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

The Great Stock Market and Economic Train Wreck of 2016...

Stock-Markets / Stock Markets 2016 Dec 13, 2015 - 06:18 PM GMT

By: Clive_Maund

Stock-Markets

Today we are going to review irrefutable evidence that a slow motion train wreck is already well underway across global markets, that will end with the last wagons on the train, the S&P500 index and the Dow Jones Industrials, disappearing into the abyss right after their immediate predecessors.

There are still a remarkable number of investors out there, and an even more remarkable percentage of mainstream financial journalists, who seem to think that everything is alright just because the flagship indices like the Dow Jones Industrials and the S&P500 haven't caved in yet, but as we will now see they are probably just about to.


We start with the 6-month chart for the S&P500 index, where we see that it has just broken down from a topping Triangle, that formed after the big October recovery. This breakdown was predicted on the site last week. From this position it is vulnerable to a precipitous decline, which could happen next week ahead of the Fed meeting, or after it - or both.

SPX Daily 6-Month Chart

Latest COTs for the S&P500 index are bearish, with the Commercials holding their largest short positions for nearly a year - more bearish than before the August plunge when they were modestly long. This chart certainly allows for a lot more downside.

S&P500 CoT Chart

On the 5-year chart for the S&P500 index we can see exactly why it stalled out where it did, and has now reversed. It had arrived at the boundary of a giant Distribution Dome that started to form way back late in 2011. Some bullish writers have claimed that the market has broken out upside from a smaller Dome of shorter duration, but their Dome is overridden and nullified by our bigger stronger one. As we can see, our Dome has capped the advance and is bearing down on the index, forcing it lower, and it is now clear that the recent advance served to complete the Right Shoulder high of a large Head-and-Shoulders top. Last ditch support is above and at 1800 - once this fails, the market should plummet.

S&P500 Daily 5-Year Chart

How low could the market drop? - before reading on you might want to make sure you are sat down, and perhaps with a stiff drink. We'll see just how far it could fall on the long-term 20-year chart for the Dow Jones Industrials shown below. On this chart we see that after a long bullmarket phase from the 2009 low, the market has risen to the top of a gigantic bullhorn pattern. If it turns lower here, which it certainly appears to be doing, it could conceivably drop all the way across the bullhorn, back to the lower boundary in the 6000 area. I know - it doesn't seem possible, just too far-fetched, right? - WRONG!! - with a brutal depression almost upon us caused by the rapidly accelerating implosion of the bankrupt fiat money system after over 40 years of excess after the abolition of the gold standard by Richard Nixon, culminating in the vertical blowoff move of recent years, as the entrenched beneficiaries of this system played the last cards in their hand, these hyper-leveraged markets could now collapse in one of biggest self-feeding liquidations in history. Whether it will drop back as far as 6000 I don't know, but it is certainly within the realms of possibility - and it will seem a lot more possible to you as you read on and witness the carnage that is already underway elsewhere.

Dow Jones Industrials Daily 20-Year Chart

The Dow Jones Transports have been much weaker than the Dow Jones Industrials and the S&P500 index in the recent past, as we can see on its 3-year chart shown below, on which we can see that a large, downsloping, and thus very bearish, Head-and-Shoulders top is rapidly approaching completion. Once the neckline is breached, this index could plummet. The Transports are providing a classic Dow Theory non-confirmation of the action in the Dow and the S&P500 index, and it means trouble.

Dow Jones Transports Daily 3-Year Chart

There are other markets pointing to Big Trouble dead ahead, like the London FTSE100 index, on whose long-term 20-year we can see that a gigantic Triple Top is completing, with the market now starting to descend from the 3rd protracted peak...

London FTSE Daily 26-Year Chart

Other European market indices look similar, like the French CAC, the German DAX and the pan European STOXX600, as we would expect.

Emerging Markets are in ragged retreat again, and descending from the 2nd protracted peak of a gigantic Double Top. The Emerging Markets indices made a good recovery from their 2008 crash lows, with investors thinking it was back to business as usual but they were unable to make new highs and have limped along sideways for years marking out a very elongated 2nd peak of what is viewed as a giant Double Top. Now they are clearly on the defensive again and if the $30 level on the EEM chart gives way, it could plummet quickly all the way back to its 2008 lows - or lower still. Again, this clearly means Big Trouble, not just for Emerging Markets themselves, but all markets.

iShares MSCI Emerging Markets Daily 10-Year Chart

Commodities markets are in a parlous state, as is made plain by the long-term CRB index chart, which is at multi-decade lows. If you ever needed proof of the gathering forces of depression, this is it...

Commodity Index 1980-2015 Chart

The slump in the oil price is a symptom of the deepening global malaise, and makes nonsense of the claims of an economic recovery...

Light Crude Oil Daily 1982-2015 Chart

Our downside target for oil has for some months been the mid-low $20's. As we can see on the Light Crude chart above, it is now arriving at a support level, which ordinarily might be expected to generate a bounce, or at least a temporary price stabilization, but if markets generally drop heavily or crash then it is likely to continue lower with little or no pause, probably into our target zone.

The slump in world trade has contributed to a decline in shipping rates to very low levels - they are now close to hitting record lows, another sign of depression...

Baltic Dry Index 13-Year Chart

Both the Baltic Dry shipping index and the Commodities markets have been warning of depression for a long time, but stockmarkets have happily ignored them up to now, pumped up as they have been by massive Central Bank slush funds financed by QE, so that ordinary citizens can finance speculators (by later losing their purchasing power via inflation of the price of basic goods), but it's going to be a lot harder for markets to ignore the breakdown and collapse of the Junk Bond market, which really started to get underway just last week...

SPDR Barclays High Yoeld Bond ETF Daily 5-Year Chart

The message of this chart is that interest rates are going up, whether the Fed wants to join in raising them or not. When rates rise significantly markets will crash, because of the impossibly huge debt overhang.

Turning to sectors within the US stockmarkets that look set to implode, we have Biotech, which signaled that it is entering a bearmarket back in September, when it plunged on huge record volume as it broke down from its parabolic slingshot uptrend...

BioTech iShares Daily 10-Year Chart

As we can see, Biotech's bearmarket has only just begun, and it still has an awful long way to fall. On the site we have looked at leveraged inverse ETFs and options to take advantage of the expected drop.

Meanwhile the Tech heavy NASDAQ index still looks relatively strong, but has just double-topped with its highs of last Summer, and is moving in conformity with the broad stockmarket S&P500 index, and so should drop with it. Interestingly the NASDAQ appears to be topping out just a shade above its 2000 bubble highs, and even though the current bubble does not look so serious this time round because it has not risen so steeply as in 2000, the red-hot Bay Area (San Francisco) property market certainly has the attributes of a bubble about to burst.

NASDAQ 20-Year Chart

While the products of Tech companies are certainly alluring, and much additional demand is generated by consumers upgrading their equipment every 6 months or less in order to keep up with their peers and abreast of the latest developments, they will find it a lot harder to do so when they are flat broke, out of a job and maxed out on credit. In this situation demand for even the most attractive products can falter. So the stocks of Tech companies can drop like anything else.

Speaking of the property markets, they are still riding high, but don't expect that to last much longer. The REIT chart below shows that it is still at a high level within an uptrend, but don't expect that to last as rates rise and stockmarkets crash. If you own speculative property you should offload it to the bagholders as soon as possible.

Dow Jones Equity REIT Daily Chart 1998-2015

We will end with an interesting Treasury proxy chart which shows that Treasuries broke out upside from a rather large Triangle on Friday. What this suggests is that, despite the huge careening deficits and the likelihood of a dollar crisis later on, investors are still going to run for safety to Treasuries during a 2008 style meltdown. Why? - because they reason that the US will be the last domino to topple, certainly well after Europe and debt-wracked Japan have gone down the drain.

iShares Barclays 20+ Year T-Bond Daily 6-Month Chart

I could shovel still more of this stuff onto you, but if you haven't got the picture by now you never will.

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