Best of the Week
Most Popular
1.BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - Nadeem_Walayat
7.Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - Michael_Noonan
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.Gold And Silver: Security, And BREXIT - Michael_Noonan
10.BrExit Vote - "The Trend is Set" -- And What You Should Pay Attention to Next - EWI
Free Silver
Last 7 days
Stock Market Bounce May be Over - 28th June 16
Stock Market Meltdown Likely to Drive Gold Towards $1,500 - 28th June 16
Brexit Victory over the EU Globalists - 28th June 16
Brexit Psyop: Greenspan Falsely Blames the Brits for the Crash and Chaos to Follow - 28th June 16
Greenspan Calls Brexit a ‘Terrible Outcome’ as Euro Area Tested - 27th June 16
Stock Market SPX Below Mid-Cycle Support - 27th June 16
Best Holidays for Summer 2016 - 27th June 16
Another Stocks Bear Market? - 27th June 16
BBC EU Referendum Result Highlights - YouGov, Markets, Bookmakers, Pollsters ALL WRONG! - 26th June 16
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Market Volaility

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