Financial Canaries Warn Of Dangerous Investing Conditions

Introduction
Early coal miners didn't have today's specialized equipment, so it was impossible to tell if gases were building up to dangerous levels. Miners carried the bright yellow canary into coal mines in cages; these animal's highly sensitive metabolism detected methane and carbon monoxide gas traces that signaled potential explosions or polluted air. The Mine Safety and Health Administration website says: "Canaries were preferred over mice to the presence of carbon monoxide underground...For instance when consumed by the effects of carbon monoxide, a canary would sway noticeable on its perch before falling."

Financial Canaries Warn Its Time To Exit The Stock Market:
1) Charts show the stock market that has topped out. Take for example the Russell 2000 which is traded by the ETF IWM. It has has formed the rare megaphone broadening top pattern. Its most recent close at 78.07 is approximately its mouthpiece price as is seen in its weekly chart; this week's doji candlestick reflects that neither the Bears nor the Bulls gained the upper hand.For more charts of this age's topped out stock markets I suggest one read permabear Tim Knight's articles: Stalled Bull and Engulfed and It's A Most Elusive Fish and When Great News Doesn't Help.

2) A realization that the ability of corporations to consistently provide ever higher profits has peaked out.

3) Ehud Olmert's calls for action against Iran; in times of international conflict money flows out of stocks and into gold.

4) We have passed through Peak Liquidity: December 4, 2006 was the day the Bond Market called interest rates higher independent of Federal Reserve action: lacking a fresh quenching of liquidity, stocks will fall in value.

5) A tenet of Dow Theory: the transportation and industrial averages must move to new highs or new lows together in order for the trend to last; in as much as the Transports failed on January 19, 2007, the Dow must now move lower as well.

6) Exxon Mobil (XOM), completed a three white soldiers reversal and market blow off on December 14, 2006. Exxon Mobil, the derivative SSO and the easing of interest rates by the bond market place were the three most important driving factors for the recent rally. Now with Exxon Mobil's capacity to help capped by low oil prices, the S&P can no longer soar to new heights.

7) The bell weather banking sector, as traded by the EFT (KRE) peaked at 50.75 on 1-4-2007 simultaneously with bonds, which is traded by the ETF (TLT), which fell from 89.60. In other words, this key interest rate sensitive sector was driven lower by a series of bond market interest rate hikes independent of Federal Reserve action.

The Coming Bear Market Will Be Like No Other In History
The Kress Wave Cycle chart heralds a Kondratieff Winter : fiat wealth will be extinguished by the year 2014.

Two Investment Strategies For The Coming Bear Market
One could:1) Short sell

Deron Wagner of Trading Markets recommends short selling. As does Trader Tim Knight in the article Engulfed where he provides the chart of the Nasdaq ($NDX) manifesting two bearish engulfing candlesticks in a row.For those who are interested in short selling, the ProFunds mutual funds SRPSX and UVPSX are terrifically oversold as are the ProShare ETFs DXD, SDS, MZZ. There is also the Nasdaq ETF QID but it presents a higher risk entry point than the previously mentioned ETFs. And there are the newly offered Bear ProShare ETFs: Small Cap 600 (SDD) and Russell 2000 (TWM). I do not recommend short selling, as this simply yields dollar denominated fiat investments.

2) Study the investment demand for gold and invest at BullionVault.com Notices:

I am not an investment professional; I recommend that one print this document from Google Docs and use it as the basis of a consultation with one's financial planner.