Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Natural Gas Sets Up Bottom Pattern - 26th June 19
Has Gold Price Broken Out Or Not? Technicals And Fundamentals - 26th June 19
Stocks and XAU Gold Miners Next Bull and Bear Markets are Now Set Up - 26th June 19
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

The Most-Anticipated Stock Market Crash

Stock-Markets / Financial Crash Aug 06, 2014 - 07:40 PM GMT

By: John_Rubino

Stock-Markets

US equities have been going up for so long that most investors — especially those who were only recently enticed into the casino by the apparently easy money on offer — have trouble remembering the last time it was possible to lose big in stocks.

Along the way, a whole slew of indices and indicators have drifted into their historical danger zones, prompting many in the financial media to address the subject, either by making explicit predictions (YouTube is now full of recent videos with pundits hammering the “get out while you can” theme) or considering the issue from unusual angles. Here’s a good example of the latter from MarketWatch’s L.A. Little:


How you’ll know if it’s time for a market crash

Last week, U.S. equities dropped 2% to 3%, depending on what index you monitor. That had the financial columns full of crash warnings about the coming plunge. Now to be fair, we have seen these headlines for a while now, so it’s not like they just suddenly began to appear, but the fact that there actually was some selling added a little credence to the crash worries. Sure there were a few voices of reason, but for the most part, the coming declines were all but set in stone as far as most commentators were concerned. But is that really the case? Is it finally time for a crash?

A year ago, almost to the day, I penned a piece here on MarketWatch that outlined the technical structure that precedes a crash. You can read that original column here and the follow-up column as well. Back then, the crash chorus was rising as well. The most important points of the columns were:

1. Market crashes have a technical structure that forms prior to the crash

2. Significant market declines (not crashes) also have the same exact structure

3. The technical structure is a necessary but not a sufficient condition

That last point is a salient one. What it says is that given historical data, large declines and crashes have a structure we can identify, but just because the structure is present does not necessarily mean those declines will be realized.

What is the structure? It is the break of multiple swing points on multiple timeframes across the major indexes and, in case you are wondering, we don’t have that yet . In fact, we haven’t seen that since that piece was penned a year ago. We came close a couple of times — once late last year and again earlier this year, but so far, nothing yet. Remember, even when we do get the breaks and the trend transitions that they imply, it still doesn’t follow that we will necessarily get a large decline or crash — it just raises the possibility and the resultant odds.

So what would it take to get a larger decline at this juncture? If you take the weakest index, the Russell 2000, it would need to decline another 3.7%, which is equal to another decline of equal size to last week’s push lower. That would bring it to the brink.

The same is true of the S&P 500 as a decline of another 3.5% from Monday’s closing levels would also bring it to breakdown levels

The conclusion of the MarketWatch analysis is that US equities are one really bad day (or another week like last week) from falling off of the table. Without pretending to know the future, this seems technically reasonable, since big trends tend to continue once they get going, and psychologically consistent, since so many people are waiting for such an occurrence and are presumably primed to sell and/or short this market in a big way.

In any event, a stock market correction isn’t much of a story, since there have been dozens of them in the average adult’s lifetime. Way more interesting are 1) the reasons for the long bull market and 2) the likely response of the world’s governments to a, say, 20% decline in the average stock. In a nutshell:

The S&P 500 has gone an amazing 33 months without a 10% correction because the world’s central banks have pushed interest rates down to levels that make equities the only game in town. Major corporations now find it more profitable to borrow cheap money and buy back their stock than to actually invest in their businesses. This year they’ll devote nearly a trillion dollars to this “strategy.”

Central banks, meanwhile, are beginning to invest in equities directly, something they’ve never before done on this scale. In both cases, the buyers are not bothering to analyze their purchases, they’re just steadily accumulating. This consistent inflow of funds gives the market an upward bias and stops minor corrections before they start.

As for how the word’s governments will react to a serious equities bear market, that’s easy. They’ll do what they’ve done for the past 30 years: pump more newly-created currency into the financial markets. What was once known as the “Greenspan put” is now a global guarantee of paper profits in risky assets. The European Central Bank, People’s Bank of China and Bank of Japan will all join the Fed in trying to stop a correction from turning into something worse. And in the process they’ll lead speculators to even more bizarre flights of fancy in whatever sector is hot next time around.

This will go on until the ammo stops working. That is, when fiat currencies stop functioning as money and the world’s central banks lose the ability to fool us by manipulating what used to be free markets.

By John Rubino

dollarcollapse.com

Copyright 2014 © John Rubino - All Rights Reserved

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 losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 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

6 Critical Money Making Rules