Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

If Stocks Can't Hold These Levels, We'll Have a Bear Market

Stock-Markets / Stock Markets 2015 Sep 29, 2015 - 11:57 AM GMT

By: ...

Stock-Markets

MoneyMorning.com Shah Gilani writes: With no real positives to boost markets, important support levels had better hold… or it's over.

The lines I'm about to show you have to hold, or we'll test the Aug. 24, 2015, lows.

And if those lows don't hold, well, say hello to Mr. Big Bad Bear Market.


But don't worry. I'm going to show you how to protect yourself, too…

Central Banks' Failures Are Finally Catching Up with the Markets

Quantitative easing has turned out to be the failed monetary experiment we always knew it would be.

If you look at it this way, its fanciful stupidity becomes obvious…

Central banks spent trillions of dollars (and yen, and euros, and yuan) based on virtual equity in black-hole balance sheets to buy underwater securities from struggling banks to bail them out.

Then they bought their own government's debts to bail them out. Along the way, they raised asset prices to create a wealth-effect and lowered interest rates enough to try and stimulate a trickle-down boost to consumer spending, which they then thought might resurrect Keynesian fake perpetual-motion fantasy factories.

Does that sound like a good idea to you? As if that was ever going work.

And of course, it hasn't. Here's the proof:

There's not a single economy in the world where central bank bond and asset purchases were exercised (or are being exercised) that's experiencing decent GDP growth.

Not a single one.

And worse, not only have QE programs not generated inflation (other than market-based financial asset inflation), deflationary pressures are mounting again.

Once-heralded central bank "bazookas" now appear to be smoking, empty pipe dreams.

And that failure is going to have serious consequences…

Then there are the more than $2 trillion worth of stock buybacks in the United States since 2007.

If, as an increasing number of analysts fear, earnings weaken into the fourth quarter and turn negative in 2016, and stocks break support lines, all that financial engineering to boost earnings per share metrics and stock prices will prove to be a total waste of cash and a weight on corporations that borrowed to play the game.

While that's a global and domestic snapshot, there are two other shoes we have to watch, which are dropping…

There Are Two "Canaries" Set to Choke to Death

I'm talking about China and the already down-in-the-heels emerging markets.

China's growth and the knock-on effects that growth had on emerging markets after the credit crisis and through the Great Recession kept the world from completely imploding.

Now China's GDP growth is slowing, perhaps significantly. Forget China's Ministry of Slick Statistics – the emerging markets taking it on the chin is proof positive that China's real growth rate may be doing a lot worse than just slowing.

China's stock market is just one canary in the coal mine.

You know that miners take a canary with them. If the canary dies, they know the air they're breathing is about to choke them next.

Well, the Shanghai Composite has been boosted higher by the Chinese plunge-protection team. If the Shanghai Composite falls back below the psychologically important 3,000 level, all hell is going to break loose in China.

The government not being able to hold the markets up, after openly saying they were doing just that, will send a chill across global markets that the Chinese Emperor has no clothes.

The yuan will fall, emerging markets currencies will take further hits, and we'll be facing a 1998-style "contagion correction" in the face.

There will be no quarter for the United States if that happens. The dollar will strengthen, putting further pressure on emerging markets currencies, and capital flight from Brazil, Russia, India, China, and South Africa (the BRICs) will devastate their economies.

The other canary in the coal mine is the price of oil. The falling price of oil is a bright, loud, and clear statement that global demand is weakening.

If West Texas Intermediate (WTI, the American crude oil benchmark) breaks below $40, makes new lows, and cracks the $30 handle, the United States could see a wave of energy loans defaulting and an upheaval in the leveraged loan and high-yield markets. Banks could go under, too.

Globally, if oil spirals downward, energy companies around the world and oil-producing countries like Malaysia (that converted hundreds of billions of locally denominated debt into dollar-denominated debt because U.S. interest rates were so low and appetite for yield has been so high) will trigger a negative feedback loop that no one knows how to stop.

As oil prices fall and the dollar as a safe haven strengthens, it will take more oil revenue, at lower prices, to service all that dollar-denominated debt.

So, those are the "Horsemen of the Apocalypse" that have the markets running terrified.

Now, here's when we can expect those bogeymen to come riding by…

Protection: What to Buy (and When to Buy It)

If the Shanghai Composite breaks 3,000, run for cover. It could drop another 30% to 50%.

If West Texas Intermediate tests $44 a barrel, can't hold that level and breaks below $40, run for cover, it's going to test $30.

If the Dow Jones Industrial Average can't hold 16,000, it's going to test August lows of 15,370. If the index can't hold there, it could lose another 1,000 points in a matter days.

The S&P 500 just broke its support level of 1,900. If it can't hold August lows of 1,867, run for cover; it's going to 1,820 in a hurry.

The Nasdaq Composite just broke its support of 4,600. If it can't hold soft support at 4,526, it's going to test its August lows of 4,292. If it can't hold there, it's going to 4,100.

You've been warned.

To protect yourself at each of these "support" levels, buy inverse ETFs like ProShares Short Dow30 (ETF) (NYSE Arca: DOG), ProShares Short S&P 500 (ETF) (NYSE Arca: SH), and ProShares Short QQQ (ETF) (NYSE Arca: PSQ) to hedge your investment portfolios.

If we rally off support levels, give your inverse ETFs about 5% room to move against you before getting out of them.

Me personally, and in my newsletter subscription services, we're already in defensive mode and will add to our hedge positions at all these support levels.

Only, we'll probably add to those positions on any head-fake rallies, because we are loading up for bear.

Join the conversation! Follow Shah on Facebook and Twitter.

Source http://moneymorning.com/2015/09/29/if-we-cant-hold-these-levels-well-have-a-bear-market/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2019 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