Guest Post: Market Dislocation: Dow 11,908?

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Market Dislocation: Dow 11,908?

I've got a bad feeling that the Great Intervention Rally of 2009 - 2011 is about to hit an iceberg.

January 2011 is eerily reminiscent of January 2000
. Ignoring warning signs of being overheated and overloved, the stock market rose month after month, defying doubters.

With 12,000 within one good day's run, the Dow reached 11,908 in the week of January 10, 2000, and then rolled over. The next week it sprinted again for 12,000, hitting 11,834, but alas, the mighty advance was over. The S&P 500 topped out a few months later and then started down a relentless three-year slide.

I sense a dislocation coming in global markets.
For goodness sakes, don't put any money on it (please read the HUGE GIANT BIG FAT DISCLAIMER below), as the timing of the dislocation is unknown.

Technically, we're in the zone where the Dow rolled over in 2000. Depending on whether you track weekly closes or intraday highs, that zone extends from about 11,725 to 11,908. As I type, the Dow is at 11,745.

That could be important, because that spike in 2000 looks like the left shoulder in a multi-decade head and shoulders pattern. The current Central Bank-goosed advance could be the right shoulder. If so, the coming dislocation could be deep and prolonged.

Here is a chart of the Dow JOnes Industrial Average, 1977 - 2011.

The S&P 500, meanwhile, has traced out a gargantuan double top. Optimists can discern the possibility of a triple-top, but I doubt the Central Bank interventions that have goosed the SPX to these heights can work their magic long enough to push the index 300 points higher to complete the triple top pattern. (As I type, the SPX is 1,285.)

What is the basis of my doubts? I think Michael Panzner of Financial Armageddon has pegged the macro situation exactly: the Federal Reserve and the other central banks, and all the governments frantically borrowing and spending trillions of dollars on fiscal stimulus and financial bailouts, are assuming this is merely a cyclical downturn which can be "cured" by massive intervention with a time-stamp of a few years.

Well, the clock is ticking, and the authorities have borrowed, printed and pumped unprecedented sums of money into the global economy to "get it through this rough patch" for two years.

Authorities are claiming the "recovery" is now "self-sustaining." Fine: then stop the QE2 goosing of the stock and bond markets, and cut Federal spending by $1 trillion, returning the deficit to "only" $500 billion a year rather than $1.5 trillion a year.

Does anyone seriously think the economy and stock market will continue "recovering" if the trillions in intervention and stimulus were pulled?

But as Panzner asks: what if the downturn is structural rather than cyclical? In that case, the central banks and Central State authorities are simply digging a deeper hole with every loan, every bailout, and every deficit.

Many of us have spent years describing the myriad ways that the global economy is indeed in a complex, interlocking chain of structural challenges. The idea that the imbalances in the global economy can be "cured" with permanently high levels of borrowing and spending and continued intervention to prop up equity markets is absurd.

Which brings us to the coming dislocation. The stock market is famously supposed to be a discounting mechanism which looks out six months. The Fed's QE2 POMO support of the stock market is set to expire in summer, so the market has at best five months of goosing.

Is the smart money going to wait until May to exit, stage left? Why take chances after a stupendous run-up since August? Why not take profits now and let the chumps play the game of holding on for the last dollar of profit?

I like the absurd precision of 11,908 as a target for the final stage of the Great Intervention Rally of 2009 - 2011. Maybe we get there, maybe not; but technically, we are in the sweet spot to roll over hard and complete the right shoulder of a long-term head and shoulders pattern.

If you prefer a fundamental-analysis reason for a dislocation, then please read the Wile E. Coyote Economy by David Rosenberg, via Zero Hedge.

As the Star Wars guys and gals said: I've got a bad feeling about this.

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BigJim's picture

Did they have POMO and QEn back in 2000?

Methinks not.

bob_dabolina's picture

Who needed pomo when you had 50, 60, 70, 80,  100:1 leverage?

Same shit. We all know how that ended.

SheepDog-One's picture

Right they didnt have Imagination Land back then, and they still dont have it today either. 

Rogerwilco's picture

Greenspan was seriously spooked by the prospects of a Y2K bank run. The Fed dumped hundreds of billions into the system in the late '90s to preempt any troubles -- roughly the equivalent (in todays dollars) of the combined TARP/POMO subsidies.

Pool Shark's picture


I've had the same feeling all day even before reading this post.

US$ off bigtime.. should be helping equities and metals, but everything's down today: stocks, metals, muni's, commodities (except ag)

Feels like.... deleveraging

SheepDog-One's picture

Back in 2000, they actually HAD billions! Today? Empty bottomless pit of debt.

JW n FL's picture

The bottomless pit of debt does have the full force of the United States Marine Corp. behind it!

velobabe's picture

just my 2¢'s, but i think these jokesta's who know the dumb damn numb american, just can't fathom what these numbers represent. i sure can't, i can't even imagine a trillion dollars is, means = nothing to a layperson like me. they know this about the people in this country. i mean i would like to have the true grasp of what these numbers and figures mean. they just come from no where and doesn't impact my mind. i think the rest of american is on my same flight path. i sure bernank and comp know this to be true in the general american populace.

JW n FL's picture
by velobabe
on Thu, 01/13/2011 - 17:51


just my 2¢'s, but i think these jokesta's who know the dumb damn numb american, just can't fathom what these numbers represent. i sure can't, i can't even imagine a trillion dollars is, means = nothing to a layperson like me. they know this about the people in this country. i mean i would like to have the true grasp of what these numbers and figures mean. they just come from no where and doesn't impact my mind. i think the rest of american is on my same flight path. i sure bernank and comp know this to be true in the general american populace.


1st great pics from you always, God Bless You!

2nd... its not money, its not paper... it is "1's" and "0's"! being moved from point "A" to "B".

3rd... and most importantly... people, I will use my Mother as an example... My Mother gets her Bank Statement every Month and it says she has "X" amount of dollars in her Bank account... which the FDIC does protect to any amount now as described by her Personal Banker...

Now in walks me... with this in hand...

Operation 1 - RESULTS Operation Date: 1/13/2011 Operation Type: Outright Coupon Purchase Release Time: 10:15 AM Close Time: 11:00 AM Settlement Date: 1/14/2011 Bitmap
Maturity/Call Date Range:

07/31/2016 - 12/31/2017 Total Par Amt Accepted (mlns) : $8,412 Bitmap
Total Par Amt Submitted (mlns) :

$20,995    Inclusions: Bitmap

  CUSIP ID Security Description Par Amt Accepted ($) 912828LD0 T 03.250 07/31/16 3,000,000 912828FQ8 T 04.875 08/15/16 0 912828LL2 T 03.000 08/31/16 168,000,000 912828LP3 T 03.000 09/30/16 93,000,000 912828LU2 T 03.125 10/31/16 337,000,000 912828FY1 T 04.625 11/15/16 3,000,000 912810DX3 T 07.500 11/15/16 101,000,000 912828MA5 T 02.750 11/30/16 377,000,000 912828MD9 T 03.250 12/31/16 115,000,000 912828MK3 T 03.125 01/31/17 184,000,000 912828GH7 T 04.625 02/15/17 12,000,000 912828MS6 T 03.000 02/28/17 559,000,000 912828MV9 T 03.250 03/31/17 167,000,000 912828NA4 T 03.125 04/30/17 416,000,000 912828GS3 T 04.500 05/15/17 236,000,000 912810DY1 T 08.750 05/15/17 165,000,000 912828NG1 T 02.750 05/31/17 51,000,000 912828NK2 T 02.500 06/30/17 26,000,000 912828NR7 T 02.375 07/31/17 51,000,000 912828HA1 T 04.750 08/15/17 239,000,000 912810DZ8 T 08.875 08/15/17 101,000,000 912828NW6 T 01.875 08/31/17 0 912828PA2 T 01.875 09/30/17 267,000,000 912828PF1 T 01.875 10/31/17 98,000,000 912828PK0 T 02.250 11/30/17 852,000,000 912828PN4 T 02.750 12/31/17 3,791,000,000 Bitmap

   Exclusions: Bitmap

  CUSIP ID Security Description   912828HH6 T 04.250 11/15/17

and..... so on for the year prior...


and I say... Mr. Personal Banker of my Mother... what effect does this have on my Mothers Monies that are located in your Bank and NEVER, EVER change?

Is my Mother living with a false sense of security?

well....well.... well.... well.... is the answer.


So whether or not You understand how the money is moved (Not Printed) or not is not at issue..


Do You understand that $1 last year was part of "X" amount of other dollars... 12 months ago.

Now do you understand that Ben has printed 30% more money since then (Lite number 30%, to date.. please anyone tell me I am wrong by 2 fucking %... I dare you!)

Thusly, Your Money in the Bank... that looks the same as it always did is in fact worth that 30% he printed less...

The idea that things will turn, sounds great... I like things that sound good / easy, just like everyone else...

BUT! they might not. and that is as well a Blatant Fact.

So, while you can... stock up on things that you need, then things that you want and then things you where going to wait to buy when the time was right.. becuase shit, is cheap as it going to ever be again (in almost all cases).

Do you own silver? how would you trade with someone in the event that all things in the world did not go perfectly? gold? 1 oz.? pieces... you are a big spender then. good for you, but think about being prepared.

as well...

you can have all the gold and silver / platinum and / or whatever.. food / medicine... but if you cant keep it, then you dont really own it. 9 10ths of the law is possesion.

so, get an extended clip, a few of them... and load them up. or... follow this video advice from Ron White!

The reality, is your quality of life will not change.. other than your food / gas / and / or other is more expensive equal to Ben's printing (and hoping and for inflation) at least... but other than that, "1's" and "0's" being moved from here to there.. dont really matter...

if this doesnt make sense... then watch this..

velobabe's picture

bless you bro, glad someone invented R O C K  n  R O L L †

StychoKiller's picture

Assuming a dollar bill is only 6 inches long, a Trillion of them would reach from the Earth to the Sun (98 Million miles) with room to spare!

Misean's picture

In 2000, Greenslime was slowing the rate printing. B.S. Bernutty hasn't just kept the throttle steady, he's put pedal to metal.

But what does a number based on fiat mean? 11,908 in Y2K Greenslime bucks (gold was 260ish) is like 52,000 Y2K11 Bernutty bucks.

Bartanist's picture

If it happens again, what TPTB need to do is take that opportunity to restructure the banking industry when things are down.

Break up the mega-banks and write off everything that is even close to crap. Then lets get a re-set based on fundamentals instead of HFT power and leverage.

SheepDog-One's picture

Yep! Theyll certainly have learned their lesson THIS time, and realize it time to seriously reign themselves in once and for all for the good of the peasantry.  ;P

SheepDog-One's picture

I personally hope all the permabulls get caught in a few major down drafts, confident Bennie will come save the day for them while they watch it all continue to slide down. Theyre at the end of their rope, calls for more Q/E's out into infinity are just nonsense, they're fooling no one.

duo's picture

The close before Intel's earnings in 2000 was the high, right?

Arch Duke Ferdinand's picture

Could the U.S. Dollar rise 50%?

"It is well within the range of possibility that both bonds and stock markets will experience 25% declines....meanwhile the vast debts remain...a mad rush for U.S. ensues..."

abalone's picture

Go "The Duke" with scoop

I like it

Deep's picture

Correct me if i am wromg, I do not see DOW hitting 11908 first week of Jan. 2000


RobotTrader's picture

Maybe gold stocks are telegraphing an epic crash in risk assets.

After all, they always decline 3x faster than anything else in a "dislocation".

As of now, bank and retail stocks remain unfazed.  We'll have to see if they crack to confirm gold's weakness.

Bill Lumbergh's picture

Would you characterize today's action as "bludgeoned" or just "blowtorched"...also would this action be on "world record volume" or just "national record volume".


SheepDog-One's picture

Robo personally I think youre talking out of your ass.

SwingForce's picture

If your feet smell and your nose runs, you're built upside down.

erik's picture

XRT (retail) has not regained its highs along with the major indices.  XLF (financials) is still below April highs for now.

The major non-confirmation of a market selloff occurred today with the USD dropping beneath its 50 day moving average.  The confirmation of a potential selloff still has 4 signals supporting it; copper, crude oil, 10 year, retail.

Thus 4 of 5 are not sounding the all-clear signal just yet.

Robot Traders Mom's picture

Come up stairs honey. Your trench coat friends are here to play world of warcraft again.

AGoldhamster's picture

Roboboy - as a whole in your camp - since already early this european morning:

132x, 128x and 126x my next targets. Though not sure whether all will be hit. But anyway for those positioned on the right side of this raid - a lot of fun. As with the profits later - at the lows - we will have enough power to double up the longs ... long live white witch Blythe ... and blythe bitchez 

trav7777's picture

I have been wondering the same thing as the HUI and XAU fail to confirm the POG.  But, at the same time, the TLT continues its epic slide.

Bank and retail stocks won't be the place to be during such a crash...but given price dynamics lately, there is nowhere to be.

JW n FL's picture

Like or Love what he says... he bases his comments in numerical facts and historical trends. FACT! and then he takes his time to come here and share his findings. so that you fucking monkeys fucking a football can bash him.


so, allow me to once again remind everyone here.. we are on the same team, like it or not.


Robo was down for a while last year and missed while he was gone...


So unless you can fucking show a chart where Robo is wrong... junk your momma or your wife / sister.

abalone's picture

Well said...I must say your new avatar has softened your image a notch too

JW n FL's picture

Careful... truth will get you junked, no one likes ugly facts... thusly its my fucking fault shit is fucked up and I tell the truth...


as for the attack dog! highly trained to jump and lick any and almost all people! Divorce will make you meaner and nicer all at the same time... I am not always as angry as I used to be, just some times now.

abalone's picture

Glad to hear. You certainly weren't scared that's for sure. Somehow the ZH landscape has shifted as I also recall many waiting for Robo's unprecedented humorous market wrap ups. Oh well, I'm sure there will be a Renaissance some time soon.

malikai's picture

Queue QE3 and the flight to commodities and metals to follow.

Or, queue the deflationary spiral that wipes out everything.

I wonder which choice our overlords will make.

unwashedmass's picture


couldn't agree with this more. we coming to a terrifying moment as all the intervention fails.

Apostate's picture

Why worry if rates are going to stay nigh zero?

Dow 72,000. Even if munis start to crack up, that money will have to go somewhere, and it won't be under the mattress. 

SheepDog-One's picture

DOW is already at about 182,000 in Benniebux, priced in 2000 Greenslime $250 gold correlation.

'The money has to go somewhere and it wont be under the matress'.....far wiser place for that money to go is into stockpiles of long term food stores, firearms and ammo.

ssp2s's picture

"Why worry if rates are going to stay nigh zero?"


A million or so Tokyo housewives already have the answer.

Apostate's picture

That's a good point, except for that our favorite chairman "invests" vigorously into stocks, especially through his friends in investment banking.

unwashedmass's picture


note the intervention right now in the gold/silver markets where the CBs are now methodically walking the both of them down.

what happens when they stop?

Whalers's picture

Right on the money. 

HarryWanger's picture

This ain't 2000. It ridiculous when people data mine charts to try and predict the future. Different time, different economic environment. We have tons of money being thrown into this economic machine to power it forward. That didn't happen in 2000. This will go on for some time, TPTB have no choice.

SheepDog-One's picture

Money throwing is over, now get back in that store room and pack up those dildoes! Housewives of america are depending on you Harry!

fiddler_on_the_roof's picture

Funny. I like different views which Harry provides. But this is funny.

High Plains Drifter's picture

He is researching the ZH bears.  I wonder how much longer he will be around here.  When his stores are burning and being looted , and his Chinese made junk is being carted off, by the car trunk full, ala 1992 in Los Angeles, nobody around here will care.

High Plains Drifter's picture

I wonder if his stores sell that shitty Chi com furniture that makes people sick.

Just a note to anyone that reads this. Do not and I repeat, do not buy any furniture or office chairs made in China. Gads, the things smell bad with a strong chemical odor.

SheepDog-One's picture

Probably shipped with bedbugs and lice in em as well.

The Profit Prophet's picture

"Wangers Discount Dildos"....its got a nice ring to it.

bob_dabolina's picture

You're stinking stinking up the place Harry.

ForWhomTheTollBuilds's picture

" It ridiculous when people data mine charts to try and predict the future."


Wow...  just wow...


How's the psych paper coming?