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Gary Schilling the author of “The Age of De-Leveraging” thinks there will be more pain ahead. As the economy stalls, demand for goods and commodities will fall causing deflation and subsequently stock markets will fall.

The 2007 violent sharp downward move happend on Oct.29th which signal the bear market that eventually ended and bottomed on March, 2009. From the beginning of the bear market crash to the bottom the timeframe was 17 months roughly. The pattern is pretty much the same for all markets Dow Jones, Nasdaq and S&P 500.

The reason why commodities prices drop is simple, when good times are here, demand for commodities increase. More computers, electronics and other products requiring commodities like gold, silver and rare earth minerals are being manufactured, because the economy is in a growth stage more products are being sold to consumers and corporations.

It is just a matter of time before every market will start to test the 2008-2009 lows. Right now all governments around the world is just delaying the evitable.

Looking at the charts of most U.S indexes over the last 2 weeks or so, it is clear that things are definitely volatile. The stock market have been bouncing up and down and having trouble breaking past previous ceiling. The markets are trading in a range right now.

If you ask me looking at the jobs numbers and the headlines about layoffs along with lots of companies now not meeting their numbers and having negative forward guidance, it looks like we are heading into a big recession.

If this future trader is betting that the Dow Jones Industrial Average is going towards near 2009 lows of 8200, then it should take the Nasdaq also down to near 2009 lows, which is around 1750 points. I would have to agree with this view and it might take several months to get to that level, however you never know sometimes with the market, so we will just have to wait and see.

I started purchasing HQD.TO (Horizon Bear Nasdaq ETF) again. Some at 2450, and then some at 2500 points on the Nasdaq. I will look at loading up some more when the Nasdaq hits 2578 or higher, if it ever gets there.

If you think about the highs for the Nasdaq this year which was slightly above 2800, it is unlikely in this current economic environment that it will hit that high again.

About 6 months ago I warned a family member to move all his investment to cash or Canadian bond position, however the response I got back, was “Why should I do that, the financial stocks are doing very well now.”
I however, did not press the issue with this family member because I didn’t want to seem like a know it all, but I knew that the rise in the stock market will be followed by a sharp and violent downturn and it finally arrived.

I’ve been anticipating the U.S stock market decline for a while now and this week the Dow Jones industrial average declined below 12,000.

I believe there is more downside coming in the near future. My initial assumption was that this decline will start near the end of June, however with markets it is always difficult to know when it will actually happen.