Best of the Week
Most Popular
1.The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War - Nadeem_Walayat
2.London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - Nadeem_Walayat
3.The BrExit War, Game Theory Strategy for What UK Should Do to Win - Nadeem_Walayat
4.Goldman Sachs Backing A Copper Boom In 2017 - OilPrice_Com
5.Trump to Fire 50 US Cruise Missiles To Erase Syrian Chemical Attack Air Base, China Next? - Nadeem_Walayat
6.US Stock Market Consolidation Time - Rambus_Chartology
7.Stock Market Investors Stupid is as Stupid Goes - James_Quinn
8.Gold in Fed Interest Rate Hike Cycles- Zeal_LLC
9.The BrExit War - Britain Intelligence Super Power Covert War With the EU - Nadeem_Walayat
10.Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold and Emerging Markets to Outperform - MoneyMetals
Last 7 days
Bifurcated US Stock Market - 29th Apr 17
Damn the Deficits, Huge Trump Tax Cuts Ahead! - 29th Apr 17
Gold Hostage to Stocks - 29th Apr 17
Warren Buffett Hates Gold… But Here’s Five Reasons You Need To Own It - 29th Apr 17
Stock Market Sentiment, Re-Fueled Along the Way - 28th Apr 17
Calling out the Central Bankers - 28th Apr 17
Fed's Third Inetrest Rate Hike and Gold - 28th Apr 17
USD/CAD - Invalidation of Breakout or Further Rally? - 28th Apr 17
What Happened to the Stock Market Crash Experts Were Predicting - 28th Apr 17
Earth Overshoot Day - Human Population Growth - 28th Apr 17
Misunderstanding GDXJ: Why It’s Actually Great News For Junior Miners - 28th Apr 17
What Makes Bitcoin Casinos So Remarkable? - 28th Apr 17
Financial Markets Improvised Explosives - 27th Apr 17
More Stock Market Short-Term Uncertainty As Stocks Get Close To Record High - 27th Apr 17
Elliott Wave Theory: Is Elliott’s Theory Enough? - 27th Apr 17
Billionaire Investor Paul Tudor Jones Says Stock Market Valuation Is “Terrifying” And He Is Right - 26th Apr 17
The Great BrExit Divides - Britain, USA and France - 26th Apr 17
10 Facts That Show Our Taxes Are Worse Than You Thought - 26th Apr 17
What Trump’s Next 100 Days Will Look Like - 26th Apr 17
G20: SURPASSING THE 2nd GLOBAL STEEL CRISIS - 26th Apr 17
What A War With North Korea Would Look Like - 25th Apr 17
Pensions Are On The Way Out But Retirement Funds Are Not Working Either - 25th Apr 17
Frank Holmes : Gold Could Hit $1,500 in 2017 Amid Imbalances & Weak Supply - 25th Apr 17
3 Reasons Why “Spring Forward, Fall Back” Also Applies To Gold - 25th Apr 17
SPX may be Aiming at the Cycle Top Resistance - 25th Apr 17
Walmart Stock Extending Higher - Elliott Wave Trend Forecast - 25th Apr 17
Google Panics and KILLS YouTube to Appease Mainstream Media and Corporate Advertisers - 25th Apr 17
Gold Price Is 1% Shy of Ripping Higher - 25th Apr 17
Exchange-Traded Funds Make Decisions Easy - 25th Apr 17
Trump Is Among The Institutionally Weakest National Leaders In The World - 25th Apr 17
3 Maps That Explain the Geopolitics of Nuclear Weapons - 25th Apr 17
Risk on Stock Market French Election Euphoria - 24th Apr 17
Fear Campaign Against Americans Continues Nuclear Attack Drills in New York City - 24th Apr 17
Is the Stock Market Bounce Over? - 24th Apr 17
This Could Be One Of the Biggest Winners Of The Electric Car Boom - 24th Apr 17
Le Pen Shifts Political Landscape- The Rise of New French Gaullism  - 24th Apr 17
IMF Says Austerity Is Over - Surplus or Stimulus - 24th Apr 17
EURUSD at a Critical Point in Wave Structure - 23rd Apr 17
Stock Market Grand Super Cycle Overview While SPX Correction Continues - 23rd Apr 17
Robert Prechter Talks About Elliott Waves and His New Book - 23rd Apr 17
Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash - 22nd Apr 17
Why You Are Not An Investor - 22nd Apr 17
Gold Price Upleg Momentum Building - 22nd Apr 17
Why Now Gold and Silver Precious Metals? - 22nd Apr 17
4 Maps That Signal Central Asia Is at Risk of War - 22nd Apr 17
5 Key Steps For A Comfortable Retirement From Former Wall Street Trader - 22nd Apr 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

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

© 2005-2016 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