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Trading Lessons

Stock Market Crash Black Wednesday Rally Crushes the Bears

Stock-Markets / Stock Markets 2015 Aug 26, 2015 - 09:17 PM GMT

By: Nadeem_Walayat

Stock-Markets

The mainstream financial press and blogosfear has been full of relentless stories all week painting a picture of doom and gloom. Even the usually buoyant CNBC air heads that usually sit smack middle on the fence, today had turned bearish with expectations at mid US trading today for the days stocks rally to soon run out of steam and reverse to a down close much as the Dow did yesterday. Instead what did the stock market do? It did CRASH, but it was to the UPSIDE! For if falls of 3.5% have been reported on in the press as a CRASH with headlines of Black Monday, then an greater upwards daily move of 619 points, 3.95% should surely be reported upon as a stock market crash to the upside!


The following table further illustrates the detachment from reality that takes place in the financial press and blogosfear on a DAILY basis for the fundamental reason that FEAR SELLS! Doom and Gloom SELLS! Whereas reality does NOT sell because reality tends to be laboriously boring, much as the missed by most stocks bull markets relentless climb higher for the past 6 years has been, which does not sell much mainstream press copy to the gullible masses that tend to lap up the verbal diarrhoea as being definitive.

Bad Thursday - 20th -358 -2.1%
Disaster Friday - 21st -531 -3.1%
Black Monday - 24th -588 -3.6%
Dire Tuesday - 25th -205 -1.3%
WTF? Wednesday - 26th +619 +4%

 

The reality is as I have consistently pointed out that since western stocks started correcting that the markets are undergoing a correction where the volatility is a function of the fact that it has been over 3 years since the last 10% correction took place which means that there exists significant weak bullish investor sentiment that needs to be unwound so that the market can lay the groundwork for the next leg higher.

Meanwhile the China stocks bear market continued with the Shanghai dropping a further 1.3% despite an interest rate cut, which as my analysis of 5 weeks ago stated to expect far worse to come, so it's what the western stock markets are battling against i.e. a western bull market that's trying to keep afloat whilst a drowning China keeps tugging at its legs.

13 Jul 2015 - China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015?

China Stock Market Forecast Conclusion

Pulling all of the threads together implies that the current rally is corrective, following which the SSEC bear market looks set to resume with a vengeance with the SSEC targeting 2,500! Which is quite some distance from its last close of 3877.

As for what happens after SSEC 2,500 is less clear, I am leaning towards probability favouring a dip to 2,500 being a panic spike that soon reverses higher and resolves to base building between 3,000 and 3,500 for the remainder of 2015. However, if the spike low rally fails then that could yet trigger FURTHER panic that plunges the SSEC into a deeper trading range of 2,000 to 2,500 for several years.

So the bottom line is that there is far worse to come for China investors. In fact the china bear markets only about half done!

The China SSEC close of 2927 is still some way from my probable target for a spike low of 2,500 which means to expect more bad news out of China.

My next in-depth analysis due to be completed this week will seek to update my existing long standing trend forecast for 2015 as excerpted below. Where I will seek to answer key questions such as -

Is the china stock collapse a warning of what is in store for western stock markets?

Could China do irreparable damage to the 6 year old stocks bull market by destroying bullish sentiment?

What if anything could support the market now? Corporate profits?

Does this mean the Fed will abandon raising interest rates?

So is it time to sell ALL stock holdings or a buying opportunity?

Ensure you are subscribed to my always free newsletter to get this in your email in box.

In the meantime check out Robert Prechter's view on the Pandemonium in the Stock Market in his timely FREE Report.

Existing Forecast

03 Feb 2015 - Dow Stock Market Trend Forecast 2015 by Nadeem Walayat

The Dow resolves to a bullish Elliott Wave pattern i.e. implies that the Dow should now embark on a trend to a new all time high, probably before the end of March! So contrary to much of the building picture so far. Thereafter suggests a summer ABC correction back down to around 17,500 to coincide with "Sell in May and Go Away".

Dow Stock Market Forecast 2015 Conclusion

My final conclusion is for the Dow to spend the first half of 2015 in a wide volatile trading range as it continues to unwind the 2014 bull run and sets the scene for the next series of bull runs to new all time highs. I expect the Dow to have started its bull run by early August off of an summer low and then continue into the end of the year, punctuated by an October correction low. I further expect the Dow to be trading well above 19,000 during December 2015 and probably above 19,500, before closing at around Dow 19,150 for a 7.5% gain for the year as illustrated by the following trend forecast graph for 2015.

Dow Stock Market Trend Forecast 2015

The bottom line is don't be frightened by first half weakness, yes it may look grim if we see the Dow trading under 16k, but all it would represent is a deeper buying opportunity before the market resolves to above Dow 19k.

Ensure you are subscribed to my always free newsletter for my next in-depth analysis and concluding detailed trend forecasts that include the following planned newsletters -

  • Stocks Bull Market Over?
  • US Dollar Trend Forecast Update 2015
  • Crude Oil Price Trend Forecast
  • Islam 3.0

Also subscribe to our Youtube channel for notification of video releases and for our new series on the 'The Illusion of Democracy and Freedom', that seeks to answer questions such as 'Did God Create the Universe?' and how to 'Attain Freedom' as well as a stream of mega long term 'Future Trend Forecasts'.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2015 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

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

mydan
06 Sep 15, 17:41
Global markets

I look forward to your update on the stock market.

Most technical signals are bearish and with the upcoming fed rate hike causing a higher dollar and currencies havoc, the end of QE which has been main engine of the stock market everywhere, problems on the oils sector, China's bubble busting, there is a lot of uncertainty.

From the Ew perspective we may be in 4 with only limited upside in 5 and the a manor a b c correction. Sell signals have been triggered for many following technical analysis, stop losses have been captured.

Analysts have mixed opinions about the U.S. Market and many recommend emerging market shares or European and Japanese. Only die hard goldbugs still believe in a gold.

i look forward to hear your view on the global markets in your next article.

Best

D


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