Best of the Week
Most Popular
1. Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - Nadeem_Walayat
2.Gold Price Forecast 2018 - February Update - Nadeem_Walayat
3.Bitcoin Crypto Currencies Crash 2018, Are We Near the Bottom? - Nadeem_Walayat
4.Trump Bubble Bursts, Stock Market Panic Dow 1175 Point Crash Analysis - Nadeem_Walayat
5.Gold Corrects, Bitcoin Markets Crash, Whilst Stocks Plunge - Nadeem_Walayat
6.US Treasury Bonds: Fuse to Light the Bonfire - Jim_Willie_CB
7.Dow Falls 666 Points As Cryptocurrencies Crash And Krugman Emerges From His Van - Jeff_Berwick
8.Stock Market Roller Coaster Crash Ride Down to Dow Forecast 23,000 - Nadeem_Walayat
9.Trading the Shadows - Oil, Dollar, Stocks, Gold Trend Analysis - B.R. Hollister
10.Stock Market Analysis: Baying for Blood - Abalgorithm
Last 7 days
The Latest US Debt Blow - 22nd Feb 18
6 Tips For Seamless Business Foreign Exchange - 22nd Feb 18
How to Anticipate Stock Market Trend Changes - 21st Feb 18
Gold Miners’ Rally? What Rally? Watch Out for More Fake Moves! - 21st Feb 18
5 Big Drivers of Higher Inflation Rates Ahead - 21st Feb 18
Goofy Indictments Divert Attention from Criminal Abuses at the FBI and DOJ - 21st Feb 18
Bitcoin or British Pound ‘Pretty Much Failed’ As Currency? - 21st Feb 18
Stock Market Waiting for the Fed - 21st Feb 18
National Identity Demands Restrictive Immigration - 21st Feb 18
Best Opportunities for Freelance Technical Writing Jobs - 21st Feb 18
4% US 10-year Treasury Note Yield Will Be a Floor Not a Ceiling - 20th Feb 18
Governments Are LYING about Their Gold Activities while Mining Companies Cower - 20th Feb 18
No Silver Lining Here - 20th Feb 18
Semi Conductor Stocks SEMI Bearish? - 20th Feb 18
The Prisoner Promised Land - 20th Feb 18
Best Car Dash Cam Review: Z-Edge S3 Dual Dash Cam - UNBOXING (1) - 20th Feb 18
How Inflation Reduces The Real Value Of Social Security Net Of Medicare Premiums - 19th Feb 18
Could Stellar Lumens be a Challenger to Bitcoin for International Payments? - 19th Feb 18
US-China Trade War Escalates As Further Measures Are Taken - 19th Feb 18
How To Trade Gold Stocks with Momentum - 19th Feb 18
Is a New Gold Bull Market on the Horizon? - 19th Feb 18
Stock Market Decision Point! - 19th Feb 18
An Inflation Indicator to Watch, Part 1 - 18th Feb 18
Get on Top Of Debt Before It Gets on Top of You - 18th Feb 18
Will the Stock Market Make a Double Bottom? - 18th Feb 18
5 Reasons Why Commodities Are the Investment Place to be in 2018 - 18th Feb 18
1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On - 17th Feb 18
Crude Oil Prices: A Case of Dueling Narratives? - 17th Feb 18
Free 1000 Youtube Subscribers Services - YTpals, Subpals, SubmeNow Test - 17th Feb 18
How to Trade as We Near March Stock Market Top - 16th Feb 18
Bitcoin as Poison - 16th Feb 18
GDX Gold ETF Weathers Stock Market Selloff - 16th Feb 18
Casino Statistics and Demographics - 16th Feb 18
IS Today Thee Stock Market Turn Day? - 16th Feb 18
Huge SMIGGLE Shopping HAUL, Pencil Cases, Drinks Bottles, Back Packs, Toys.... - 16th Feb 18
Tesla Cash Keeps Burning at $320 a Share - 15th Feb 18
Big Conflict Ahead in the Financial Markets - 15th Feb 18
Stocks Extend Rally Off Friday's Low, But Short-Term Exhaustion Near - 15th Feb 18
Stock Market Out on a Limb... - 15th Feb 18
Things Only a True Friend Would Say About Gold - 14th Feb 18
Global Debt Crisis II Cometh - 14th Feb 18
Understanding Crude Oil Behavior - 14th Feb 18
Stock Market is Getting Scary... - 14th Feb 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Stock Market Crash - Last Week was The 2nd and Final Warning...

Stock-Markets / Financial Crash Jan 11, 2016 - 07:28 AM GMT

By: Clive_Maund

Stock-Markets

Many were talking about the market crashing last week and the mainstream financial press were waxing hysterical, but as we will now see the crash hasn't even started yet. If the press got like that last week, imagine what they will be like when it really does crash - last week was just a "warmup", the 2nd and final warning, the 1st warning was the plunge last August.

On the 10-year chart for the S&P500 index, we can see that while the market did indeed drop hard last week, it still has not broken down from its Head-and-Shoulders top, the lower boundary of which is shown by the thin black line. When it does break down from the top area, there is an awful lot of air below it - it has a long, long way to drop, and the decline is likely to be precipitous.


S&P500 10-Year Chart

On the 5-year chart for the S&P500 index we can see a big Head-and-Shoulders top pattern completing gracefully beneath a giant Dome top, with the index dropping back exactly as predicted in the 2nd January update from its Right Shoulder peak, where we shorted it. The drop last week was steep, resulting in a short-term oversold condition, so we should not be surprised to see a bounce soon, or at least a period of choppy sideways movement, before it breaks down from the top area and plunges.

S&P500 5-Year Chart

An important catalyst for the steep drop in world markets last week was the sudden renewed mayhem on the Chinese markets. Before the end of last year we had worked out that the preceding rally was a countertrend bearmarket rally that had run its course, and that it would be followed by another steep drop, so we shorted the Chinese market via a triple leveraged inverse ETF.

Shanghai Composite Index 2-Year Chart

Any claims that a genuine economic recovery has taken hold are exposed as hollow and lacking any substance by the following 2 charts. The first is for the Baltic Dry shipping index, which even taking into account a glut of newly constructed ships, looks absolutely terrible - and is a harbinger of economic depression.

Baltic Dry Index 14-Year Chart

That the pitiful level of the Baltic Dry index is not an anomaly is made plain by the long-term commodity index chart. This shocking chart reveals that commodity prices are at more than 42 year lows and it shows that the world is tipping into a debt induced depression. Low as it is, it could drop even further if we now see a stockmarket crash soon, as looks likely.

CRB Index 1980-2016

The Fed's recent raising of rates, and statement that further rises are in the pipeline, is widening the differential between (negative) rates in Europe and the US, and tightening the stranglehold on who collectively still hold a cool $9 trillion or so carry of trade obligations. This is threatening to force an upside breakout by the dollar from its recent lengthy trading range. If it does break out upside from the range, all hell will break loose and the dollar could ramp up to the 120 area on the index and perhaps even higher. On the long-term chart for the dollar index below, we can see that the pattern that has formed from the highs of last March now looks like a bull Flag. If it is, the dollar will soon be on its way to the 120 area. This risk is the reason why, even though we are aware of the extreme undervaluation of gold and silver stocks, we have been hesitant about piling into them until now. If the dollar does make a last "swansong" rally to the 120 area, that is when we will pile into the PM sector in a more unrestrained manner. Senior economic geologist Nigel Maund has written an extensive report on the best Australian mid-cap gold mining stocks, entitled GOLD MID-CAPS PLAN OF ACTION, PART 1: THE AUSTRALIANS , in preparation for this time, and will be writing a similar report on the best Canadian mid-cap gold mining stocks in due course.

US Dollar Idex 1980-2016

If global stockmarkets crash, as in 2008 only probably worse, then in addition to the dollar going on a tear it is likely that investors will seek safe haven in US Treasuries again, despite growing Sovereign risk. On the 2-year chart for T-Bond proxy TLT below, we can see that they are now set up for a substantial rally with a large Symmetrical Triangle closing up, although this Triangle could theoretically break in either direction. A rally in Treasuries would occur in lockstep with a dollar rally.

TLT Daily Chart

Finally, a number of investors, brain-addled by Wall St propaganda, have taken to entertaining the fanciful notion that world stockmarkets will be towed higher by the stocks of "fluff" companies like Facebook, Amazon, Netflix and Google, who now have the acronym of the "FANGs". This seductive but dangerous presumption might be more believable if these stocks weren't already well into bubble territory. The long-term chart of the most extreme of these, Amazon, which we bought Puts in at the start of the month , is shown below. As we can see it is in the final vertical blowoff phase of a multi-year bullmarket, and once the extremely steep vertical 3rd trendline fails, which should happen soon, it will crash and burn, probably along with the other FANGs, and the Tech sector at large, including, and especially, Biotech, and the market will finally lose its low grade leadership and plunge.

Amazon 20-Year Chart

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2016 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

© 2005-2018 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