Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Is the Tech Stock Market Bloodbath is Finally Here? - 28th Jun 17
Crude Oil Sinks 20%: Why "Oversupply" Isn't the Half of It - 28th Jun 17
Important Money Management Tips For Teenagers - 28th Jun 17
The Coming Battery Bonanza - 28th Jun 17
Overlooked Stock Investments To Keep An Eye On in 2017 - 27th Jun 17
The Federal Reserve And Drug Addiction – A Prediction - 27th Jun 17
Charts Show Why Emerging Markets Will Be an Essential Part of Your Portfolio Going Forward - 27th Jun 17
Former Lehman Brothers Trader: I Bet My Reputation That Stocks Bubble Will Pop In A Year - 27th Jun 17
US Bonds and Related Market Indicators - 27th Jun 17
Stocks At Record Highs: Market Sentiment Still Bullish - 27th Jun 17
Stock Market Running Out of Steam - 27th Jun 17
Gold Back With A Vengeance As Bitcoin Bubble Bursts - 26th Jun 17
Crude Oil Trade & Nasdaq QQQ Update - 26th Jun 17
Gold and Silver Ongoing Consolidation May End Soon - 25th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 25th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

Stock Market Crash What is Going On?

Stock-Markets / Financial Crash May 08, 2010 - 05:51 AM GMT

By: Robert_McHugh_PhD

Stock-Markets

Best Financial Markets Analysis ArticleWhere do I even begin. Thursday, May 6th, saw the single largest daily decline in the history of the U.S. Stock Market. But, even more amazing is that most of it occurred in a matter of 10 minutes, between 2:40 and 2:50 pm EST. During that ten minute period, the Industrials fell approximately 600 points. It was a scary drop, an all-out panic attack, a stock market crash free-fall where bids were absent, and selling pressure was powerful. At the bottom, the Industrials had fallen 1,010 points Thursday. Then deep pockets intervention appeared and bought markets hard, stopping the dive, and driving prices higher.


The previous greatest single day decline was 780.87 points on October 15th, 2008, inside a multi-week stock market crash. Even though there was a 600 point bounce into the close Thursday, the Industrials and stock market still ended the day down substantially. The Industrials closed the day down 347.80 points, or 3.2 percent, the largest closing drop since February 2009, over a year ago. The selling continued Friday, the Industrials falling another 140 points after being down over 200 intraday. The Industrials, S&P 500, and NDX are now all down for the year 2010. If you missed the rally from February, you didn't miss anything.

There was a lot of chatter from the cheerleaders in the mainstream financial media suggesting that the decline was a computer glitch of some sort, a mistake by a large seller, a fat finger, or a bunch of other nonsense reasons. The truth is, Thursday saw all out selling panic, the fourth 90 percent down day in two weeks, a situation we also saw before the stock market crash of September 2008 through November 2008. We mentioned this warning in Tuesday's newsletter to subscribers, before Thursday's debacle. Thursday's drop was predicted by the stock patterns, and came a day after our DP/SP indicator generated a sell signal, and occurred with our key trend-finder indicator on a sell signal. No surprise, the technical analysis we have been showing in these pages warned of a coming sharp decline. Further, the stock market had strong downside momentum before the 10 minute collapse late Thursday. The Industrials were already down over 300 points before the 2:40 to 2:50 pm EST collapse. Panic selling was already starting before any so-called computer selling technology issues kicked in.

Both the NYSE and NASDAQ reported that there were no technology issues from the exchanges that affected the plunge. That said, both the NYSE and NASDAQ decided to cancel trades that moved 60 percent or more above or below the last printed prices at 2:40 pm EST. There was clearly some serious bizarre trading in many stocks, as sell orders were generated with little or no bids, allowing some stocks with illiquid market-making to fall dramatically. The market became extremely inefficient. This demonstrates the fragility of markets at this time, that something like this could happen, and should have a destructive impact on confidence in markets, especially from retail investors, who are feeling more and more alienated from the volatile nature of markets, and the corruption on Wall Street.

As the week progressed, fears of Europe's economic woes spread like a contagion. Riots continued in the streets of Greece. It is becoming obvious that sovereign insolvency is a growing possibility in many nations, as deficit to Gross Domestic Product ratios, and debt to GDP ratios threaten the foundation of western economies.

The internals of the market worsened this week. New 52 Week Lows rose substantially above the 85 we have been warning about as a barometer for a potential crash. They came in Thursday at 218. We did not get a Hindenburg Omen observation Thursday because the number of New Highs were insufficient. We need both New Highs and New Lows to be more than 2.2 percent of total NYSE issues traded, which is about 70. We came close to getting one Thursday, as New Highs were 52. We will report any news of a Hindenburg Omen to subscribers in our Daily Market reports at www.technicalindicatorindex.com

Thursday's decline didn't even put a dent in the overbought level of the weekly Full Stochastics, although they are now solidly on a sell signal. This suggests we are going lower over coming weeks.

The Wilshire 5000 Index, which is really about 6,000 stocks, is essentially the entire U.S. listed stock market. This index tells us the U.S. stock market has lost $1.0 trillion of value over the past two weeks. All the gains over the past 5 months have been wiped out in the past two weeks. It took just two weeks to destroy months of gains. The big picture patterns have been warning in spades that something is very wrong with all major stock markets and economies globally. We are now starting to see the details and news unfurl which technical analysis showed the markets knew was coming. And it is not over. More danger lies ahead. That does not mean a bounce cannot occur from time to time, but patterns are warning that there are serious risks to economies and global stock markets, dangers that could wipe out 80 percent of more of the value of stocks over the next several years.

Which brings us to Gold. Gold is inches away from setting an all-time new high. We have a substantial position in Gold in our conservative portfolio. What we are now seeing, which is fascinating, is Gold is beginning to replace fiat currencies around the globe as the world's reserve currency. Euros are being sold by the busload in exchange for Gold. We have been tracking patterns in Gold for several years which suggested something like this was going to happen. We also have a concentration of U.S. Treasuries in our conservative portfolio. Well, Treasuries are doing very well as this crisis continues to unfold. U.S. Bonds rose 3 points Thursday. The yield curve is flattening again, which is often a sign of a coming economic slowdown. European countries are going to have to raise taxes and cut spending, a plan of austerity which will reduce aggregate demand globally, and exacerbate a worldwide economic slowdown.

It is highly likely that Catastrophic Supercycle degree wave (C ) down has started.

How are our indicators doing? Well, since the PPI generated a sell signal on April 16th, the Industrials fell 1,149 points, or 10.4 percent. Sell signals in the 14 Day and 30 Day Stochastics have been followed by declines of 9.7 and 10.2 percent. The very next day after our Demand Power and Supply Pressure Indicator triggered an Enter Short signal, we saw Thursday's intraday stock market crash. Recent sell signals in our NDX key trend-finder indicators have been followed by 12 percent declines in the NDX. The recent sell in the RUT's PPI on April 30th has seen a subsequent 11 percent decline.

Check out our New May Specials, good through Sunday, May 9th, 2010, including a fabulous 13 month offering, only $259, a little over $21 a month, or 2 years for only $459 at www.technicalindicatorindex.com. We also offer a FREE 30 Day Trial Subscription, by clicking on the FREE Trial Button at the upper right of our home page at www.technicalindicatorindex.com

“Jesus said to them, “I am the bread of life; he who comes to Me
  shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
     For this is the will of My Father, that everyone who beholds
  the Son and believes in Him, may have eternal life;
  and I Myself will raise him up on the last day.”
                                
John 6: 35, 38, 40

by Robert McHugh, Ph.D.  
technicalindicatorindex.com

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com.

The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2008, Main Line Investors, Inc. All Rights Reserved.

Robert McHugh, Ph.D Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife