Crash guru warns the Dow could plunge to 14,800 — a sign could come this week

via MarketWatch

Chart specialist Sandy Jadeja focuses on price, pattern and time


It’s already been a big year for the Dow industrials, which have stretched a near-decade-long bull market to historic heights.

But if the technical stars collide, as one chartist predicts, the blue-chip gauge could soon plunge by more than 6,000 points to 14,800. That’s nearly 30% lower, based on Monday’s close.

Sandy Jadeja, chief market strategist at Master Trading Strategies, claims several predicted stock market crashes to his name — all of them called days, or even weeks, in advance. (He told CNBC viewers, for example, that the August 2015 “Flash Crash” was coming 18 days before it hit.) He’s also made prescient calls on gold and crude oil.

And he’s extremely concerned about what this year could bring for investors. “The timeline is rapidly approaching” for the next potential Dow meltdown, said Jadeja, who shares his techniques via workshops and seminars. Timelines are at the heart of his predictions, which he bases on repeating cycles in the market that are connected to specific times.

“People need to look for three things,” Jadeja told MarketWatch in a late-January interview and follow-up conversations. “Price, pattern, and … time. You can get the price pattern wrong, but if you get in at the right time, the other two don’t matter.”

He sees 2017 as littered with pitfalls for the Dow DJIA, -0.47% . Below is his so-called “timelines” chart of the stock index, defined by green horizontal lines. He’s currently on the lookout for the benchmark to approach that upper green line, which represents a range of 21,800 to 22,000.

he chart shows how the DJIA is edging ever closer to that higher green line and his target range. Once it hits that level, investors need to look for a weekly fall in the index, according to Jadeja, and then do something specific:

“Don’t just go short,” he said. “ That’s where the public gets it all wrong. You have to wait for a break of the low of that weekly bar, and put a stop above the high.”

And here’s the crux of Jadeja’s concerns: If the rally inspired by last year’s presidential election continues, the Dow industrials could hit that 22,000 level — but if it fails, the pullback could be steep, or even steeper, based on history.

One level down would take the DJIA to 18,600, while moving two full levels lower would bring it to the aforementioned 14,800 level.

“If the Dow Jones reaches 22,000, then there’s a strong opportunity for it to fall back,” Jadeja said. “It’s nothing to do with trend lines or channels. These green lines are based on units of time and move forward step by step.”

As he has done in the past, Jadeja offers up specific dates around which he expects “potential volatility for market declines.” One of those is March 13 — Monday. But if that doesn’t materialize, then he says watch out for May 11. He’s more concerned about the latter date than the former.

Like a trip to the 7-Eleven

Jadeja is a frequent subject of media interviews and counts Robert Kiyosaki as a fan. The “Rich Dad, Poor Dad” author says Jadeja’s charts back up his own view that markets are going to pull back this year.

“Is it possible that we can take data and then forecast future turning points? After 31 years in the business, it’s absolutely ‘yes,’” said Jadeja.

If more clarity on the chartist’s method is needed, here’s another way of explaining how Jadeja has managed to get so many calls correct.

He suggests visualizing a trip to a 7-Eleven: “You would notice that in the morning, there’s a rush around 7 a.m., [when] people are going to work. Then a lunchtime rush, then late-afternoon rush, then evening rush. If you look at the data, in a 24-hour period there are three or four periods where there’s an increase of volatility.”

So when and how did that method pay off for Jadeja? On July 31, 2015, the chart specialist went on CNBC and warned of a major volatile move to come between Aug. 7 and 18, which turned out to be the so-called “flash crash” of Aug. 24. He also flagged another period to be careful of — Sept. 13 to Sept. 23.

He then went back on CNBC on Aug. 28, 2015, and told viewers there would be a drop on Sept. 14 or 17. A nearly 290-point plunge hit the Dow industrials on Sept. 18; the index proceeded to lose more even ground over several trading days.

On Oct. 1, 2015, and then in November of that same year, Jadeja told the network that a Jan. 4, 2016 would “face a bearish mood,” according to Business Insider, which has tracked his calls closely over the years. That was the date that the Dow began to tumble, shaving 1,955 points over 11 trading days.

Again, Jadeja said those moves were predicted by looking at repeating cycles. Below is a “time windows” chart of the Dow industrials DJIA, -0.47% that he uses. This chart shows market movements, which happen in between those big blue bands.

This chart shows the nine times the Dow entered that “time window” and then declined — moves foreseen by Jadeja using his method.

The technical strategist said investors can use his system to trade any instrument they like, as long as they can go short (such as with a futures contract, or bearish put options on an index or short exchange-traded funds. A put option is a type of derivative that confers an owner the right to sell an asset at an agreed upon price and date.)

The 84-year cycle

There’s just one more reason why Jadeja is so uneasy about this year, and into 2018. Stocks are in the midst of a seven-year cycle that only comes around every 84 years, according to the chartist. (Check out that 84-year chart here on Business Insider) . The current cycle stretches back to 2011 and ends in 2018 — and that’s why he’s more convinced than ever that stocks could be in for a bumpy ride.

“The first concern is that every time the market has gone into a blue time window it has gone down. Now we’re in even bigger time windows, the 84-year cycle …,” he said.

“My concern is that because we’re in that big time window and the Dow is reaching for the upper green line, those two things together are like fireworks about to go off,” he said.