www.bearmarketcentral.com - Grizzly's Growlings 11/02/03

Despite (or perhaps even because of) the rally extension through the summer and early autumn, little has changed since our June 28th report when we raised our outlook for the markets to FULL CRASH WARNING. This is our highest level of preparedness, the financial equivalent of the Homeland Security Department's terrorism threat level of RED. We believed then, and we still believe now, that all the conditions and prerequisites are in place for a "crash of historic proportion" to happen at any time.

To our critics who berate us for our failed attempts to pinpoint, in real-time or thereabouts, THE top of the long and painful counter-trend rally, yes, we plead guilty as charged. The markets have held up much better and for much longer than we had expected.

At this juncture, it appears that this wave C rally extension has just about run its course. Here's our Elliott Wave big picture in the Nasdaq, going back 3 1/2 years to the all-time high of 5,032 in March 2000.

The large wave 2 counter-trend bounce from last October may have only a few more squiggles to the upside remaining. Wave 3 is imminent. Wave 3 is what we have been anticipating, a devastating down-leg that will take the markets to new lows, well below 5,000 on the DJIA and 1,000 on the Nasdaq.

In addition to the Elliott Wave picture, all of the reasons we cited in our June 28 report remain valid. Our analysis and outlook for the stock markets cannot be any clearer or more bearish: We've updated and expanded the June 28th Bear Market Gallery.

With bulls still outnumbering bears by more than a 3 to 1 ratio (the latest Investors' Intelligence sentiment survey), the Fat Lady is singing!	With Mr. VIX (old or new) sitting below 20 each day for the past 29 days, he is at the top of his lifeguard tower shouting through his "bull"-horn: "Get out of the water, NOW!"	With the U.S. trade deficit growing so large that our Treasury Secretary is practically begging China to revalue its currency, a storm of unprecedented magnitude is threatening just off shore.

With the Nasdaq trading at an estimated 333 times actual earnings, the markets are on a one-track path to derailment.	With mutual fund cash levels near historic lows at 4%, the captain of the Titanic is merely shuffling the deck chairs.	With Nasdaq margin debt soaring and approaching the previous all-time peak in March 2000, it's time to grab the safety bar.

With the bursting of the credit and interest rate bubble, mortgage re-financings are down 78% since May. The re-fi cash-out stream into equities has dried to a trickle. Real estate has turned the corner. (More below.)	With the gang at CNBC waxing nostalgic about the "good old days" of the 1998-2000 tech bubble, it's "deja vu all over again."	With "legal" insider selling outweighing buying by a staggering rate of 44-1, the highest ratio on record, the notion of Martha in pen-stripes is nothing but a diversion for the tabloids.

With the mutual fund scandals threatening some of the largest fund families in the industry, a mass run on these funds would be disastrous.	With money flows into equity mutual funds soaring to the highest level since February 2000 (just prior to THE top), the stage is set for Act II, the next leg of this Great Bear Market.	With the extremely bearish Elliott Wave pattern, we believe a stock market crash of historic proportion is inevitable if not imminent. (See above).

But don't take our word for all of it, or any of it. We urge you, we implore you, we beg you to jump over to fnancialsense.com and listen to Jim Puplava's round-table discussion with market technicians/historians Peter Eliades, Kennedy Gammage, Tim Wood and Robert Prechter. These venerable gentlemen lay out all the bloody details for you. This is a 5-star, don't miss program! We wholeheartedly and completely concur with their conclusions: by virtually all standards and measures, the markets are historically overvalued, technically overbought, and ready to plunge.

Real Estate
The real estate bubble has (so far) only cracked, not burst. However, there are increasing numbers of pockets across the country where the downside cycle has begun in earnest. For example, in just the last three days these stories have graced the newspapers n formerly hi-flying Denver:

Gold
We don't usually comment on gold, but we think it's at an interesting juncture here. The formidable $400 milestone is but a stone's throw away, and gold may soon receive the jolt it needs to hurdle that barrier. The long-delayed gold ETF may actually be christened on the NYSE before the end of the year. Gold bugs see the fund as a solution to the longstanding logistical hassles that have kept gold out of many investors' portfolios. The fund should (literally) add tons of demand for the metal each year.