JC Penny update... 3rd wave in progress. [JCP]

In a very recent blog post, I wrote about the ugly looking chart of JC penny and the plight of retail stocks in general.  The below, left chart is from that post.  At the time the stock was $23.96 and I wrote,  

“…I believe this has to put the shares into a 3^rdwave and it will be a 3^rd of a C wave so it should have some bad downward gaps in it (AKA "cliff diving"). As a bellwether for retail I think the JCP chart is telling us here that Bernanke is about out of gas to stimulate without causing inflation (otherwise known as “sterilized” stimulus whereby the stimulus stays within the banks for the most part and thus does not make it into the economy where it can cause prices to go up).”. 

 

 That was on Oct 8^th. Fast forward to today and we get the chart shown directly above. As you can see, the price has since plummeted to $17.29 which represents a loss of roughly 28% in roughly 35 trading days.  That’s big time 3^rdwave type movement.  Worse yet, JCP is now sitting at decade long support which it has tested twice in the past and bounced up.  I don’t know by what miracle JCP could possibly avoid collapsing through that support line given the state of global affairs but the odds of holding that support line are perhaps 10% this time.  In other words, a solid 90% chance of big time splash through and collapse.  But this post is not just about JC Penny and it’s not even just about retail.  It’s about the coming massive loss of all confidence in ALL stocks. 

I predicted long ago that the marginal players would get hurt the first and the worst.  Well, the marginal players have gotten clobbered even though you can hardly tell at this point from the DJIA and S+P 500 averages.  That’s because to get on those prestigious lists you generally cannot be a marginal business.  Plus, once on those lists, the big money that holds retirement funds and pension funds like to buy the big indices as a basket.  That’s why they don’t collapse as easily.  But there is growing economic and chart evidence that they will indeed collapse and it is my assertion that the collapse of the marginal companies is predicting the coming collapse of the big names.  Each brand name that breaks down causes another loss in the confidence of the financial markets which, I hope you know by now, are largely Ponzi schemes which will certainly collapse at some point before all the boomers are able to withdraw as much as they put into them. 

Making predictions about the near term movement of the herd is never easy but I think the setup is pretty obvious.   Everyone is complacent and nobody thinks much bad can possibly happen.  Pride, as they say, goeth before a fall.  Watch the marginal players like JCP for continued signs of collapse and then keep an eye on Wall St darlings:

Wal-Mart (WMT)

McDonalds (MCD)

IBM

American Express (AXP)

Home Depot (HD)

Johnson and Johnson (JNJ)

United Health (UNH)

When these guys roll over (and some of their charts look very scary with double tops galore...), the whole corrupt shooting match will roll over.  You have to be really, really economically ignorant or really, really foolish to be ignoring all these warning signs.  The new breed of winners are those that will let this Ponzi crumble and then swoop in and pick up the good, dividend paying (or completely abandoned leaders of serious growth areas like solar) stocks for 5 or perhaps 10 cents on the dollar.  I feel very sorry for anyone who has not been able to cash out of their pension fund or out of their 401k.  Huge numbers of people will get creamed in the coming carnage.  It's going to be one for the record books.  It is literally a perfect storm:

• Japan loaded with debt, no longer a net exporter.  OUCH!.  It's completely out of gas after 25 years of scraping by.  Bye bye Japan.
• China is a huge real estate bubble AND it has a large portion of its wealth tied up in US government debt.  Can you say "suckers"?
• Euroland is going to explode sky high.  The EU will certainly break up as Greece, Spain, Portugal spin out of control with France not behind and Germany (yes, Germany), not all that far behind France.
• Russia is a corrupt scam.
• The US is going to lose reserve currency status and then it will smell a lot like Russia.  The US is a corrupt scam as bad as any other but it has the smartest moneymen (con men) on the planet and the biggest military on the planet too.  So it will likely be the last to fall and fare better than most places.

When all this will happen, I cannot say except it has to occur before the boomers get paid.  So, within 5-7 years IMO and probably much sooner.

Good luck to us all.