago.

Psychologists say this is because of the way the amygdala works. That's the part of the brain that activates in response to emotionally charged circumstances, especially those that provoke fear.

I think it's simply the collective knowledge of one generation being passed involuntarily to the next as part of a critical survival instinct, which is why even those who were not investing then feel the fear now.

To draw a parallel, saber-toothed tigers haven't existed for more than 12,000 years. Yet, the thought of them prowling around still causes an involuntary reaction, not to mention a totally irrational "grab-your-spear-and-run-for-the-cave" reaction in most people.

The bull market that started in March 2009 is now up 169% through Friday. That's nearly step for step with the rally that began in 1982 and immediately before the biggest single-day drop in market history on Oct. 19, 1987 – a day we now refer to as "Black Monday."

S&P 500 Bull Market

Many technicians, myself included, are concerned that we could have a repeat 30 days from now.

Join the conversation. Click here to jump to comments…

About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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  1. H. Craig Bradley | April 15, 2014

    STOCK CHARTS OR BLOOD MOONS ?

    You have 4 Blood Moons ( Lunar Eclipses) Coming; two in 2014 and two more in 2015. Both sets occur during the Passover and the Feast of the Tabernacles ( Spring and Fall ). In the past, conflict or instability specifically in the Middle East, has often accompanied these natural phenomena (Ill Omens). Israel was in a 6-day War during the last one in June, 1967. They are very rare; the next occurrence in about another 200 years. So, stop looking at P&F Charts and instead start looking at the stars. Both are about as good at predicting anything in the future.

    • Keith Fitz-Gerald | April 16, 2014

      Don't forget tea leaves and voodoo bones!

      You raise a very valid point Craig. Thanks, as always, for being part of the Money Morning family.

      I've studied the concept of financial astrology over the years. There's enough information to make me believe that the ancients actually knew a whole lot more about the way the world works than we like to think as "modern" people. I don't know if I'd be ready to integrate it into my financial decision making, but I am not prone to dismiss it either as I would have 20 years ago. Perhaps there's a seasoning that comes with age.

      Best regards,

      Keith :-)

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