Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
SNP Controlled Scottish Parliament Demands Right for Scotland to Commit Suicide - Indyref2 - 29th Mar 17
USD Gold Myriad of Signs - 28th Mar 17
Ominous Social Trends That Will Shape Our Future - 28th Mar 17
Foundation And Empire: Is Donald Trump The Mule? - 28th Mar 17
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

Stock Market Bulls Set To Be Tasered Again - Imminent Crash, Severe Downleg...

Stock-Markets / Stock Markets 2015 Sep 07, 2015 - 10:50 AM GMT

By: Clive_Maund

Stock-Markets

The stockmarket is toxic! It's very important that you don't get seduced by the old siren song of Wall St about "buying the dip" and other nonsense like "being selective". While these strategies have worked up to now, they won't any longer, because we are now in a bearmarket, and furthermore it looks like we are on the verge of another plunge.


The past few weeks have been momentous. The stockmarket has finally broken down from the huge bearish Rising Wedge that we had delineated many months ago, as shown on the 8-year chart for the S&P500 index below. The validity and importance of this Wedge is amply demonstrated by the fact that after the index broke down from it, it plunged.

S&P500 Index 8-Year Chart

There's an old saying that "they don't ring a bell at the top". Oh really? - they do if you are able to hear it. Witness the chart posted on clivemaund.com a week or so before it turned lower and proceeded to break down and plunge...

S&P500 Index 4-Year Chart

We had also correctly identified and delineated a massive Distribution Dome forming in the S&P500 index and how the market was topping out at the apex of the Dome during the Summer. The market is now breaking lower, but don't make the mistake of thinking that it will rally back to the Dome boundary again - it won't because markets drop twice as fast as they go up, due to fear being a stronger emotion than greed. Before leaving this chart note that we have seen the first bearish moving average cross for 4 years, and volume on the recent plunge was the heaviest for 4 years, which is also bearish.

S&P500 Index 4-Year Chart 2

Now we turn to shorter-term charts to see what's likely to happen next. On the 3-month chart for the S&P500 index we see that the bearmarket phase kicked off with a super-bearish "4 Black Crows" candlestick pattern. Although this pattern is very bearish indeed, by the time the 4th crow has completed the market is obviously heavily oversold and in need of a breather - hence the bounceback and congestion pattern of the past 2 weeks, which most unfortunately for the bulls, looks like a bear Pennant. Although this Pennant may take a little longer to complete so that we have to adjust its boundaries somewhat, action in recent days suggests that the market will break lower again imminently into another plunge probably of similar magnitude to the 1st, and possibly worse, as the penny finally drops amongst the mob that this is not just a dip but something far worse.

S&P500 Index 1-Month Chart

To see in detail the bearish action of recent days which suggests that the market will break lower again imminently and plunge, we will now look at a 1-month chart, which opens out the congestion pattern of the past 2 weeks. On this chart we see that, in addition to clivemaund.com subscribers sitting on very large profits having bought Puts at the points shown, there were 2 bearish "Evening Doji Star" candlestick patterns in succession over the past 7 trading sessions. We spotted the 1st one forming which is why we bought more Puts, and the 2nd one, which included a very bearish "Gravestone Doji" at its high, suggests that instead of further flim-flamming around, the market is going to break lower and plunge again very soon, and if the pattern of the past 2 weeks is indeed a bear Pennant, it means that the next plunge will be at least of the same magnitude as the 1st. This is important as it gives us an idea regarding when to ditch the Puts (and bear ETFs). The approach of the MACD indicator shown at the bottom of the chart to its moving average, and the contraction of the MACD histogram back towards the zero line are a further indication that the market is now ready to drop again.

S&P500 Index 1-Month Chart 2

Given the awful and rapidly worsening fundamental outlook it is actually surprising that the market has held up as long as it has. We have global debt saturation, which is the core reason for the looming collapse, involving a festering Sovereign Debt Crisis in Europe, a hopeless intractable insoluble debt crisis in Japan, ballooning deficits in the US, an imploding Ponzi scheme debt bubble in China, a commodity market that has already collapsed, Emerging Markets that are collapsing, and to cap it all a world in denial. The Fed faces a desperate dilemma - it wants to start a rising interest rate cycle in order to eventually scale down its massive balance sheet and to head off a threatening collapse of the dollar and Treasury market, but if does so it will collapse the stockmarket and create a depression. It is raises rates at its next meeting on 16th - 17th markets will crash. If it doesn't raise them, markets will probably crash anyway, because it will be interpreted as meaning that the economy is too weak to handle even a miniscule rate rise.

Our interpretation is that the markets could collapse without waiting for the Fed, since the writing is already on the wall, because the Fed would willingly sacrifice the stockmarket in an attempt to save the more important dollar and bondmarket, as setting up a rate differential with the rest of the world will sluice a vast torrent of funds into the US and create a cushion - this could loop round and end up supporting the stockmarket again later, regardless of the state of the economy. The US has always been ahead of the competition when it comes to setting global economic policy to its advantage - you only have to look at the establishment of the dollar as the global reserve currency to see that. It leads and the others follow.

Here at clivemaund.com we have already racked up big gains on this collapse thus far, having bought a raft of bear ETFs on 1st August close to the market peak and Puts on 7th August and again on 21st as the crash started, and we are in position to make massive gains if the market proceeds to plunge further as expected and stand ready to exit our positions the moment it looks like the 2nd oversold trough is at hand.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2015 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2016 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