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Why 95% of Traders Fail

Stock Market Crash Nightmare!

Stock-Markets / Financial Crash Jul 21, 2014 - 11:03 AM GMT

By: Nadeem_Walayat

Stock-Markets

My yesterdays article painted a picture of a stock market that has failed to correct the consequences of which were for sowing the seeds for a more violent future correction that could even risk triggering an end to the 5.5 year stocks bull market that began in March 2009 -


20 Jul 2014 - Stock Market in DANGER of Strangling the Bears to Death

STOCK MARKET BLOW OFF DANGER

Whilst I DO NOT consider the stocks bull market to be over. However for me the most dangerous thing the stock market can do now would be to start rallying strongly and thus risk entering the BLOW OFF PHASE when investors lose all sense of of reality and send stock prices soaring by 20-30% into the stratosphere that probably COULD terminate this 5+ year stocks bull market.

What I Am Doing

I have to recognise the increasing risks and will be further reducing by exposure to the stock market by 1/3rd to approx 15% of assets in favour of UK housing.

Stock Market Crash Nightmare

The last time I was finding myself having sleepless nights in respect of my exposure to the stock market was a couple of years ago when I had about 40% of my assets invested in the stock market which I subsequently reduced to about 15% over the following 6 months as I cycled out of stocks, cash and bonds and into UK housing. Today I find myself literally waking up to a stock market crash nightmare, where on waking my immediate awareness was that the Dow HAD started to crash by having closed its first waterfall day down by some 3,000 points to stand at just above 14,000, from its previous close of 17,100, which just so happens to be where the Dow closed last Friday!

From what I can recall the timing was summer, and the price matched the present! so appeared imminent and the day was apparently Thursday. Yes it was just a dream, well a nightmare and whilst yesterday I had already indicated that I was seeking to cut my stock market exposure by approx 1/3rd to around 15% due to the dangers of failing to correct, now I am seeking to hasten the process of significantly lightening my portfolio to BELOW 15% of assets.

This further illustrates the point of why what you hear and watch on the broadcast news by journalists and salesmen is worthless rear view mirror looking BS because they do NOT LIVE and BREATH the MARKETS! So never commit what needs to be committed to be in SYNCH with the market which is why most miss the WHOLE Bull and Bear markets. And if nothing else I get to find out if dreams / nightmares are worth paying any attention to or not.

The bottom line is that when the end does come, I don't want to be sat holding a mountain of fast depreciating stock certificates! Instead I want to be ready and able to BUY! And if I am lucky I may even be able to ride most of the crash down as I have a number times before (1987 Stock Market Crash - How a Newbie Beat the Great Crash!), though I do consider trading the right side of a crash being at least 50% luck because a stock market crash CANNOT be Forecast because it is a PANIC event. Still my trading eye is now more focused towards the potential of trading another crash, and once more chuckling at the parallysis that tends to grip the mainstream financial press durign such events with gaping open mouths, desperatly clutching at straws to explain what is beyond their level of market awareness.

Your sweet dreams soon analyst.

Source and Comments: http://www.marketoracle.co.uk/Article46535.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2014 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Yuriy
21 Jul 14, 23:08
pile on

looks like a time to pile on a long side for a blow off top ride with a small bet and then reverse for a nice ride down!


zahlen2k
22 Jul 14, 00:05
FTSE

Hi Nadeem

Thanks for the heads up. Was wondering, with the stocks bull market on going for many years now, do you not think its curious that the FTSE still hasnt been able to take out 7000?

I'm looking at the vix, but also long ftse short dow could be an interesting trade even if there isnt a crash.

Also will this affect your previous forecast of gbp/usd to 1.8?

Thanks for your time

Zahir


exotic_007
24 Jul 14, 07:46
Is The Stocks Bull Market Over

hello,

Do you think that dow jones can go to 17500??

It has all the support of the FED and all the necessery liquidity.

Do you think that tops are in and we are really going for a bear period?

Many thanks

Best regards


moniv
24 Jul 14, 16:34
Alternative Exposure to UK Housing Market: Housa Product and similar?

Hi Nadeem

I find your writings very interesting: thank you putting them out there.

I am outside the UK and so have trouble obtaining exposure to the UK property market. I wondered whether you had any views on alternative mechanisms to gain exposure, like the Castle Trust Housa Growth Bond (which pays a multiple of the % rise in a particular UK housing index after 5 years)?

Most interested in your views (perhaps you think the bond misses the point of buying particular areas in the UK)

Kind regards

M


Nadeem_Walayat
24 Jul 14, 22:59
Stocks Bull Market

Hi

My last analysis article made clear where I stand in terms of the bull market in that I DO NOT think that the bull market is over.

My view is that the stock market needs to correct, as it has failed to correct implies a more significant correction is likely.

The risk to the bull market is that it now enters the blow off top.

So in summary we so far have not entered the blow off top stage so the bull market is intact instead a signification correction is likely.

Best

NW


Nadeem_Walayat
24 Jul 14, 23:06
Castle Trust Housa Growth Bond

HI Moniv

Wow % multiple of rise in UK house prices!

The Castle Trust Housa Growth Bond sounds too good to be true and in my experience they usually ARE!

BE VERY CAREFUL! As you may find out that even if UK house prices rise strongly you make NOTHING!

Thoroughly Inspect the small print with a CRITICAL EYE, You want to figure out what the catch is and there usually is one!

In reality, even after including yield it is near impossible for anyone to pay you MORE than an housing market index such as the Halifax.

Best

NW


Nadeem_Walayat
24 Jul 14, 23:08
GBP and FTSE

Hi zahlen2k

I usually only trade the Dow in terms of stock indices.

And invest in individual stocks so the FTSE to me is not that important.

Yes, still expect GBP 1.80 by end of this year.

Best

NW


Parviz
25 Jul 14, 08:06
10 % corrections are extremely rare

Nadeem,

Here's an interesting analysis from Financial Sense, which I have followed closely for many years and which actually has been very close to your own forecasts, so you are both in good company ;-) ..... However, on this point you differ and only time will tell who is right:

Richard Dickson says that in a bull market, 10% corrections are actually quite rare and that the most we can expect is 5 % (in which case if you sell your best stocks they may not correct sufficiently to permit re-entry):

"We've already had two corrections over 10% in this bull market-in 2011 and in 2012. And, historically, when you go back and look at all the bull markets that we've had since 1940…there has never been more than one 10% correction in any one bull market. Now this is based on the Dow-it is based on a closing price. There's never been more than one 10% correction in a bull market since 1940 right up until 2009. Obviously we've had two this time."

On a historical basis, this would imply that the market can keep going higher without seeing a significant correction-but certainly a pullback-assuming you believe the bull market will continue (Note: a "pullback" is usually defined as a 5% move over time from the highs, "correction" as a 10% move, and a "bear market" as 20% or more).

When asked whether he thought the bull market would continue, Dickson replied:

"Oh yeah-no question about it. We are not seeing any signs still of a major top. The July highs in the S&P, the New York Composite, obviously the July high in the Dow Jones, were all confirmed by the advance-decline lines as I pointed out before. You asked me about selling pressure-that really has not shown any kind of a dynamic increase. Historically, we have seen a significant increase in selling pressure at some point prior to the major market top. And there has been none."

I myself am 30 % in cash and 70 % in stocks, just in case, but the case is not very strong. I loaded up with great stocks like Gilead Sciences and don't intend to sell them in the hope of buying them back cheaper.


Nadeem_Walayat
25 Jul 14, 11:11
Stock Market Corrections

10 % corrections are extremely rare ... and then along come two in a row :)

My analysis expects about 7%. The longer the delay the larger the correction.

If I was 70% invested in stocks right now then I would be writing this from an hospital bed.

Best

NW


Parviz
25 Jul 14, 17:43
Why I'm 70 % invested

......... because I went massively long in 2011 and picked some amazing winners that outperformed the indices by wide margins. Only a 20+ % crash would seriously disturb me. I would use a 5-10 % correction to invest the remaining 30 %.

I cannot envisage an inflation-related crash because the main market, the U.S., is in deep financial trouble and the massive wealth gap there has skewed the outlook give the appearance of strong growth. Main Street is suffering and any rise in interest rates will scupper the 'recovery', and after possibly a brief rally of the 10 Year TNote to between 3 - 3.5 % (resulting in your 7 % correction) rates will come crashing down again and the Fed will have to re- re- re- re-QE.

It's a vicious cycle


exotic_007
28 Jul 14, 22:21
stock market corrections

Hello Mr Walayat Nadeem,

This week is very important with economic data (US GDP, FOMC, NFP).

We all know that the FED support the stock market.

Recently, Janet Yellen began to talk about bubles especially in the biotechs and internet.

Do you think that this FOMC will give a selling signal confirmation to avoid a sharp correction later?

Till now, all indices stick to their highs without showing real sell signals.)

Do you think that the correction is near (days, weeks, months?)

Thank you for you answer

Best regards


Nadeem_Walayat
28 Jul 14, 23:15
Stock market correction

Hi

For several weeks I have flagged that a correction is likely imminent, original expectations where for a down swing of about 7%. I have now reduced my stocks portfolio to approx 15% of assets.

Trading wise during the past few weeks has been tough, Short trades with tight stops and quick to move them means small profits and small loses, with little net to show for the effort.

Best

NW


exotic_007
31 Jul 14, 08:09
stock market corrections

Hi Nadeem,

Do you consider that the bearish period is begining to happen?

Well, even with a +4% GDP anounced yesterday, that didn't boost the market (even after FOMC).

Do you think that we can go higher (which is more difficult now)?

thanks a lot.

Best regards


Nadeem_Walayat
31 Jul 14, 10:58
Stock Market Imminent Correction

Hi exotic_007

All of my trades for the past month have been Shorts so I view the correction as IMMINENT, NOW.

GULP its Thursday today!

Nightmares can come true!

Best

NW


exotic_007
01 Aug 14, 13:51
stock market corrections

HI MR WALAYAT,

INDEED DOWNTREND IS CONFIRMED.

YOU HAVE TALKED ABOUT 7% MARKET CORRECTION;

DO YOU THINK WE CAN GO LOWER THAN 16000 FOR THE DOW JONES?

MANY THANKS

BEST REGARDS


despe906
01 Aug 14, 21:17
Song for winners

https://www.youtube.com/watch?v=80eC9cymeo8


moniv
07 Aug 14, 05:01
Thanks for Great Response

Hi Nadeem

Thanks so much for your considered response: really valuable, and very much appreciated.

Kind regards

moniv


exotic_007
13 Aug 14, 10:22
stock market corrections over

Hi nadeem,

Do you think that the correction is over??

many thanks

Best regards


Nadeem_Walayat
14 Aug 14, 18:37
Stock market correction trend

Hi

My original expectations are for a trend to about 16k, so price wise we are not quite there.

Trend wise, we had an impulse wave down, which means the current rally should be a corrective B wave rally ahead of the final swing down i.e. C wave for an ABC.

So probability suggests that the correction is not over and we should at least revisit the recent lows, and most probably break them towards achieving Dow 16k.

My next in-depth analysis will be on US housing after which I will take a more detailed look at the Dow,

Best

NW


exotic_007
18 Aug 14, 08:46
stock market corrections over

Hello Nadeem and thanks a lot for your answers.

Do you think that the dow jones can go higher than 17151 (all time high) before the steep plunge?

Many thanks

Best regards


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