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Is a Massive Head and Shoulders Pattern Completing ... Just Like On the Eve of the Second Wave Down in the Great Depression?
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In January 2009, I pointed out:
The Telegraph's lead economic writer, Ambrose Evans-Pritchard, has an interesting article arguing that we are in 1931-like conditions:
- A big crash has already happened
- Things are very gloomy
- But we haven't been hit by the biggest crash, the "second leg down" which didn't end for a couple of years
What's he talking about?
Well, look at this chart:
(click here to see full image).
As you can see, the 1929 crash was actually very small compared to the "second leg down" crash which didn't end until 1932 or 1933.
According to Elliot Wave and other chartists, a second - bigger - crash is on its way, just like Evans-Pritchard is warning.
Today, CNBC is reporting:
The
Dow Jones Industrial Average is repeating a pattern that appeared just
before markets fell during the Great Depression, Daryl Guppy, CEO at
Guppytraders.com, told CNBC Monday.
“Those
who don’t remember history are doomed to repeat it…there was a head and
shoulders pattern that developed before the Depression in 1929, then
with the recovery in 1930 we had another head and shoulders pattern
that preceded a fall in the market, and in the current Dow situation we
see an exact repeat of that environment,” Guppy said.
(Robert McHugh is saying the same thing.)
And yesterday, Evans-Pritchard gave
an update on macroeconomic trends in an article entitled "With the US
trapped in depression, this really is starting to feel like 1932":
"The
economy is still in the gravitational pull of the Great Recession,"
said Robert Reich, former US labour secretary. "All the booster rockets
for getting us beyond it are failing."
"Home sales are down.
Retail sales are down. Factory orders in May suffered their biggest
tumble since March of last year. So what are we doing about it? Less
than nothing," he said. [You can read the rest of Reich's essay here]
California is tightening faster than Greece.... Can Illinois be far behind?
***
Roughly a million Americans have dropped out of the jobs market
altogether over the past two months. That is the only reason why the
headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18
months into zero interest rates, quantitative easing (QE), and fiscal
stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually
fell from 58.7pc to 58.5pc. This is the real stress indicator. The
ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks.
Nothing like this has been seen before in the post-war era. Jeff
Weninger, of Harris Private Bank, said this compares with a peak of
21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little
prospect of finding meaningful work, and benefits that are being
exhausted. By our math the crop of people who are unemployed but not
receiving a check amounts to 9.2m."
***
Dean Heller
from Vermont called [the jobless facing an imminent cut-off of
unemployment benefits] "hobos". This really is starting to feel like
1932.
Washington's fiscal stimulus is draining away. It
peaked in the first quarter, yet even then the economy eked out a
growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and
8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled
away. The expiry of homebuyers' tax credit led to a 30pc fall in the
number of buyers signing contracts in May. "It is cataclysmic," said
David Bloom from HSBC.
Federal tax rises are automatically
baked into the pie. The Congressional Budget Office said fiscal policy
will swing from a net +2pc of GDP to -2pc by late 2011. The states and
counties may have to cut as much as $180bn.
Investors are
starting to chew over the awful possibility that America's recovery
will stall just as Asia hits the buffers. China's manufacturing index
has been falling since January, with a downward lurch in June to 50.4,
just above the break-even line of 50. Momentum seems to be flagging
everywhere, whether in Australian building permits, Turkish exports, or
Japanese industrial output.
On Friday, Jacques Cailloux from
RBS put out a "double-dip alert" for Europe. "The risk is rising fast.
Absent an effective policy intervention to tackle the debt crisis on
the periphery over coming months, the European economy will double dip
in 2011," he said.
There is alot of talk of a massive new round of quantitative easing. But as long as the real problems with the economy are not fixed, the additional stimulus will just create a larger drag on the economy.
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add the RSI on there,it's at,not below 30, and isn't oversold until it is. SP 1000 takes it below, 25 or so, before any bounce. Of course, it could stay under 30 for a while before a bounce.
Sunny, been watching that one on the DJIA since '02-'03. They are doozies.
Talked to a neighbor who is a VP at 5/3 bank in Cincy....He said that bank did $5.6 billion in loans last month....He did say only the most credit worth need apply.
did he also mention that the loans were secured with collateral worth 200% of the loan?
The biggest difference that I see is that we now have the PPT "helping" out the market. The fact is, we would all be better off if TPTB had allowed the market to crash, the banks to go insolvent and the rot to have been worked out of the system. Instead, we are living with this cancer that is causing us a slow death while we are asking the voodoo doctors to find us a cure.
The PPT is powerless to stop the next leg down. All they have managed to accomplish, with their trillion dollar slush fund for banksters, is a ~60% retrace of the initial drop--in other words, a classic bear market rally.
Fuck them to hell.
Painfully.
> “Those who don’t remember history are doomed to repeat it…there was a
> head and shoulders pattern that developed before the Depression in 1929,
>then with the recovery in 1930 we had another head and shoulders pattern
>that preceded a fall in the market, and in the current Dow situation we see
>an exact repeat of that environment,” Guppy said.
Hmmm…Ben Bernanke remembers the Great Depression; does that mean we’re safe from repeating it?
I worry that the CBO estimate is way off having expected a better jobs recovery. Businesses are hoarding cash like I am spam for an expected ugly down turn come Jan 2011. Alot of capital and potential savings is going to be sucked out of the private sector for the govt. to feed on.
How 'bout you CPA sorts out there. Do these companies "cash" include accounts receivable? If so, that so-called cash may be at risk -- or just a chimera.
A/R typically wouldn't be considered a cash equivalent under GAAP, but would be a current asset. Non-cash items that you could classify as "cash" for balance sheet reporting could, however, include highly liquid investments (like securities) or very short-term commercial paper.
A big, fast downward slide in the market or an impairment in the ability of a debtor to make good on paper could cause a company's "cash" as reported to evaporate, depending on the composition of their cash and equivalents line.
Of course, this all assumes everyone is following the spirit of the FASB rules, which ain't all that safe an assumption these days.
brandy night rocks, CPA
double post-my bad-Ned
Papa--I've been searching for ANY time that the CBO has been even close. No luck so far, but I'm not trying very hard either. Other things to do.
Have you had any luck in that arena? I think that their rules of "scoring" are rigged and I'm shocked, shocked I say that this is the case.
- Ned
You and Roubini with the Spam. I guess Hormel's stock should be picking up. I will be watching the Hormel or Spam indicator.
Temp,
As I am sure you know..............
With a 2yr shelf life,(expiriation comes when you need it worst)best steer clear of the SPAM, and get Pasta,beans,rice, etc......
Vienna sausages/Sardines, etc have a LONG shelf life.(:>)
Anything in a can, if the top is popped up, botulism express.
Caveat Emptor............
DosZ-probably can't get my family to do sufficient consumption to keep a rolling 2-year average of spam. And I guess if we get hungry enough, sardines will do ;-)
- Ned
The charts and the economic conditions do indeed match up, as does a government with absolutely no interest in promoting work, production, or investment. A perfect storm...
Agencies, such as the PPT, working for the federal government are very good at painting charts, rendering most short term technical analysis almost useless. Nevertheless the long term charts are very ugly, and Dow Theorist Richard Russell has recommended exiting nearly all long positions. I have already, for example, reduced my net long holdings to roughly less than 15%, consisting of investments in private firms and selected gold and energy holdings. In addition I have a significant short position via Proshares Ultrashort.
Technical analysis without considering the fundamentals and geopolitical elements is essentially a zero sum game (minus sum when accounting for commissions, slippage etc). Spending 20 hours reading alternative financial media material, such as ZH, SeekingAlpha,Marketoracle.co.uk is enough, in my view, to convince the unbiased reader that we are headed into financial armaggedon. Further, a shallow understanding of HFT should convince anyone that the stock market is now a muggs game. As for the government, in the best of times they can do nothing useful. But in the worst of times, led (sic) by a inept,mendacious and intellectually insipid president, I am going deep into the bear bunker, taking beans and protective means. Further, and I am not joking, I am looking to buy farmland more than 700 miles away from the gulf. My parents were WW2 survivors, and one thing they always hammered into my head is if you can produce food, you can survive. It was those who lived in large cities that suffered the most.
It's worse than that. Back then, we were a creditor nation, now we are the world's largest debtor. Not only that, but we aren't on the gold standard anymore, and probably don't have any gold.
Actually, all the gold is used as gold teeth caps and as we speak the FED is sending out repo squads to collect the gold.
Actually.... according to the records you to have gold teeth right? Does tommorow moring suits you for a 5 minute visit?
True, true, Mr Mosley. They took gold out of the equation back then. What can they take today? How about your 401k? Lots of talk about that lately. Gold backed the economy then, and YOUR savings back the economy today. Some of that "excess cash" on the balance sheets of companies could come into play as well. See any income taxes for the likes of GE (which paid $0.00) coming on line any time soon? Hmmm. No place left to go but the savings of the already beleaguered middle class.
Rocky, lotsa talk:
http://www.senseoncents.com/tag/teresa-ghilarducci-of-new-school-for-soc...
et cetera (I love those words).
- Ned