Note* My html charts can't be displayed on this blog. Feel free to contact me at jessestine@gmail.com for an email with all corresponding charts.

As many of you know, I have been moderately market bearish over the past 2 years. Quite frankly, the environment for traders and investors has been crap for quite some time now. One year ago, I sent out my "market forecast" for 2011 based almost entirely on The Royal Bank of Scotland's own forecast. I have learned to take their forecasts very seriously ever since June 6/18/2008 when the research team from Royal Bank of Scotland (RBS) warned investors to get ready for a “full fledged crash in global stocks and credit markets over the next three months". Global markets immediately crashed w/ the S+P going from 1350 to 850 in the next 4 months.

Anyway, I sent this out: ".....as of this morning, "The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trades for 2011." Having been on the ground in China for close to 3 months now, my belief continues to be that China is priced for perfection for many years to come. Any missteps will be reflected in the market in an exaggerated fashion. China is forecasted to grow at 10% per annum for years to come. As the article states, any hiccup (5% growth) will take markets down by 25%. "The result of such a hard landing (+5% growth) would be a 20pc fall in global commodity prices, a 100 basis point widening of spreads on emerging market debt, a 25pc fall in Asian bourses, a fall in the growth in emerging Asia by 2.6 percentage points, with a risk that toxic politics could make matters much worse....Albert Edwards from Societe General said the OECD’s leading indicators are signalling a "downturn" for Asia’s big five (Japan, Korea, China, India, and Indonesia). The China indicator composed by Beijing’s National Bureau of Statistics has fallen almost as far as it did at the onset of the 2008 crash."

The day I sent that note out, the Shanghai index closed at 2857.18. As fate would have it, 2 sessions ago, the index hit 2134.32....a fall of 25.3%! It is my contention that the low of 3 sessions ago in China will be the low going forward and perhaps its low for the rest of our lifetimes! I have now spent much of the past 2 years in China, and the real estate situation is simply dire. Imagine walking around ANY CITY in China at night and literally seeing MILLIONS of empty condos with no lights on. I don't know what will happen to Chinese real estate but the charts are telling me that the Shanghai Index has BOTTOMED and may never look back.

I see a possible giant transition taking place right this second throughout worldwide markets. As you will see in the charts below, I see:

1. An imminent end to the 30 year bull market in 30 year U.S. treasuries resulting in a flood of capital into worldwide equity markets.

2. An imminent bottom in worldwide equity markets- especially China, India, Vietnam etc. out of severely oversold levels.

3. The Dow Jones 13 week exponential moving average (ema) just crossed above the 43 week ema (a rare occurrence) signaling a bull run. Prior instances have resulted in short-term thrusts higher of 30+%.

4. According to Oppenheimer (see below), 2011 was THE MOST VOLATILE year on record going back to 1950. There were huge drops in March, June, September, October, and November...not to mention a "once in a lifetime" mega-drop in August. The individual investor has simply given up in frustration. After periods of extreme volatility, markets go up...a lot.

5. The "Ted Spread" (measure of credit risk in the economy) has topped out. Its rsi (14) of over 81 is higher than at any other time during the crisis of the past 4 years. This extremely overbought rsi indicates an imminent fall in the "Ted Spread" resulting in money flowing out of the safety of bonds and into more risky assets- stocks.

6. The American market flat performance in 2011 masks an ALL-OUT worldwide market crash in 2011. Much of Europe is down 50% from its highs, Cyprus is down 72%, Vietnam is down 50% (VNM), China is down 33% from its highs this year, India is down 45%, Russia is down 30%, Brazil is down 28%,Copper down 28%, Japan down 25%, biotech index down 33% from its highs, networking index down 28%...... and basically every sector in the U.S. market is down big time. If you look at every sector in the States, it is literally impossible to figure out how the S+P, Dow, Nasdaq etc. finished the year flat. Put simply, 2011 was an ALL-OUT MAJOR market debacle worldwide. A once in a lifetime worldwide market decline. My friends, we are due for a worldwide market reversion higher!

7. Goldman Sachs. I will never understand how Goldman Sachs will forever be allowed legally to purposely mislead investors. It is what it is. At the end of 2010, the indexes surged over 20% resulting in an end of year weekly rsi (14) in extremely overbought territory above 70...a level consistently leading to significant market declines or crashes. SO.... I've seen it over and over and over w/ Goldman (as with many other houses), as they upgrade at unsustainably overbought levels and downgrade at unsustainably oversold levels. Anyway, their forecast for 2011 was for a 25% S+P surge LEAD BY........ BANKING STOCKS!!!!! Just take a second to look at some banking stocks over the past year! This brings us to 2012. What is Goldman's forecast??? Any guesses???

"Our 3-month, 6-month, and 12-month forecasts are 1150, 1200, and 1250"!! And how about this: ""We estimate the S&P 500 could fall by 25% to 900 in an adverse scenario in which the Euro collapses." Wow! By the way, the average portfolio manager predicted a 17% S+P return heading into 2011. A USA today poll of individual investors was right at about 17% as I recall. Euphoria at very overbought levels is a recipe for disaster. Things got so out of control that I bought index puts for the first time in my career in February.

8. The U.S. market has survived! It has survived EVERYTHING in 2011. The most volatile year in history. The entirety of Europe collapsed in spectacular fashion (already priced in), S+P downgraded U.S. debt, dismal GDP figures, depression-level consumer confidence numbers, lackluster earnings, riots in the UK, Tunisia, Greece, Syria, Israel, Egypt, Libya, the occupy Wall Street movement in the U.S., possible warfare with Iran, bursting of the world's biggest property bubble in China, municipal debt crisis in China, the collapse of MF Global, the uproar against quant trading, the runaway debt crisis in the U.S., ...the worldwide debt bubble etc. etc. etc.... Guess what? The U.S. markets survived everything. What happens if we get any good news? Anything. We get a HUGE market surge.

9. There have been 97 negative earnings pre-announcements issued by S&P 500 corporations for the fourth quarter, compared to 26 positive pre-announcements, resulting in a negative-to-positive ratio of 3.7. That's the highest in 10 years, according to Thomson Reuters data. The earnings bar is now set much lower. These pre-announcements came in early, meaning estimates have been coming down across the board in every industry. This now sets the stage for some significant "beats" for those firms who meet or exceed their initial guidance set at the start of the quarter.

10. The U.S. market is a complete and total wasteland. The leading sectors like banks, solar (down 80%!), shipping(down 50%), and coal (down 50%) have simply been devastated. They have priced in a total collapse of the worldwide economy. The good news is that from a sector-down approach, I see dozens and dozens of setups within these sectors suggesting a massive rally in many of the individual stocks. I see many "cash cows" trading at absurd Buffet-esque discounts. Take coal company ACI for example. 3% dividend, $38 enterprise value, $2.90 eps run-rate in Q1 2012, profitability booked well into the future through forward contracts....all for $14.50 per share. I haven't done enough work on solar yet, but the charts suggest a big turn for several of these firms in the coming year. For example, lottery ticket solar firm HSOL w/ $3.50 in cash, backed by a multi-billion dollar Korean company is trading at $0.98. $33 FSLR, is projected to earn $6 in 2013, RDN w/ a book value of $8.50, highly leveraged to a housing rebound (yes, it is coming) trading at $2.34. I have dozens of companies like these on my radar. I see many potential 100-600% "rebound plays" this year.

11. Industry reports are suggesting a surge in some leading indicator consumer and industrial activity. Sales of new cars have been surging very late in the year. TSM (Taiwan Semiconductor) is the big boy in the semiconductor space (the leading of all leading indicators in my opinion). I just received this note from CSFB the other day: "Taiwan foundries opening up order spigot. We analyzed the equipment orders made by Taiwan chip makers in Taiwan public filings. Orders from TSMC & UMC in 4Q11 have increased to $2.63bb (up 421% q/q from just $504mm in 3Q11). The order levels are higher than the $1.62bb average levels in 1H11. With sales of ultra-laptops surging in the second half of 2012 combined with the intro of revolutionary TOUCH SCREEN Windows 8, we could see a huge computer upgrade cycle setting up a second half technology bonanza.

12. Presidential Cycle. The average 3rd year return for the presidential cycle is 17% while year 4 is around 10%. Its my guess that the market over the next 12 months will combine year 3 and year 4. I have spent 80% of my time outside of the U.S. over the past 3 years and 2 themes consistently emerge whenever I meet somebody. 1) Obama, Obama, Obama! (Similar to Tebow mania) and 2) "The U.S. is no good anymore....it has collapsed, right?" There is/will be a worldwide push for Obama to remain president of the United States. Unlike any other president in my lifetime, he is almost universally loved outside of the U.S. As always, big money the world over will want to preserve the status quo by making conditions conducive for his re-election, jobs will be created, markets will surge, everyone will be happy, and Obama will win in a landslide (and no, I am not a democrat nor an Obama supporter). By the way, Intrade and other markets are forecasting only a 52.5% chance of his re-election. I don't think that figure will stay there for very long. The other point is that the world has totally given up on the U.S.. Everyone I meet abroad thinks that the United States is in a terminal state of decline. It is precisely when you see this kind of universal dour sentiment that the U.S. (or any company/country etc.) comes back swinging and surprises everyone in a BIG way.

13. The U.S. real estate collapse is over. Period. Nationwide U.S. real estate futures are slowly starting to reflect this- http://www.recharts.com/cme.html . Banking stocks and indexes will surge when the data show that prices are no longer falling. If prices start climbing (at all), we could see an all-out market moon-shot.

14. Professional traders are totally out of the market. During my career, there have always been at least 30-40 stocks at any point in time that are "in play". There are virtually none at the moment. Well, there are a small handful, but they are nothing like what we are used to "playing" in good markets. The "momo stocks" of 2011 have all been completely decimated. TZOO, GMCR, OPEN, REDF, MITK, MCP, NFLX, VHC, JVA, SFLY etc. have been absolutely crushed reflecting a depression scenario. Should we enter a less volatile, uptrending market in 2012, professional traders will return en masse pushing the next generation of "momo stocks" through the roof similar to the 2003-2006 momentum heyday.

15. Lastly, I can't find any other commentators or traders looking for a huge market surge this year. Being an ultra-contrarian investor, this single fact alone makes me even more confident that 2012 could be the "Big One".

Bottom line, I see a possible once in a generation market move this year with scores of individual stocks making "multi-bagger" moves over the course of the year. Everybody has an outlook for the stock market. For the reasons stated, I just feel particularly bullish this year. Unfortunately, market outlooks are wrong more often than not. According to Steven Kiel at Arquitos Capital, "If you want to keep yourself in check, head on over to this BusinessWeek article from December 20, 2007. Some very talented analysts, some of whom I really respect, put out their end of the year 2008 stock market predictions. William Greiner, Tobias Levkovich, Jason Trennert, Bernie Schaeffer, Leo Grohowski, Thomas MacManus, and David Bianco all are included. Their S&P 500 predictions ranged from 1520 to 1700." Do you all remember S+P 666?:)

The charts below show the mega bullish crossover for the Dow (happening in other indices as well), a mega-bullish 4 year cup and handle formation for the Nasdaq, the bottoming formation in the Indian market, descending bullish channel for coal stocks, descending bullish channel for networking stocks (NWX), the same pattern for the Nikkei, a chart showing natural gas closing on Friday at its cheapest level (relative to oil) in its history. This will prove to be its lowest monthly close in our lifetimes w/ future 1-3 year returns of 100-800%, a bullish emerging markets formation, a chart of 2011 being the most volatile year ever, a chart of 30 year treasuries hitting their long term 30 year upper channel (the top is in for the rest of our lifetimes), a chart of the TED spread, charts of the Shanghai index, a chart of the solar index (TAN), Oil services index (OIH) and its bullish descending channel, a chart of the agricultural index (GKX) suggesting a possible 100%+ move over the next year or so, and a long term commodity chart.