As I had predicted, on July 19th the stock market made an important top at the psychologically significant benchmark of Dow 14,000 and sharply reversed course into a downward trajectory eerily parallel to the perilous course that led to the historic crashes in 1929 and 1987, a point recently highlighted by Frank Barbera at FinancialSense.com. If history were to repeat itself precisely, then we should now be entering the Great Crash of 2007 involving a 5000-or-so point drop in the DJIA into Black Tuesday, September 11th, during which stock prices could plunge some 3000 points in a single day (although this would likely take two days since modern-day trading curbs could shutdown the stock exchanges).

While I do not expect an exact repeat of the stock market crash patterns that unfolded in 1929 and 1987, I do suspect that we may soon enter a historic crash of some sort. If, indeed, we reached the Elliott Wave "Grand Supercycle" top at Dow 14,000 on July 19th, as I believe we did, then the "crash" which might soon unfold could be the greatest in history and could even entail an outbreak of war.

To understand just how history repeats itself, it is necessary to understand the psychology of man and how collective mood is connected to nature. The reality is that human history flows in somewhat predictable waves shaped by natural forces including the movement of the sun and moon.

While this idea may seem preposterous to many, if you read further you will discover it is not.

The truth is that the Mayans and other great civilizations, who depended on precisely tracking the heavens over eons of human history to keep their agrarian societies alive, correctly realized that there are important cyclical relationships between celestial and worldly affairs.

The bottom line is that we can not separate ourselves from the rhythms of the universe, for we are all notes in God's Grand Symphony. It is most important that we listen carefully. To do otherwise is arrogant folly.

So what kind of music is God playing?

When it comes to mankind, I think we are clearly dealing with Beethoven and music shaped by the excruciating emotional highs and lows of a mad genius.

Recent human history has involved unprecedented advances in technology and scientific knowhow. The develop-"mental" process for mankind has moved at an increasingly frenetic pace, particularly during the last 200 years, and this has not come without a high price. Just as the creation of Beethoven's passionate music came at his personal expense of painful emotional and mental instability, so has man's creative prowess come at the cost of collective instability in the form of booms and busts, prosperity and depression, peace and war. Society suffers from mass mood swings between irrational extremes of optimism and pessimism over time. As revealed by the "Elliott Wave Principle", these cycles in mass mood can be tracked by the bull and bear markets that occur on Wall Street, a global focal point of man's creative energy in the modern era.

While academicians are consumed by extraordinary popular delusions of "rational expectations" and "general equilibrium"in the long-run, the unfortunate reality is that man's mental and emotional instability is a source of social disharmony that could ultimately result in a devastating crash resulting in collective suicide. And this brings us to the current historical juncture.

During the 20th Century, there were two "Great Crashes" on Wall Street that were very similar in character. In 1929 and 1987, the stock market reached all-time record highs in the late-summer and then reversed into dramatic autumn sell-offs that climaxed with October "Black"-day panics during which the stock market fell 20%+ in one or two trading sessions. More specifically, on September 3rd, 1929, the DJIA peaked at a then record close of 381 and then entered a tumultous sell-off climaxing on Black Monday and Tuesday, October 28th and 29th, on which days the Dow fell 13.5% and 11.7%, respectively, to a closing low of 230, nearly 40% down from the top. On August 25th, 1987, the DJIA peaked at 2722 and then entered a dramatic sell-off that ended with a climactic panic on October 19th, Black Monday, on which day the Dow fell 22.6% to close at 1738, more than 36% below the August top.

What's remarkable is that the crash pattern that unfolded in 1929 and 1987 is now repeating itself. Consider the comparative chart below:

As can be seen, there are parallel market patterns in the stock market between 1929, 1987 and 2007 that suggest another Great Crash might soon unfold. Regarding '29 and '87, there's a three wave count of relevance. In 1929 and 1987, there was an initial 31 day and 28 day leg down of 14.7% and 8.4%, respectively. Then the market rebounded retracing 50% and 65% of the initial decline over a 7 day and 10 day period, respectively. Finally, stock prices fell 34.8% and 30.3% over 18 days and 17days, respectively, to the 1929 and 1987 crash lows. Both market crashes resulted in around 40% declines from the tops over the course of 55 calendar days.

As for the current juncture, the Dow peaked at 14,000 on July 19th after which the market fell 8.3% over 28 days. Since then the DJIA retraced 46.2% of the initial decline over an 8 day period into a close of 13,379 on August 24th. Now the question is whether or not the stock market is entering a 30%+ collapse over the next 18 days into the Fibonacci 55th day from the July 19th top on September 11th. If so, the total lunar eclipse tomorrow may be the trigger....a point revealed below.

The profound parallels between the 1929 and 1987 crashes caught the attention of Chris Carolan, who was a trader at the time of the '87 panic. Carolan noted that...

ORIGINAL ALERT POSTED 7/25 BELOW:

Last week the DJIA peaked at the psychologically important 14,000 mark, closing at 14000.41 on July 19th. Since then a significant reversal has started to unfold:

As pointed out in my most recent article, the stock market tends to top and reverse from psychologically important thousand marks in the DJIA.

Historically, when the major stock averages, and the DJIA in particularly, reach or trade around psychologically important round numbers like thousand marks, the stock market may top-out and, failing to hold near or above the mark, sharply reverse course. A remarkable feature of these stock market reversals at thousand marks in the DJIA is that they are often associated with negative news that follows the market top.

For instance, on September 6th of 2001, the DJIA fell decisively below the 10,000 mark , THEN September 11th occurred driving the market down sharply.

Thus, when the DJIA reversed decisively from 10,000 in September of 2001, the breakdown in Western confidence manifested as the literal collapse of a key symbol of Western financial prowess and American global economic hegemony....the World Trade Center towers in New York City. Likewise, a blow occurred against the Pentagon in Washington DC, the symbol of American global military hegemony.

There are other major examples of significant negative historical events erupting in conjunction with reversals from key thousand marks in the DJIA.

Right after the DJIA failed at Dow 8000 in late-October of 1997, a mini-crash occurred in association with a financial panic in Asia.

Finally, between 1966 and 1982, the DJIA reversed from the "Magic 1000" barrier several times. After each reversal, all kinds of troubles emerged ranging from OPEC oil embargoes, to the Vietnam War, to Watergate. One of the most notable cases occurred in October of 1973 when the DJIA rose to just below Dow 1000 as the Arabs launched a surprise attack against Israel which, in turn, led to a major East/West confrontation and an Arab oil embargo against the West. Consequently, the world economy entered a severe contraction and stock prices plunged in the largest market correction up to that time since the Great Depression.

Given the historical pattern of major stock market reversals from key thousand marks in the DJIA, there is reason to believe that the new reversal from Dow 14,000 will be associated with a major decline in stock prices possibly exacerbated by some sort of historical "shock(s)" like occurred with such breaks in the past.

- HINDENBURG OMEN CLUSTER -

On top of the DJIA reversing from the psychologically important 14000 mark, there are other reasons to suspect a stock market crash may soon occur.

For instance, recently there has been a cluster of Hindenburg Omen signals that reliably predict stock market crashes. As explained at Wikipedia:

As explained by Robert McHugh in an article for Safe Haven, the record of the Hindenburg Omen in predicting major stock market drops is impressive:

Below is a table breaking down the record of this signal in predicting stock market declines:

In his daily Financial Markets Forecast & Analysis, McHugh points out that there has been eight Hindenburg Omen signals since mid-June. Given the record of this signal, this means there is a significant risk for a stock market crash in the days and weeks ahead.

- THE SEPTEMBER 11th SOLAR ECLIPSE -

On top of the Hindenburg Omen, one might also note that there is a risk of a major financial panic based upon the work of Steven Puetz concerning eclipses.

Steve Puetz discovered that almost all of the largest stock market crashes in history have occurred around the time of a lunar eclipse.

Consider the following excerpt from Peter Eliades online "Current Observations":

There's a solar eclipse on September 11th that will be preceded by a total lunar eclipse on August 28th. Furthermore, the full moon on July 30th occurs six weeks before the 9/11 solar eclipse. As indicated above, this means a stock market crash window will occur from July 24th to August 2nd.

This window should be expanded to a week before and after full moons according to a University of Michigan Business School study by Ilia Dichev and Troy Janes. This study examined 100 years of the stock market trends as they relate to the lunar phases. According to it, “Returns in the 15 days around New Moon dates are about double the returns in the 15 days around full moon dates. This pattern of returns is pervasive: We find it for all major U.S stock indexes over the past 100 years and for nearly all major stock indexes of 24 other countries over the last 30 years.”

Thus, from the week before to the week after the full moon on July 30th, there is the potential for a stock market crash. This potential seems much greater given the reversal from the 14000 mark in the DJIA and the Hindenburg Omen cluster.

Given that we are entering a window for a possible worldwide panic and global collapse of stock markets, it begs the question as to why?

If, indeed, a new large-scale decline in U.S. stock prices is getting underway, then what sort of events might erupt to upset investors' expectations?

Again, it could be that we are mainly dealing with an unraveling of the debt bubble that has been inflated by reckless government and Federal Reserve policies in recent years and decades. If so, then the stock market may now start anticipating a debt-deflation implosion in the economy that astute thinkers like Robert Prechter have been warning about for years.

Beyond the potential for a deflationary economic depression, however, what Prechter and other such long-wave theorists fail to recognize is that the social wave patterns they analyze do not necessarily unfold in a consequential manner, i.e., where a downturn in mood gives rise to the negative thinking and associated actions that beget greater upsets in collective confidence and reinforce given downtrends in collective mood. Rather, such historical wave patterns are synchronistic such that reversals and large-scale downtrends manifest as negative events collectively experienced as mass mood collapses. Accordingly, a reversal Dow 14,000 may be connected to negative historical shock(s) outside of financial markets and the economy. My concern remains for terrorism involving weapons of mass destruction and/or ultimately global nuclear war as I foresaw back in 1991.