Submitted by Michael Snyder via The Economic Collapse blog,
Is the stock market going to crash by the end of 2015? Of course stock market crashes are already happening in 23 different nations around the planet, but most Americans don’t really care about those markets. The truth is that what matters to people in this country is the health of their own stock portfolios and retirement accounts. There are a lot of people out there that are very afraid of what could happen if the money that they have worked so hard to save gets wiped out in a sudden financial collapse. And right now there is an unprecedented amount of buzz about the potential for a giant stock market crash by the end of this calendar year. In fact, I don’t think that I have ever seen more experts come out with bold predictions that a stock market crash will happen within a very specific period of time.
The following is a sampling of some of the experts that have made very bold proclamations about the rest of this year over the past few weeks. Many of these individuals are putting their credibility on the line by proclaiming that a stock market crash is just around the corner…
-Tom McClellan says that we are heading for an “ugly decline” and that there will be “nothing good for bulls for the rest of the year”…
Tom McClellan loves doing what financial advisers tell you not to do. He tries to time the financial markets — to the exact day, if his charts align just right.
At the moment, they are telling him to be bullish on the stock market for all of his trading time frames, including those that trade every few days, weeks and months. But bulls should be ready to flee, as soon as this week.
That’s because McClellan said his timing models suggest “THE” top in stocks will be hit some time between Aug. 20 and Aug. 26. He expects “nothing good for the bulls for the rest of the year,” he said in a phone interview with MarketWatch.
McClellan doesn’t have a strong view on how far stocks could fall, just that it will probably be an “ugly decline” lasting into early 2016.
-Harry Dent recently stated that we are just “weeks away” from a “global financial collapse“.
-Gerald Celente says that “the global economy has collapsed” and he is “predicting that we are going to see a global stock market crash before the end of the year“.
-Larry Edelson insists that he is “100% confident” that a global financial crisis will be triggered “within the next few months”…
“On October 7, 2015, the first economic supercycle since 1929 will trigger a global financial crisis of epic proportions. It will bring Europe, Japan and the United States to their knees, sending nearly one billion human beings on a roller-coaster ride through hell for the next five years. A ride like no generation has ever seen. I am 100% confident it will hit within the next few months.”
-Jeff Berwick, the editor of the Dollar Vigilante, says that there is “enough going on in September to have me incredibly curious and concerned about what’s going to happen“.
-Egon von Greyerz recently explained that he fears “that this coming September – October all hell will break loose in the world economy and markets“.
-Even the mainstream media is issuing ominous warnings now. Just a few days ago, one of the most important newspapers in the entire world published a major story about the coming crisis under this headline: “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control“.
-The Bank for International Settlements and the IMF have jumped on the prediction bandwagon as well. The following comes from a recent piece by Brandon Smith…
The BIS warns that the world is currently defenseless against the next market crisis. I would point out that the BIS has a record of predicting economic crashes, including back in 2007 just before the derivatives and credit crisis began. This ability to foresee fiscal disasters is far more likely due to the fact that the BIS is the dominant force in global central banking and is the cause of crisis, rather than merely a predictor of crisis. That is to say, it is easy to predict disasters you yourself are about to initiate.
It is no mistake that the warnings from the BIS and the IMF tend to come too little too late, or that they are beginning to compose cautionary press releases today that sound much like what alternative analysts were saying a few years ago. The goal of these globalist organizations is not to help people prepare, only to set themselves up as Johnny-come-lately prognosticators so that after a collapse they can claim they warned us all, which can then be used as a rationalization for why they are the best people to administrate the economies of the planet as a whole.
So why are so many prominent voices now warning that a global financial crisis is imminent?
The answer is actually very simple.
A global financial crisis is imminent.
Back on June 25th, I issued a red alert for the last six months of 2015 before any of these other guys issued their warnings.
When I first issued my alert, things were still seemingly very calm in the financial world, and a lot of people out there thought that I was nuts.
Well, here we are just a couple of months later and all hell is breaking loose. 23 global stock markets are crashing, the price of oil has been imploding, a new currency war has erupted, industrial commodities are plunging just like they did prior to the market crash of 2008, a full-blown financial crisis has gripped South America with fear, and junk bonds are sending some very ominous signals.
In the U.S., things are beginning to slowly unravel. The Dow is now down over 1200 points from the peak of the market. At this point, it isn’t going to take much to push us into a bear market.
So enjoy what is left of August.
September is right around the corner, and if the experts that I mentioned above are correct, then it is likely to be one wild month.
September Song
by Jesse
“…The broken wall, the burning roof and tower,
And Agamemnon dead.”
W. B. Yeats, Leda and the Swan
North and South Korea were exchanging live artillery rounds over their troubled border today.
US equities were in a Daedalian swoon today, falling through support lines on the charts as if they were merely insubstantial constructs.
Surprisingly to some, so far this is just a stiff rinse, certainly to be expected after this choppy back and forth action after the long run up for the past two years on the back of the policy errors and malinvestments of the Banking system and their Fed.
The next moves if they go lower still will be much more significant.
This is where charts prove helpful. You can clearly see the big, big support on the SP futures chart at about 2030. Even if we should gap lower tomorrow, it only really counts if we break that support and stick it on the weekly close.
There is a similar position on the NDX futures chart, which is the key confirmation factor since it has led the way up with a narrowing phalanx of big tech names that provided a fairway for the momentum players. The key support there is at 4340, about another 30 points lower.
At some point I expect the Fed to jawbone the markets in some manner, with the designated stooge saying something essentially meaningless, but perhaps sufficient to ‘whistle up a wind’ in the windiness of the markets which they have blown into being.
If we break further still, it may be a long long time until September, and the stormy season in which the denizens of market crashes and declines tend to dwell. The deadliest pattern is a break and a rally back that fails.
So I would be quite careful in chasing anything here, up or down. Our markets are like the words of our politicians and economists: it is hard to be too cynical or too skeptical about their substance and veracity.
Make it so number one, I gots no dog in that hunt. So tired of hearing about the impending doom since forever it seems. Admin told me this could not go on another second, day, week, month, year. and that was three and a half months ago……………..still waiting. The stage is set for the final act, so bring down the curtain already!
Bought more silver yesterday and I will be picking up a little more very soon. Been warning a few people that I actually like for years but not sure if any are listening, I really doubt it, only one person has asked me where I buy precious metals. Most just give me a strange look, I can tell they sense things are not right. My best advice to all of them is turn the TV off and seek the truth, it’s out there if you put a little effort into it.
When this Titanic finally sinks it’s going to be really hard for me to keep that shit eating grin off my face, but I will do my best.
Hey Admin!
Seems a couple of years back, you were talking about a purchase you made that shorted China. I can’t remember the call letters. How has that turned out?
Hey Pirate Jo!
I owned FXP about 5 years ago. I think I made a little money on that before I sold it. I haven’t bought a stock, mutual fund or ETF since 2011.
We have been pouring gasoline on the tinder for a long time. When it sparks off, it is going to be hell to pay. What is DC Sunsets saying about the technical condition of the market?
I was at the grocery store Wednesday when the Fed meeting minutes were released. The SPX had gapped down hard at the open, and in the minutes after the minutes (grin) it rallied ALL THE WAY back to close the gap, then failed.
That was a great shorting opportunity I missed. I have a modest position in SDS (the 2x inverse ETF for the SPX) and I would have added to it had I not been asleep at the switch. My big trading error was that 2 weeks ago I bought 100 sh of GLD at $105.11, watched it waffle around between $104 and 105 and decided it looked vulnerable to a drop to the low of 103.something so I stopped out at $104.70 for about a $50 loss. Today it traded to $110.61 (it was $107 two days ago) so I’m smarting from that. DOH! My SDS is doing okay, but the GLD was a much larger play.
I subscribe to Prechter’s work, and by his view (which is as fallible as everyone else’s) the DJIA topped last May, and the last indices to top were the SPX and NASDAQ COMP which topped a month ago. He avers that yes, stocks can make new highs but that most of the sub-indices have already entered bear trends. The Dow transports topped LAST NOV, for heaven’s sake.
The DJIA is now, by my view, unequivocally in a weekly downtrend. The SPX and Nasdaq have yet to confirm that, but perhaps they will do so soon.
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=djia&uf=0&type=2&size=2&sid=1643&style=320&freq=2&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=12&rand=1325604467&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=553&width=579&mocktick=1[/img]
I am only trading with “play money.” After years of getting my a$$ handed to me I concluded that at least in my experience, making money in speculation against the markets, anticipating a decline is much more difficult than going long the market when you expect a rally. If you look at it rationally, the market can only go down 100% (and it won’t do that) but a rally can take a stock or a market up hundreds of percents (the NASDAQ 100 is up 400% since March of 2009.) In other words, bears have a hard time making real money compared to the bulls. My main goal in the expected bear market is to simply keep what I have now. In the early stages this may be simple, but if the credit bubble deflates, the banking system will eventually freeze up. Figuring out what to do about that is a question I do not yet have an answer to.
There is a reason 90% of traders either loss money or underperform the markets. They follow scenarios and not the market.
By the way, did you notice that the author stated that he called the top of the stock market. Let’s see the author’s full record of their calls over the past 10 years.
Many of the authors we read on the internet are redundant, stealing what others have researched or written.
Nothing going to happen. This is a meme created by Snyder and a few other doomers to prop up their sagging sites that have been crying wolf for the past 5 years. Just like 2012, the blood moons, the pending mass arrests, ebola, all of it was bunk. Snyder’s own site has gone from saying the dollar will collapse to saying CERN is about to open a portal to another dimension. My predictions for September: the leaves will turn colours, apple cider will appear on the store shelves, an NFL player will do something stupid. Same as every year.
every nation with a privately owned central bank is in cahoots and will stop at nothing to get the world under their complete control ! everything else seems to be just theater to indoctrinate, control , and enslave the masses . I also do not think there is anything that can be done about it, absent a mass awakening of the worlds population. And they wont let that shit happen ,they will shut it down if there is any serious resistance to their agenda . Its extremely hard to break the programming and indoctrination that is given to everyone ,and I think only extreme duress would make people even begin to question the reality that is created by those at the top of the shitpile.
The Dow Theory just flashed a ‘sell’ signal
By Mark Hulbert
Published: Aug 20, 2015 5:17 p.m. ET
CHAPEL HILL, N.C. (MarketWatch) — The venerable Dow Theory, the oldest stock market timing system that remains in widespread use today, flashed a “sell” signal at Thursday’s close.
The Dow Theory was introduced gradually over the first three decades of the 20th century in editorials in The Wall Street Journal by its editor at the time, William Peter Hamilton. The three preconditions for a “sell” signal that he set out are:
•. Both the Dow Jones Industrial Average and the Dow Jones Transportation Average must undergo a significant correction from joint new highs.
•. In their subsequent significant rally attempt following that correction, either one or both of those Dow averages must fail to rise above their pre-correction highs.
•. Both averages must then drop below their respective correction lows.
As I’ve written before, the first two of these three preconditions were met earlier this year. Following their sharp declines in January, as you can see from the accompanying chart, the Dow Transports failed to join the Dow Industrials in rising to new highs.
That situation could have been resolved bullishly if the Dow Transports DJT, -2.50% had surpassed its previous high. That didn’t happen, and instead the third and final hurdle of a Dow Theory “sell” signal was generated at Thursday’s close when it broke under the low identified in step 1, which was 17,164.95.
But it wasn’t even close: The Dow cleared that hurdle with 174 points to spare.
Not all Dow Theorists are turning bearish, however. Jack Schannep, editor of TheDowTheory.com, is holding his fire, even though he acknowledges that the original version of the Dow Theory has indeed emitted a “sell” signal. But he has developed a modified version that he believes is superior, and that version focuses on the S&P 500 in addition to the two Dow averages.
The S&P 500 has been stronger than either the Dow Industrials or the Dow Transports. In fact, even after Thursday’s rout, the S&P 500 remains 2.2% above its January closing low of 1,992.67. Schannep’s version of the Dow Theory, therefore, won’t generate a “sell” signal until the S&P 500 closes below that level.
That could happen quite soon, if the followers of the original Dow Theory are correct.
I concur with the skeptics, and as I noted before, trying to “short” the market mathematically is less promising than being long the market (assuming Mr. Market even goes along with your expectations.)
That said, anyone who thinks that stocks can go up like a metronome (look at the DJIA above!) for long periods of time is (repeat after me) too stupid for proper description.
Yes, it can do things none of us foresee. I sure as HELL didn’t see a 400% rise in the NDX when my charts screamed “BOTTOM” in 2009. I expected just a solid bounce, followed by a renewed–crushing–decline. Yes, I can admit it. I make mistakes. Happy?
Had I followed my charts then, I’d have plowed some $$ long QLD in March 2009. Then a little more every time short-term STO got oversold and price went back up above the EMA’s I follow. I’d have made more than enough to retire *very* comfortably. Would a’ could a’ should a’.
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=QLD&uf=0&type=2&size=2&sid=2354542&style=320&freq=2&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=13&rand=1903489167&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=553&width=579&mocktick=1[/img]
Today is the reverse of that. Look at the chart above as a proxy for the Nasdaq. MACD has been screaming that it’s searching for a top for a year. It hasn’t happened yet, and perhaps this time will be the same….or this time may be different.
What I know beyond doubt is that bottoms of significance are formed by capitulation. WHEN (not if, WHEN) this market does experience a major decline, it will not stop until everyone who can capitulate HAS capitulated. It was quite easy to see this occur in March 2009. The number of non-confirmations on technical levels was huge.
My point is that the smart money makes money in uptrends (I still hope to catch part of the *presumed* bear market rally in gold) and perhaps the smarter-than-me money makes bank in all markets=—but I can’t. This means that people who are “my level of smarts” and below should largely step aside and keep what they have, with an eye to finding a better time to speculate *LONG* in stocks…buying when everyone else is selling in capitulation.
The sum I have at brokerages is a tiny fraction of my life’s savings. I lost six figures believing I was smart enough to beat everyone else, in part because I was desperate: I thought an economic cataclysm was imminent and I didn’t have anywhere near the money to tide my family through it comfortably. That was 20 years ago.
No one knows the future. On the other hand, while the improbable can and often does seem to happen, some things are impossible. Those who believe the Fed can engineer a permanently rising stock market should simply look at China to see who wrong this viewpoint is.
Investors, it’s time to prepare for a correction in stocks
By Jeff Reeves
Published: Aug 21, 2015 8:11 a.m. ET
The Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite each fell more than 2% Thursday, with the benchmark S&P 500 now in the red for 2015. It was worst rout of the year for U.S. markets.
This was no knee-jerk drop on a boring summer day, either. The decline was a long time coming, precipitated by weak corporate earnings, a global economic slowdown and concerns over higher borrowing costs as the Federal Reserve prepares to raise official interest rates.
And guess what? There’s not even a guarantee that the Fed will start its “lift-off” in September as some economists have been predicting. Not only does the market have a history of forecasting tighter policy too early, but the current conditions of low inflation and a strong dollar don’t exactly add up to a compelling case for higher rates.
So if these are the fireworks we’re seeing now, just imagine the uncertainty as we approach September’s Fed policy meeting with oil in the $30s and Chinese equities in utter turmoil.
This is the first year-over-year decline in corporate profits since the third quarter of 2012.
The bottom line is that investors would be wise to get defensive now, because stocks are in a world of hurt, and the pain is likely to intensify in the weeks ahead.
Here’s why:
Obviously, but not only, China: All the headlines from the recent market mayhem seem to have attributed the volatility in stocks to “China,” because that’s the easiest way to sum things up in 60 seconds on the nightly news. But while that’s a gross oversimplification, it is indeed true that the region is in deep trouble. Some of the risks I highlighted just this week on MarketWatch include overestimates of growth, a looming debt crisis and a currency war it can’t win. The pain in China is far from over, and that means trouble for investors everywhere.
Ugly earnings: Closer to home, with almost the entirety of S&P 500 member companies having reported quarterly results, the blended earnings growth rate — if it can be called that — is a 1% decline, according to FactSet. That’s the first year-over-year decline in corporate profits since the third quarter of 2012. The bulls like to point out that this is largely because of energy stocks, but omitting oil companies, which are not only widely held but also a huge driver of U.S. jobs, is to ignore the reality of the stock market in 2015. As wealth manager and blogger Josh Brown recently wrote about the energy sector” “If we took Jar-Jar Binks out of ‘Star Wars: The Phantom Menace’ and edited out all the stuff with the six-year-old kid, it’s a decent movie. But we can’t.”
Market breadth is miserable: The share of NYSE stocks trading above their 200-day moving average has slumped to only 40%, down from a peak above 80% during the go-go days of early 2013, when the market rallied 30%-plus on the calendar year. It’s also considerably less than 2015’s peak of about 60% stocks above their 200-day moving average. Some big companies are still propping up the market on big outperformance, including Amazon AMZN, -3.22% and Netflix NFLX, -7.84% but by and large, most stocks are a disappointment.
Liquidity has dried up: Some bulls may say the declines aren’t representative of a sentiment shift, as volume is low in August. But liquidity has been an issue all year as investors sit on their hands in advance of a move from the Federal Reserve. In fact, a July report on MarketWatch showed that volume is considerably less than half its financial-crisis peak after steady declines. Yes, some of that is a decline in robot trading and some of it is a move away from individual stocks and into instruments like ETFs. But don’t discount the fact that investors are increasingly mistrustful of this bull market, and that many see no good reason to be buyers of anything right now.
Flight to safety: Have you noticed buyers have been looking for “risk-off” trades? Fund-flow data from Lipper showed a more than $2 billion drain on domestic equity last week even before this mayhem hit. At the same time, almost $5.4 billion went to money market funds — that is, cash — as investors headed for the hills. You can expect data to surely show a similar tally when the numbers are crunched for this week. At the same time, gold is up roughly 8% from lows about a month ago.
It all adds up to one big mess for investors, with not much room for optimism.
So what’s the silver lining?
Well, the “good” news is that even the bears admit this is not a 2008-like crash in the making. Take Tom McClellan, who all but called this downturn to the day. In a recent MarketWatch interview, he said his models foresee a sustained decline but certainly not one of crisis-era proportions.
It’s also worth noting that the market has gotten much choppier, but also more selective. After years of high correlation and stocks moving in lockstep, there is finally an opportunity for stock pickers to prove their mettle. It’s risky, to be sure, but those overweight in Netflix and Amazon this year are sitting pretty.
And, hey, if you’re one of those long-term, buy-and-hold types, you’re still going to wind up ahead over the next decade or so, regardless of this bumpy patch.
But for those who are investing with short-term time horizons or who don’t have the stomach for more big swings like what we saw on Thursday, it’s going to be a long few months until this correction plays out in full.
I also point out that stocks are currently pretty oversold, a condition out of which a rally can occur at any moment, which is why after decades of painful lessons I do not chase markets. This is not a low-risk time to try speculating against Mr. Market.
This time will be an interesting experiment for me. Fifteen years ago (early 2000) I was using an inverse index leveraged mutual fund to bet against the NASDAQ. It was clearly in an exponential blow off move and every time it signaled that the top might have occurred I plowed in, only to have the moon-shot resume and run me over like a locomotive.
By early March 2000 I gave up, losing a very noticeable amount of money and simply capitulating. The Nasdaq topped two weeks later and subsequently fell 80% (that’s EIGHT ZERO, for those who think the worst that can happen now is that stocks just fall back 50% like in 2007-9 and then go up 400% afterward.)
Because I capitulated in total exhaustion, and lacked some of the tools I now use, I never found a “safe” entry on the short side during that entire 80% collapse.
This time, to the tiny extent that I’m willing to play, I intend to see if my “new” tools (they’re just tried and true, old-school technical signals like slow stochastics, MACD and Exponential Moving Averages (EMA’s)) help me find a larger entry.
Right now I am riding the downtrend with what I started with. I’m doing so without a net (no stops) which is risky—Mr. Market could absolutely put on a massive rally to crush the bears here—but as long as the weekly EMA’s don’t turn back up I’m looking for more shorter-term signals of “high” when a rally finally materializes (today, Monday, who knows?)
The trend really is your friend. EMA’s reveal the trend. With the DJIA and a host of other indices in weekly downtrends, I’m willing to give the benefit of the doubt to “the top is in.”
The problem is that I absolutely expect “the” decline (whether this is it or not) to be 1) as one-directional as was the preceding rally, and 2) declines are MUCH steeper than the rallies that preceded them. It would not surprise me to discover that even with “better tools,” I cannot find a safe place to increase my bet on the downside.
No one knows the future. Do not be surprised, however, that the stopped clock bears who have called “the” top fifteen times these past 6 years are finally right this time, and that a year from now things look a lot more chaotic than in Spring of 2009. Sooner or later they’ll be right. Trading solely on their ability to confirm your biases is, however, a guaranteed way to lose money.
For those expecting a crash, if one is to occur it (obviously) can be set up either:
1. The usual way, which is we drop a bit more, have a rip-roaring rally and that rally fails by the 2nd week of September without the SPX or NASDAQ making a new high.
2. The unusual way, where markets stair-step down in a sedate, even leisurely fashion amidst mainstream news complacency, and suddenly begin to plunge in larger waterfalls.
Even when Mr. Market serves up what you expect, he often does so in a way you didn’t expect.
If scenario #1 occurs, if the rally fails I strongly suspect that everyone will try to hit the exits all at once. There are an awful lot of highly leveraged bets out there.
Oh, and crashes occur despite deeply oversold conditions. Prices drop like the Energizer Bunny, so once you see that in play, even putting in protective stops to insure you avoid getting screwed by a V-shaped rally becomes exceedingly difficult.
I doubled my capital-at-risk in 2008, and got the heck out of it in early December. A work colleague learned of what I was doing and tried to emulate me, but when I closed my position he was certain that the markets had much farther to fall.
He lost all of his paper profits and then some. He also subsequently went long silver when it was above $40.
Whew!
I was afraid “too much bearishness” was showing up.
Jeff Reeve’s column copied above is such a relief. An absolutely certain backdrop for any major decline is for articles to show up saying, “Yes, a decline is baked in, but no worries, don’t capitulate, it won’t be that big and afterward stocks will not only recover but zoom to new highs.”
Frankly, I could have written this guys column three years ago.
I have stated FOR THE RECORD a dozen times that in order to have a 95-98% catastrophe in any investment market, investors have to be taught by recent experience to NOT CAPITULATE.
2000-2003.
2007-2009.
Followed by a one-way moon shot higher 2009-now.
Anyone care to suggest that Mr. Market could have set up people for an aforementioned cataclysm any better?
BTW, Reeves is wrong.
The markets are not responding to a decrease in liquidity.
The liquidity decrease is a symptom, not a cause.
The cause is that there is NO SOLVENCY left.
When people (decision-makers) have to borrow in order to buy, because all their capital is already committed to backing prior debts they acquired, there is no solvency.
The rout in China is being driven by what amounts to the largest margin call in history. China, however extreme, is hardly alone in this. Central bank credit creation, the largest in recorded history, simply powered markets higher on leverage alone (AKA “margin.”)
The US markets are just as vulnerable to a margin call, perhaps every bit as much because of the arrogance and complacency people have for “Bastion America” where resides the “best-of-the-best-of-the-best-of-the-best.” SIR!
As of today’s (so far) low, the SPX is down 5.5% in the last MONTH!
For the Nasdaq 100 the decline is 7.1% IN.ONE.MONTH.
The Dow Jones 30 Industrial Average (DJIA) is down 8.4% since its May top (so far.)
The Dow Transports’ low today (not the lowest they’ve been recently) is down 13.9% from its high LAST NOVEMBER.
1. This isn’t a bear market (yet.)
2. Anyone who claims that there is nothing to see about this is either stupid or lying.
This looks like what Elliott Wave adherents call a “3rd wave” decline. I believe it will go significantly lower before a material bounce.
What I believe, however, is meaningless. Que sera, sera.
The chart below doesn’t update weekly information intra-day, but zooming in and adding a little guesswork suggests that unless the Bulls grab the tape and muscle today’s decline into at least a draw (if not a small rally), the S&P500 (SPX) will be established in a weekly downtrend at the end of today.
It’s a long time until 3PM central, and just because Mr. Market says “downtrend” in one breath doesn’t mean he announces “uptrend, I fooled you!” in the next, but as long as the SPX stays below about 2080 (about where I figure the 13 week and 26 week EMAs are about to cross) the intermediate trend (one indicating the direction for the next half a year or more) is flashing “down.”
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=spx&uf=0&type=2&size=2&sid=3377&style=320&freq=2&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=12&rand=1472716106&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=553&width=579&mocktick=1[/img]
On a weekly basis this market isn’t even oversold, and the weekly MACD suggests a whole lot more downside potential. The other side of the coin is that the Williams %R is at an oversold extreme.
If this was like reading a map, everyone would be so rich we’d need space travel to find all the beachfront mansions to satisfy the demand.
I also think that Mr. Market could rationalize floating higher on the “Power of the Omnipotent Fed” narrative until one day everyone realized that the Fed was out of ammo.
The Fed is Out.Of.Ammo. What are they going to do to muscle the tape? Inform everyone that they are going to ease by not tightening? That would be good for, what? A ten minute rally?
China’s market is down 13% since Tuesday. That would be a 2,200 move on the Dow.
Don’t think it could happen here?
The 55% plunge from 2008 to its March 2009 low occurred mostly on 11 trading days.
My current “system” of trading uses Heiken Ashi charting (a nice way to visualize price movement) and a level I don’t trade (weekly) is screaming sell.
The DJIA has been telling this story for almost an entire month.
I don’t know what will happen, but it wouldn’t shock me at all if the DJIA drops another 1000 points in a fairly short time before it rallies with much conviction. That’s only about half again the decline from May to today, and would put the DJIA near the spike low of Oct 15, 2014.
How cool would it be if the Dow dropped to that in the next week or two, then rallied straight up (just like it did a year ago) only to see the rally stall and fail after 1000 points (about where we are now), right about Sept. 14th?
Boom is spelled with capital B. In this case, I use the term in its “onomatopoeia” meaning.
LET IT BURN!!!!
@Admin,
The decline in 2008 was centered during the last two weeks of Sept and first week of Oct, as I recall. Everyone (bears and bulls alike) kept expecting a V-shaped rally to emerge at any time.
The Fed was FURIOUSLY “easing” throughout that period with ZERO effect.
It was a thing to behold.
Without looking at the charts, from memory I recall that stocks stopped declining one day, Nov was a little up, Dec was flat, and (I think) tech stocks bottomed in Jan about the same level as they hit in Oct but the blue chips worked a little lower into March. The fact that the nasdaq didn’t also do this was one of many indicators that the larger downtrend had run its course and capitulation was in place.
EVERYONE expected the decline to continue. Prechter did not, and my work independently confirmed this. Sadly, my ZA bias prevented me from acting on the evidence of my own analysis. I sat out the entire past 6 year rally, because in 2010, 2011 and 2012 there was ample reason to think stocks would roll over, and when they didn’t, the rally went bat-shit-crazy, becoming overbought and staying overbought to levels I’ve never seen (even in examining ancient history) so there were no safe entries on the long side. I was also too busy to day-trade, not that day-trading has ever worked all that well for me.
Cliff’s Notes: Octobers are not usually all bad. Lots of hard declines finish in Octobers, but are often followed by V-shaped rallies so by the end of October things don’t look so bad.
Oh, and if someone is crazy enough to trade leveraged instruments (like the one I’m trying to us, like an idiot) and is not already HIGHLY experienced, all the money is made in the “3rd wave.” Leveraged instruments (inverse ETF’s and Put Options) do not make new highs in bear markets in the final leg down to capitulation. (This is another way to tell you’re in a 5th and final leg down.)
Whew. Short term charts keep suggesting “a rally is imminent” but when price gets to the 5-minute EMA’s it just keeps going and going and going.
It IS Friday, so don’t be too shocked if, literally at 2:45 PM Central Time, Janet the Fed Charwoman (intentional spelling) issues a press release stating “something” intended to goose markets higher.
This happened in 1998 and trapped a bunch of people I knew of who were short S&P500 futures in horrible losses, some of whom probably lost homes and businesses to the margin calls. It was NAKED market manipulation. Lesson: Never be highly leveraged when there’s any real chance that the market has reached an inflection point.
Of course, that was when Mr. Market already wanted to rally. I don’t think Mr. Market is ready to rally yet, I think he’s diabolically engaged in the second part of his demonic plan, where the first part was to get vast numbers of people to think they were rich and getting richer by owning stock mutual funds. The second half is to pull the rug out from under them while pushing them into an open elevator shaft.
The week before the 1987 crash was volatile and ended poorly on the Friday before Black Monday.
If the market finishes near its lows today, watch out for Monday.
Margin debt is at all-time highs. There will be margin calls after this terrible week. Margin players will have to sell stocks on Monday to make their margin calls. That results in lower prices.
The Dow & S&P have both broken below their 50 day and 200 day moving averages. All the Wall Street quants use the same HFT computer programs. They all give a sell signal at the same time.
Will the corporate CEO lemmings keep buying back their stock as the losses mount? Not a chance.
1. Stock buybacks coincide with tops, so I think that’s no longer relevant.
2. SPX just printed below 2000. “Oh NO, Mr. Bill!”
3. Oh do I wish I’d have loaded up a bit more on SDS when it was $20.30-$20.50.
(headslap)
Your point on the margin debt is absolutely spot-on.
There have to be a whole lot of people with sweat-soaked armpits now.
BTW, while no one knows for sure what’s coming, one thing is clear:
Declines, even sharp ones like this, that begin from a point where people are extremely optimistic and complacent usually do not turn out to be small events that are quickly reverse and forgotten.
During the past year or two many measures of market sentiment have hit rare extremes of complacency while (per Jim Q.’s observation) borrowing to play speculator simultaneously hit rare extremes.
Actual picture of 30 year old Wall Street traders who have never experienced a bear market
Beating my dead horse here:
Another thing: What is the “investment asset” subject to the largest synthetic short position in human history?
Background: When someone is “short” a stock (example: IBM) they borrow the shares and sell them, banking the money. The MUST replace the shares of stock back to the owner from whom they borrowed them, so in order to complete the transaction they MUST purchase them back (unless the firm goes out of business and the stock is cancelled.)
Answer: The US Dollar.
Estimates of US Dollar denominated debt vary from $59 trillion to $1.25 quadrillion, and every bit of that is “borrowed dollars,” borrowed FROM SOMEONE (the owner of the debt security or IOU.) Debtors MUST obtain those dollars they are obligated to return, and for 30 years the normal way was to simply roll over the debt and BORROW MORE.
This is the largest synthetic short position on anything, anywhere, EVER.
You might imagine that a “bank bail-in” is simply a margin call on the bank’s lending, led by the bank’s creditors who have better standing than the bank depositors.
I plan to sit on my SDS here (trading in and out has been the bane of my existence) but this chart suggests that the decline might be searching for a temporary low (at least.)
This is a probabilistic statement. There’s (total guess) 60% chance of a rally soon, leaving 10% chance of sideways and 30% the waterfall continues. I would NEVER consider opening or adding to a short position in light of the current technical condition. Better to not make money than to lose money.
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=spx&uf=0&type=2&size=2&sid=3377&style=320&freq=6&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=2&rand=1240596657&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=553&width=579&mocktick=1[/img]
Janet is on the bat phone to Dudley at the NY Fed:
BUY, BUY, BUY!!!!!!
Let’s see if the Plunge Protection Team comes to the rescue once again.
Cue the fat finger.
Admin,
FXP, that was it! Looks like you sold at the right time. It has gone up recently, but it would have gone nowhere if you’d held it all that time.
DC says:
“Estimates of US Dollar denominated debt vary from $59 trillion to $1.25 quadrillion, and every bit of that is “borrowed dollars,” borrowed FROM SOMEONE (the owner of the debt security or IOU.) Debtors MUST obtain those dollars they are obligated to return, and for 30 years the normal way was to simply roll over the debt and BORROW MORE.
This is the largest synthetic short position on anything, anywhere, EVER.”
So, how does that play out? What precedents are there are smaller scales?
Smaller scale is simply a stock short.
The closest we ever saw to this (an anthill vs. Mt Everest) was the credit bulge in the 1920’s.
It led to
– 90% fall in stocks, and (don’t believe the indices, because some companies simply disappeared) investors probably didn’t break even (if ever) until the 1960’s (which was a top, too.)
A crushing deflationary depression between 1930-32.
I don’t know how this one will play out. Logic dictates it will be the MOTHER of ALL deflationary crises as people put EVERYTHING up for sale to generate cash, while that very act crushes the price for everything.
As I’ve said before, the goal is to own what everyone else hates, right before they decide they LOVE it. This creates a paradox, because “ownership” of cash means two different things: a bank balance or folding money in your pocket. The former is safe from small time thieves, but vulnerable to big time thieves. The latter is a crime magnet, bulky, an invitation to some creative cop trying a civil asset forfeiture and gets you on all sorts of databases (and gets you convicted of the made-up crime of structuring if you try to avoid getting on those databases.)
There exists today no “vehicle” by which you can safely just “hold cash” in whatever form you choose. All possibilities have their shortcoming. One possible way is to obtain T-bills through a broker and have them rolled over every 13 weeks. The US government will abandon EVERYTHING before it abandons its managers’ ability to borrow-and-spend, so the last domino to fall will be T-bills (if they ever fall….who knows?)
There’s a company called SafeWealth that offers you the option to store US dollar banknote cash in a Swiss depository. It’s attractive until you realize that the minimum is $500,000 and that fees of a couple grand a year are part of it. For someone with a huge net worth and a huge monthly income, and who likes international travel, I guess it would be a great idea. For the rest of us humble folk, we’re still on our own.
I think the US banking system will hang in there for a while, so perhaps this is all Doom Porn. Your mileage may vary.
Why The Market Is Crashing Into The Close: JPM Explains
Submitted by Tyler Durden on 08/21/2015 15:24 -0400
Curious why someone just pulled a trapdoor from under the market? JPM’s Marko Kolanovic, head of quant strategies explains.
Impact of option hedging on the S&P 500 into the close
S&P 500 put option gamma exceeded call option gamma by more than $50bn prior to the option expiry this morning. This was the highest S&P 500 put gamma imbalance ever. The impact of this imbalance was evident in the intraday market momentum developed from 3:30PM to the close yesterday. The Figure below left show yesterday’s intraday price action for the S&P 500. We note that the market selloff accelerated into the close, with a 60bp fall in the last 30 minutes. Consistent with theory on the impact of gamma hedging (see our report Impact of Derivatives Hedging), this temporary market impact reversed near the market open today (57bps recovery in the first 30 minutes, right Figure).
Despite the fact that S&P 500 options expired this morning, put gamma is still higher than call gamma by ~$38bn, which is a large imbalance (on account of other S&P 500 option maturities and SPY options expiring at the close). This can lead to further selling pressure into the close today.
Given that the market is already down ~2%, we expect the market selloff to accelerate after 3:30PM into the close with peak hedging pressure ~3:45PM. The magnitude of the negative price impact could be ~30-60bps in the absence of any other fundamental buying or selling pressure into the close.
Dow on track for biggest two-day point drop since the financial crisis
By Tomi Kilgore
Published: Aug 21, 2015 3:30 p.m. ET
The Dow Jones Industrial Average DJIA, -2.67% is shedding 449 points in afternoon trade Friday, extending the 358.04-point selloff on Thursday, as investors grappled with concerns over global economic growth. That puts the blue-chip barometer on track to suffer the biggest two-day point drop (807.07 points) since Nov. 19 and Nov. 20 of 2008, in the midst of the financial crisis, when the Dow tumbled 872.46 points in two days. Back then, the Dow rocketed 892.10 points over the next two sessions.
Dow down 2.5%
Nasdaq down 3.5%
It’s a crash. Perhaps a mini-crash. I’m betting it’s the first of several.
It’s amusing to read the comments on Money.cnn.com. The bulls are beyond arrogant. All their comments amount to, “bears are stupid.”
Look at Faceplant (FB), Googl, NFLX, BABA, AMZN, they’re getting KILLED, I mean, taken out behind the barn and shot point-blank.
The margin calls that will be going out must be epic!
Will the Dow (SPX, etc.) all put in major rallies Monday?
Absolutely possible. My daily slow stochastic is now short-term oversold. But if this is something bigger, that same stochastic could be indicating “meltdown dead ahead.”
There’s really no way to know. Pull up a chair, pop some popcorn and watch the spectacle. That’s largely all I’m doing. I put a small bet on the roulette wheel and so far they’ve come back winners. I’m inclined to let the bet ride, knowing it could all just go away with one spin, but this is a pyramiding game of chance and letting the bet ride is sometimes the right thing to do.
Almost 900 points in two days. Months of gains evaporated in a matter of hours.
Months of gains?
The first time (in this 6 year rally) the SPX hit 1971 (today’s close) was the week of JULY 4th, 2014.
The stock blue chips have now gone NOWHERE for nearly 14 months. That’s what I call “distribution.”
I repeat, neither I nor anyone else knows the future. I am inclined to expect, however, that this is part of the largest triple-top in 300 years (there are several other examples of triple tops discussed by Prechter in his firm’s analytical work; I’m parroting him.)
You’re ALL wrong as to the cause.
Just a few days ago Admin analyzed the truth about the economy, specifically, retail stores.
The dickfuks who work on Wall Street just read the article a couple days ago.
Then ….. KaBoom!!!!
Jeebus Effing whatever …. don’t you people see the connection??
quote:
By Tomi Kilgore
Published: Aug 21, 2015 3:30 p.m. ET
The Dow Jones Industrial Average DJIA, -2.67% is shedding 449 points in afternoon trade Friday, extending the 358.04-point selloff on Thursday, as investors grappled with concerns over global economic growth. That puts the blue-chip barometer on track to suffer the biggest two-day point drop (807.07 points) since Nov. 19 and Nov. 20 of 2008, in the midst of the financial crisis, when the Dow tumbled 872.46 points in two days. Back then, the Dow rocketed 892.10 points over the next two sessions.
______________________________________
This Tomi is just FULL of shit, isn’t she.
Here’s the context of the two days in 2008 she mentions:
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=djia&uf=0&type=2&size=3&sid=1643&style=320&freq=1&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&startdate=3/1/2008&enddate=6/1/2009&rand=1108401326&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=820&width=720&mocktick=1[/img]
Notice any important differences from the last two days? Like the fact that the DJIA is still near a crazy high, that it’s been in distribution for year, vs back in 2008 when those two days were near the end of a clearly unconfirmed (by MACD) new low after a series of crushing declines?
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=djia&uf=0&type=2&size=3&sid=1643&style=320&freq=1&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&startdate=5/1/2014&enddate=8/21/2015&rand=280954013&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=820&width=720&mocktick=1[/img]
Mainstream market commentators are truly assholes. Either that or they lack the intelligence to simply visit a FREE website and key in a couple dates.
I’ll try again: the weekly reveals more:
The entire decline of 2007-2009 in the Dow, including the two days she mentions that we obviously after a huge decline.
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=djia&uf=0&type=2&size=3&sid=1643&style=320&freq=2&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&startdate=1/31/2007&enddate=3/31/2009&rand=912114054&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=820&width=720&mocktick=1
and the last two years now:
[img]http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=djia&x=26&y=14&time=100&startdate=1%2F31%2F2007&enddate=3%2F31%2F2009&freq=2&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=5&maval=13&uf=0&lf=4&lf2=32&lf3=256&type=2&style=320&size=3&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11[/img]
It is painfully obvious that a two day crushing decline after a very long period of prior declines, in an environment of huge oversold conditions, but with clear evidence of non-confirmations, was a fertile place for a huge ensuing rally.
This is NOT what we have now. For some market “person” to insinuate that it is is grossly misleading.
I may not be the smartest guy in town, nor am I continually “right” on the markets, far from it. But at least I don’t lie outright, or represent my analysis as somehow authoritative.
Screw it. here’s the second link
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=djia&uf=0&type=2&size=3&sid=1643&style=320&freq=2&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=9&rand=1380044459&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=820&width=720&mocktick=1