This page has been archived and commenting is disabled.

Stocks Post Longest Multi-Week Drop Since 2002 - History Predicts Much More Pain In Store

Tyler Durden's picture


As the superimposed chart below demonstrates, the current 6 week drop, which is the longest in the last 9 years, or since 2002, may just be the beginning. And while our prediction that 2011 is a replica of 2010 is now confirmed, the far scarier possibility is that the next comparison to 2011 is 2002 - if that year is any indication, the SPX will drop to ~1000 before rebounding: obviously at that point the Fed will have no choice but to proceed with QE3, or the downward momentum will accelerate in what may then become a repeat of October 2008, and all those predictions for an S&P 400 would promptly be validated.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 06/10/2011 - 16:19 | 1359328 mynhair
mynhair's picture

As long as Oblahma goes.

Fri, 06/10/2011 - 16:34 | 1359382 Zedge Hero
Zedge Hero's picture

Forget Oblowma, it's the Banking Cartel that needs to go.

Fri, 06/10/2011 - 16:44 | 1359437 Duuude
Duuude's picture

Zedge Hero


Tha chick should be Lisbeth



Fri, 06/10/2011 - 16:23 | 1359332 icm63
icm63's picture

Boring ... cycles said get bearish 3 weeks agooooo


Fri, 06/10/2011 - 16:22 | 1359340 GeneMarchbanks
GeneMarchbanks's picture

wait so 1000 point drop, then QE3, then ?, then gold confiscation, then _____

Go ZHers fill in my ? &______ I dare ya


Fri, 06/10/2011 - 16:22 | 1359343 Alienated Serf
Alienated Serf's picture

The D word will now be spoken. 

Look at the other Great Depression for guidance.  Mass state gov layoffs (school closures especially), sovereign defaults didn't really get going until 1932-3. 

Same pattern now.  Capitulation is near.

Fri, 06/10/2011 - 17:04 | 1359526 Missiondweller
Missiondweller's picture

Its already started but is generally confined to "housing depression". Its just a matter of time before the use of the word begins to expand into wider usage. Its a process where people begin to accept the idea.

A recent poll showed a large % of Americans believe we're headed towards a depression so acceptance is already underway.


Fri, 06/10/2011 - 19:16 | 1359985 Raynja
Raynja's picture

i'm of the belief that this is gonna turn out like 1937-1938

Fri, 06/10/2011 - 19:51 | 1360082 Cdad
Cdad's picture

Take careful note of where the actual "Great Depression" occured in 1929 on the chart...and then look at the rest of the chart.  If you believe, like you say, that we are in a repeat, well then we have an awful lot of downside beneath our feet.

I, for one, agree with you.


Fri, 06/10/2011 - 21:49 | 1360337 WonderDawg
WonderDawg's picture

If you bought at the bottom, you made 500% over the next five years. That's kind of my strategy. Ride it down in a bear fund with the money I feel comfortable putting at risk, which for me is about 25% of the portfolio, then when absolutely no one wants to own stocks, reverse course and go long.

Sounds good in theory, but there are so many uncertainties these days, it's all a roll of the dice. The only thing I believe is absolutely certain is that we're in a deflationary depression, and try though they might, TPTB can't paper over it forever.

Sat, 06/11/2011 - 02:05 | 1360740 jeff montanye
jeff montanye's picture

note the pm miners didn't participate in the 30-32 decline (sideways to up) but did in the subsequent rise: that's one way to play it. 

Sat, 06/11/2011 - 14:49 | 1361451 knowless
knowless's picture

the difference is the concentration of huge segments of the population in dense urban areas reliant nearly entirely on global trade for necessities.

Fri, 06/10/2011 - 23:10 | 1360468 Sunshine n Lollipops
Sunshine n Lollipops's picture

Spoke to a couple of state employees at the department of child support today. They've had 7 'furlough' days (unpaid days off) so far this year, a result of state budget cutbacks. Their wages have also been cut 3% and they're now having to pay more each month into their medical plans. They were telling me it's a bad time to be a gov't worker. They probably have no idea what's coming.

Fri, 06/10/2011 - 16:22 | 1359344 Hedgetard55
Hedgetard55's picture

"Help us, Obi Wan Bernanke!"

Fri, 06/10/2011 - 16:27 | 1359367 wombats
wombats's picture

The force is strong with him.

Fri, 06/10/2011 - 16:41 | 1359419 Troublehoff
Troublehoff's picture

I think you mean:

'the bourse is strong with him'

Fri, 06/10/2011 - 17:06 | 1359521 richard in norway
richard in norway's picture



jeg liker

Fri, 06/10/2011 - 20:04 | 1360134 PhD
PhD's picture

Haakon på bilderberg. Snodig verden vi lever i

Fri, 06/10/2011 - 16:44 | 1359451 buzzsaw99
buzzsaw99's picture

The Dark Side of the Schwartz is strong with him more likely.

Fri, 06/10/2011 - 16:23 | 1359345 AladdinSaneGirl
AladdinSaneGirl's picture

Are certain investors trying to force a QE3 by taking money out of the markets? And sitting on it? If so, it amounts to robbery of the taxpayer/state. Or do I misunderstand where the QE1/2 funds have gone?

Fri, 06/10/2011 - 16:53 | 1359435 Rynak
Rynak's picture

Look at the dollar. Yes, folks are going fiat and sitting on it. What else is there to do, when the economy tanks even while it is on steroids, and when certain big players provide the direction?

I mean, if i had cash in the stockmarket, i certainly wouldn't want to stay in, while stocks and commodities become a capital-sink?

P.S.: The big picture is simple: Both the stockmarket as well as commodities are massively overvalued, thanks to QE1 + 2. It's a baloon that wants to deflate, yet constantly is resupplied with more fiat-air. The fed is threatining to stop pumping air..... what else is one supposed to do, than jump off the sinking ship? Of course, this in turn will send the market down.... which in turn is just the excuse which bernanke needs, to announce the next round of air infusion, at which time stocks and commodities will explode in price.

Fri, 06/10/2011 - 17:04 | 1359491 AladdinSaneGirl
AladdinSaneGirl's picture

Well the problem is there: "certain big players": it's not their own cash these "players" have taken out, it's the taxpayers'. Meanwhile a lot of good stable companies remain undervalued (from what i've read). How can it help the economy when share price is so volatile? Maybe the QE funds should've gone straight into the companies, ie into jobs, R&D, production, etc. The whole thing sounds totally stupid.

PS Just read your ps! Yes i get that the market may be overvalued due to QE1 and 2. Yet i have read last week that some companies are undervalued (according to the usual measures, NAV and whatnot). I'm not an economist but surely there has/d to be a smarter way of solving these issues. 

Fri, 06/10/2011 - 17:08 | 1359523 rocker
rocker's picture

Jamie Dimon cried to the FED, and it failed. So Jamie Dimon tried to do it diabolically for us to see, and it failed.

Do you think Jamie would take all that money back out of the markets? Of course he and the other hedge funds will too.

Remember, JPM, GS and BAC traded 90 days straight and only one had one day that they lost money. Hmmmmm.

I am willing to bet they all made money this month too. No QE so they will destroy the markets. That is how it works.

Risk off, totally now.  Could change, but they will have to have a fresh diaper and powder first.

Fri, 06/10/2011 - 18:55 | 1359918 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Remember, JPM, GS and BAC traded 90 days straight and only one had one day that they lost money. Hmmmmm.

Yes hmmmmmm, the big boys are going to shake out the small hedgies and other investors not in the know. HFTs better watch their backs. They are robbing the elite. It it time to stop that. The mafia whacks their enemies, big money bankrupts theirs. They will crash the market, then QE 3 will appear at the proper moment.

Fri, 06/10/2011 - 19:15 | 1359977 AccreditedEYE
AccreditedEYE's picture

+1 However, you also have to keep in mind that big money has plenty of hft programs all their own. Also, with PD's net short the market right now the evidence would indicate you are correct.

Fri, 06/10/2011 - 17:17 | 1359540 Rynak
Rynak's picture

The problem is with you - you're thinking too "Sane" :)

This whole stupid experiment never was supposed to actually help the economy. As you correctly point out, there are about a few hundred better ways to fix the broken economy (and many of them do not require much cash - just pissing off a lot of lobbies and campaign contributors)... rather than bailing out banks, who have already shown that they are parasites and a hazard to the economy. Heck, even thowing all those billions out of the window, by throwing a really big party in every major city, every day, would have been better - not because it would have fixed anything, but because it at least wouldn't have helped to sustain the issues which caused the whole crisis.

But alas, that's not what they have been doing, and are doing. It's neither about the bottom 90% of the population, nor is it about small to midsized companies. Those actually are now worse off than before. The only ones who benefitted, were large banks and megacorps. So yes, it is robbery... but on a much larger scale, than just the recent stockmarket drop.

Fri, 06/10/2011 - 18:03 | 1359734 SwingForce
SwingForce's picture

It's TREASON, I say.

Fri, 06/10/2011 - 18:35 | 1359774 AladdinSaneGirl
AladdinSaneGirl's picture

Brilliant comments from everybody. Yeah they'd have been better giving every law-abiding citizen $50 shopping vouchers or something. Well the dollar is going to suffer as the Chinese and other economies move into the IMF. Wonder how long it's gonna take before the dollar is superceded.

PS Oh yeah Sane i get u ... Well it's inSane as we know!

Fri, 06/10/2011 - 18:45 | 1359879 SwingForce
SwingForce's picture

Nomi Prins in "IT TAKES A PILLAGE" said they could have paid off EVERYBODY's mortgage in the whole country by now with what they have spent on the banks.

Fri, 06/10/2011 - 19:05 | 1359947 Rynak
Rynak's picture

They also could have "cushioned" the supposed big evil crash, that according to them would have happened, if they do not bail out the megabanks. I'm sceptical if said crash would actually have been as severe as they claimed - but it doesn't matter, because even if it would have been that bad, all the trillions of dollars printed, could have softened such a crash.

So, two of the choices they had were:

1) Print massive amounts of cash to conserve the problem.

2) Print massive amounts of cash to get rid of the problem, and soften the consequences.

They did choose 1. And they didn't do so, because they're incompetent.

Fri, 06/10/2011 - 18:55 | 1359892 Rynak
Rynak's picture

$50 ?

You're still underestimating the in-sanity of the whole program :)

They are each month printing almost 50% of a low-income wage..... multiplied by the total population of the USA.


P.S.: In case you are not aware about it - taxpayers are not paying any taxes for this. Taxes are collected IN ADDITION to this. The way how *all holders of US Dollars* pay for this instead, is inflation. It really isn't so different to taxation, but is not called taxation (the population would instantly turn washington into a blootbath, if they figured this out). It works like this: When you print money and give it to people, those people now hold more weatlh, while everyone elses wealth (buying power) is reduced. And the killer is that this type of "taxation" knows no national borders - as i mentioned, every holder of US dollars is affected, regardless of where on the planet he lives.

Fri, 06/10/2011 - 22:21 | 1360391 Rynak
Rynak's picture

Woah, holly shit! Well, if there was any doubt left, that people are escaping the market, then look at friday's close. Neither traders nor bots wanted to stay in the market over the weekend - no trust in consistency left in the market. Pick any stock or commodity index.... everyone was fleeing the market near the close.... and where did the capital go? Well, look at the dollar, heh.

Prediction: At this rate, the market will crash before the end of QE2, unless the "dealers" stabilize it, or QE3 is announced already in the next week.

Fri, 06/10/2011 - 16:23 | 1359347 mynhair
mynhair's picture

I thought S&P 666 was the target?

Fri, 06/10/2011 - 16:34 | 1359361 dwdollar
dwdollar's picture

I kind of doubt either.  I just don't see them giving back that much.  It would look really bad and discredit QE2.  Either way it's going to be a roller coaster.

But... on the other hand.  They have to wait long enough so QE3 can have a lasting impact going into the presidential debates.

Fri, 06/10/2011 - 16:34 | 1359400 hamurobby
hamurobby's picture

Either way it's going to be a roller coaster.


I agree, Im long volatility with both calls (C and dollahs) and puts (spy), should be interesting.

Fri, 06/10/2011 - 16:46 | 1359460 Rynak
Rynak's picture

At the current speed, they cannot wait for long. Look at the speed at which the market is going down... SP will reach 1000 in weeks, if not less.... perfectly timed to coincide with the end of QE2. At that point, there will be only two routes left: 1. Do nothing, and the broken market will go down vertical. 2. Inflate the broken market with more stimulus.

It's a matter of weeks, not months.

Fri, 06/10/2011 - 18:57 | 1359922 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

dwdollar, the big boys never lose when the market goes into a known crash. They short it and make a killing in the process.

Sat, 06/11/2011 - 09:22 | 1360954 snowball777
snowball777's picture

The "giving back" would be from 401k holders, not the big boys; sheeple make more attentive voters when their retirement isn't being sacrificed at the altar.

Sat, 06/11/2011 - 12:22 | 1361185 dwdollar
dwdollar's picture

Exactly.  As long as people believe in their 401k retirement fantasy, they won't make too big a fuss.

A general uprising of angry voters can still displace any accounting irregularities at the tally machine.

Fri, 06/10/2011 - 16:23 | 1359350 buzzsaw99
buzzsaw99's picture

They KNOW what the number is. We can only speculate.

Fri, 06/10/2011 - 16:40 | 1359433 Troublehoff
Troublehoff's picture

Given all the wage inflation, I guess we can assume that this QE trigger number may be a little higher this time...


...oh wait

Fri, 06/10/2011 - 16:49 | 1359462 buzzsaw99
buzzsaw99's picture

QE1 ~ 666

QE2 ~ 1050

QE3 ~ ????

Fri, 06/10/2011 - 17:19 | 1359573 Troublehoff
Troublehoff's picture

i still cant get my head around this Deflation and Inflation both being good for Gold  - surely that makes about as much sense as piling debt on top of more debt to get ourselves out of this mess?

Fri, 06/10/2011 - 17:37 | 1359629 buzzsaw99
buzzsaw99's picture

I disagree with that premise. Gold is historically a hedge against monetary inflation. The "gold is money" crowd has yet to prove their (good in periods of deflation) thesis with me.

Fri, 06/10/2011 - 17:51 | 1359693 Rynak
Rynak's picture

Well, in pure THEORY, the real value of gold should not change much, if it is constantly used as a stable wealth storage.

But in practice, that does not happen. When fiat devalues, or is rather stable, people prefer it over PMs. I can understand why... easier to transfer than PMs, plus it's less complicated if you do not constantly need to exchange between PM and fiat. And so, as long as fiat is strong, PM demand decreases and thus sends it's prices down.

I guess, in theory the best solution would be something, which long ago was the case in the USA.

Sat, 06/11/2011 - 00:58 | 1360638 Urban Redneck
Urban Redneck's picture

Read the articles from 2008-2009.  Sorry about the source- but the search function worked easily.  The was some more substantial analysis that came out during the same period but I can't find it online now.

Fri, 06/10/2011 - 16:24 | 1359354 RobotTrader
RobotTrader's picture

IYR was finally destroyed today.


Fri, 06/10/2011 - 16:58 | 1359490 Richard Head
Richard Head's picture

"Destroyed", you mean like that TZOO stock you were pumping?  Funny how we never hear about your lame stock picks after they blow up.  Keep pretending you're a real trader, asshole.

Fri, 06/10/2011 - 17:24 | 1359579 PeterB
PeterB's picture

The youth of today, no respect. RT was one of the reasons ZH became popular before it was invaded by one eyed fanatics who will only get more & more irate as the truth unfolds. I suggest you search the archives more deeply before hurling criticism.

Fri, 06/10/2011 - 17:53 | 1359691 Bonesetter Brown
Bonesetter Brown's picture

Amen brother

Fri, 06/10/2011 - 18:02 | 1359718 Mr. Sheeple
Mr. Sheeple's picture

I'm new here and and have heard something similar. Are you saying that there is more doom and gloom talk these days?

Fri, 06/10/2011 - 18:43 | 1359874 Spastica Rex
Spastica Rex's picture

Sorry, we the peanut gallery don't roll that way.

Oh, and why no more graphs and pics? Hmmmmmmm??????

Fri, 06/10/2011 - 18:47 | 1359884 SwingForce
SwingForce's picture

That was RoboTrader  (one letter "T") me thinks.

Fri, 06/10/2011 - 20:38 | 1360198 Spastica Rex
Spastica Rex's picture



Fri, 06/10/2011 - 19:18 | 1360000 AccreditedEYE
AccreditedEYE's picture

While I agree w/ your defense of Robo, I resent your comment on "One-Eyed Fanatics"...

Fri, 06/10/2011 - 21:31 | 1360293 StychoKiller
StychoKiller's picture

Perhaps you should locate a 55-gallon drum of Visine™... :>D

Fri, 06/10/2011 - 19:27 | 1360024 bob resurrected
bob resurrected's picture

I second that emotion.

Fri, 06/10/2011 - 19:22 | 1359860 SwingForce
SwingForce's picture

-3x etf DRV +7.58% today, the black boxes are being re-programmed, I tell ya. That's why there's no panic. FAZ was last 2 weeks, now perfected (as of 2 pm). There are 2 -3x RUT etfs- SRTY & TZA. My guess is we'll have a final runup so as to wind back down these Inverse etfs, like recoil the springs before they let loose on the downside. These did not exist in 2009. Now we have FAS/Z w/ weekly options expirations, whew!

NOTE: ALX not in IYR yet largest DRN/V holding, untouched today $394.14, -0.12 

Fri, 06/10/2011 - 19:39 | 1360061 SwingForce
SwingForce's picture

Top 6 Banksterz up today: GS JPM BAC C WFC MS


Fri, 06/10/2011 - 20:01 | 1360124 buzzsaw99
buzzsaw99's picture

JNK didn't fare as well as TLT either.

Fri, 06/10/2011 - 16:28 | 1359355 SmoothCoolSmoke
SmoothCoolSmoke's picture

Que the Greeks!  Let's get it over with by 10 am Monday.

Fri, 06/10/2011 - 16:25 | 1359357 slewie the pi-rat
slewie the pi-rat's picture

zeroHeads already know this is the PPT getting us ready for QEIII

Fri, 06/10/2011 - 16:31 | 1359365 SmoothCoolSmoke
SmoothCoolSmoke's picture

Yes, they trotted out Tepper today to set the mark.  SP < 1000.

Fri, 06/10/2011 - 16:54 | 1359489 oogs66
oogs66's picture

+1   (actually -270 more pts)

Fri, 06/10/2011 - 16:26 | 1359358 TruthInSunshine
TruthInSunshine's picture

Broken spine, bitchez.

Down Bernank's glory hole the unrealized gains shall flow.

With or Without POMO.

Fri, 06/10/2011 - 16:27 | 1359364 phungus_mungus
phungus_mungus's picture

Financial Jihad!!!!

Fri, 06/10/2011 - 16:28 | 1359369 Gimp
Gimp's picture

Bankstas are using the play book to blackmail the Fedidiocricy into QE3...masterminds

Fri, 06/10/2011 - 16:33 | 1359377 skepticCarl
skepticCarl's picture

As evidenced by the VIX reading below 20, this downturn has been greeted with a collective yawn by the apathetic retail investor and trader.  These poor schmucks will finally capitulate at the bottom, with the VIX registering at least 30, maybe near 40.  Get your shorts on, or at least, close out the longs.

Fri, 06/10/2011 - 17:34 | 1359616 Boston
Boston's picture

Yup, after the Fed stops QE, the VIX should finally "wake up".  

When it slices through 30, and preferably 40, I'm selling my Treasuries.....

Fri, 06/10/2011 - 16:30 | 1359378 New American Re...
New American Revolution's picture

Welcome to the New American Revolution, the book is going out to the publisher on Monday and should hit the street sometime this summer if all goes well.    VIVA la' REVOLUTION!!!

Fri, 06/10/2011 - 16:34 | 1359380 HungrySeagull
HungrySeagull's picture

What goes up MUST come down sometime.

Sat, 06/11/2011 - 09:23 | 1360956 snowball777
snowball777's picture

The market can remain irrational far longer than you can remain solvent.

Sat, 06/11/2011 - 22:53 | 1362231 HungrySeagull
HungrySeagull's picture

Damn right.


Fri, 06/10/2011 - 16:32 | 1359381 razorthin
razorthin's picture

They are going to be rigging it to the upside very soon.  But I think we go back to at least 8500 on the dow before any real new cyclical bull.  The secular bear could take us to sub 1,000 on the dow.

Fri, 06/10/2011 - 16:31 | 1359384 YesWeKahn
YesWeKahn's picture

Come on Tyler. This is nothing. Dropping from 138 to 127? it's not even 10%. People should gradually get used to this. When this junk went up from 700 to 1380, the greedy people think it wasn't enough, they want 1500. They will eat shit first.

Fri, 06/10/2011 - 16:39 | 1359410 monopoly
monopoly's picture

Well, I think what Tyler is saying is that the elevator makes stops to let people off, and some on, to go to a higher floor., The market does not go straight down. If you look at your chart that is a good level for a bear bounce. Gotta have some patience guys. Took us 2 years of lies to get up here, not going down to the basement in a month.

Fri, 06/10/2011 - 16:38 | 1359418 YesWeKahn
YesWeKahn's picture

at least you learned your lesson.

Fri, 06/10/2011 - 22:01 | 1360354 WonderDawg
WonderDawg's picture

Maybe not in a month, but it won't take two years like it did to get here. 6-8 months ought to do it.

Fri, 06/10/2011 - 16:36 | 1359389 Josh Randall
Josh Randall's picture

Express elevator to Hell going down

Fri, 06/10/2011 - 16:45 | 1359454 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

For your viewing pleasure:


Fri, 06/10/2011 - 16:36 | 1359390 monopoly
monopoly's picture

QE whatever will be tough. If the first 2 did nothing except raise prices and inflate the goods we need what will 3, 4 to infinity do for us? And, for the first time, some of the sheeples are starting to get this "printing" from the head inmate. Politics will rule, and for now no QE, subject to change of course.

And shorting is not for the feint of heart. It is tough. Usually best just to remain with confetti if you are not comfortable with the ups and downs. For me, it feels good to work my convictions for a change. Never got into the longs outside of gold, oil, etc. but now can short and feel good about it.

And finally, shorts may do well, but lets not rant about our success on the site too much as there are many who only play long and are hurting. Remember those trolls who shout will glee as our gold and miners keep going down. Same way with shorts for those of us who work that side.

Have a great weekend all. Monday gonna be interesting.

Fri, 06/10/2011 - 16:38 | 1359401 razorthin
razorthin's picture

Sad thing is we haven't even seen the inflation from QE2 yet.

Fri, 06/10/2011 - 16:38 | 1359404 cashcow
cashcow's picture

All the way to 400. ZH u should publish the pdf which explains why 400 is coming.

Fri, 06/10/2011 - 16:45 | 1359441 Tyler Durden
Tyler Durden's picture

Start here and here

Fri, 06/10/2011 - 18:17 | 1359779 SwingForce
SwingForce's picture

That was cool!

Fri, 06/10/2011 - 19:03 | 1359955 The Fonz
The Fonz's picture

Oh damn. hahahahah.

Fri, 06/10/2011 - 22:09 | 1360375 espirit
espirit's picture

That is so cool how you do those links.

Sat, 06/11/2011 - 05:15 | 1360826 Highrev
Highrev's picture



Very cool.


Now if I could only post a chart now and then. ;-/

Fri, 06/10/2011 - 17:46 | 1359494 CoolClo
CoolClo's picture

Cycle wave C to take the DJIA down to 400 sometime in 2016....

Fri, 06/10/2011 - 16:38 | 1359405 digalert
digalert's picture

CNBS facing dilemma on new hat orders:

"DOW 36K"? or "Obama 2012"? decisions decisions


Fri, 06/10/2011 - 16:37 | 1359415 monopoly
monopoly's picture

I know Art still has his DOW 10,000 hat. Wonder if the "brilliant" ones on the idiot channel saved theirs.

Fri, 06/10/2011 - 16:43 | 1359427 razorthin
razorthin's picture

They popped that puppy out, what a dozen times?  And they'll be doing it again.

Fri, 06/10/2011 - 17:17 | 1359569 SokPOTUS
SokPOTUS's picture

DOW 2012.  No further decisions considered necessary.

Fri, 06/10/2011 - 16:39 | 1359429 You Lie
You Lie's picture

While the chart pattern may be close,   the moving averages do not compare for the 2 timeframes involved.

Fri, 06/10/2011 - 16:39 | 1359430 Brian
Brian's picture

The timing of the drop needs to be considered in the proper context.

QE3 will happen, but in order to be justified, Bernanke needs to be able to point to deflation, so a drop in stocks is inevitable.

When it will happen is also pretty clear in the context of the next presidential election and the debt ceiling matter.

In order to win the presidential election, QE3 must be made to be palatable (enough).  There is a built in excuse to blame Republicans, which is that they refuse to raise the debt ceiling.  This refusal will be spun as the cause for the crash in stocks (and the problems with the bond market), but of which will actually have been the result of the end of QE2.

However, in self-fullfilling prophecy mode, the Republicans will certainly not pass anything until after Aug. 2, which will cause some traders to panic (and rightly so, as payments to government vendors will be halted, so major banksters and government looters will see revenues drop).

Understanding the players, you can understand how to play the game.  This is poker.  Watch what happens end of July.  All the blame will go to the Republicans, the stock market will hit lows, commodities will crash, presto - deflation, just in time for Bernanke to justify QE3 because "No one is buying bonds while default fears spook the marketplace - because of the Republicans failing to do what is best for the country, blah blah blah..."

Perfect timing, perfect excuse.  QE 3 will be slated to last until at least November of next year.  YOY comparisons leading up to elections will be comparing June and July and August, which will be low this year but notionally much higher next year after massive QE3...

It is all there to see.  It also makes the timing easy.  Short now.  QE3 WON'T be announced until August, when in a "panic" weekend, the Fed will ride in to "save the day" 

I'm short as can be right now, will go long right when it looks like congress will ABSOLUTELY NOT pass a debt ceiling increase (but right before a miraculous compromise actually does allow it to pass a few days later, and after QE3 gets announced.


Fri, 06/10/2011 - 16:59 | 1359501 Hedgetard55
Hedgetard55's picture



 QE3 all the way from Sept 2011 to November 2012 elections? Do you think gas at $300 per barrel and $15 per gallon will help Obambam get re-elected? It will also drive interest rates higher.


And does QE3 necessarily mean a rising stock market at this point?


Not saying you are wrong, nobody knows what is going to happen yet, probably not even Ben.

Fri, 06/10/2011 - 17:15 | 1359544 mynhair
mynhair's picture

I'm buying gas at $300/ barrel then.  Scru gallons.

Fri, 06/10/2011 - 17:48 | 1359688 Brian
Brian's picture

I didn't say that I think the plan will be successful.  I think it is a disaster, as I have been shouting from the rooftops for the past 8 years.

This is the culmination of it, and there is no question in my mind that hyperinflation and dollar destruction will result.  I have written several articles saying the same thing over the years.

All I'm pointing out is that playing the market isn't the way to look at things anymore; playing the players is what to do as an investor right now.  And the players are looking at this current debt ceiling in the context of really, really, really wanting to print more money.  How do they get their way?  Simple, blame the debt ceiling, not their own printing, for the economy's woes.

It's absolutely a disasterous plan for the USA and the dollar, but it is exactly what is playing out.

$300 per barrel oil?  Probably.  I will be very long before that happens, though.


Fri, 06/10/2011 - 20:43 | 1360212 Spastica Rex
Spastica Rex's picture

I think your timing doesn't work; August is about 12 months too early, IMO. If the Democrats are going to pull a fast one, I think it's got to be an October ('12) surprise. How 'bout  a war?

Fri, 06/10/2011 - 16:46 | 1359445 max2205
max2205's picture

Paper propping up paper

Fri, 06/10/2011 - 16:47 | 1359466 slow_roast
slow_roast's picture

This is Friday Porn at its best.

Fri, 06/10/2011 - 16:50 | 1359476 buzzsaw99
buzzsaw99's picture

I love the smell of burning berkshire butt in the afternoon.

Fri, 06/10/2011 - 17:13 | 1359551 mynhair
mynhair's picture

That is way gross, even for you.  Gotta hurl....

Fri, 06/10/2011 - 16:54 | 1359479 Rainman
Rainman's picture

Risk off. Maybe Ben should have taken that bid from AIG on Maiden Lane after all.

Fri, 06/10/2011 - 17:02 | 1359507 foxman
foxman's picture

How about S&P ~900 with no QE intervention?

Fri, 06/10/2011 - 17:08 | 1359525 Arnolds Love Child
Arnolds Love Child's picture

That phony 2pm BAC spooge saved my ass.

Fri, 06/10/2011 - 17:20 | 1359562 foxman
foxman's picture

Fri, 06/10/2011 - 17:31 | 1359588 mendigo
mendigo's picture

the trigger for further stimulation will be unemployment rate ...well... and the need to hide the impending bond implosion for a while longer.

because future efforts will likely be as ineffective as QE1/2 and any incidental effect will be at best transitory one could expect the charade will be timed for shortly before the elections. I think this POMO stuff (while it brightens Tyler's day) is lost on most off us - I am expecting checks in the mail on this round.

Fri, 06/10/2011 - 19:00 | 1359929 Kali
Kali's picture

or abolish income tax?  I don't want their money.  I just want to keep mine.

Fri, 06/10/2011 - 17:39 | 1359638 gwar5
gwar5's picture

Buy short (inverse) ETFs and ride it down. Follow ZH when to jump out.

Fri, 06/10/2011 - 17:44 | 1359649 fartinyourgener...
fartinyourgeneraldirection's picture

I logged on to Google finance and it was showing the DIJA at 00.00 down 100%!! 


a sign of things to come?

Fri, 06/10/2011 - 17:59 | 1359707 RocketmanBob
RocketmanBob's picture

What happened to the "stick save" crew today ?!?!?

I guess the "Squid" was shorting the market.

Fri, 06/10/2011 - 18:01 | 1359713 gatorontheloose
gatorontheloose's picture

other symbols are showing this too

Fri, 06/10/2011 - 18:04 | 1359741 topcallingtroll
topcallingtroll's picture

Dont be afraid of a little pain.

Pain is good for you, just not for me.

Fri, 06/10/2011 - 18:20 | 1359787 magpie
magpie's picture

It's hard to imagine any sticksaves right now, but i have been surprised before.

Fri, 06/10/2011 - 20:15 | 1360152 yogibear
yogibear's picture

QE3 should ramp oil and the rest of the commodities.  Each QE has been less effective than the previous one.

It won't matter much if the DOW is 22,000 and peple are starving because a loaf of bread is $10 due to a greatly devalued dollar. Bernanke's QEing has led to food price spikes in the Middle East and riots. With another QE we could be facing $7/gal gas it will lead to more termoil. Eventually everybody wants out of the dollar when the value drops enough.

Bernanke and the Fed is destroying the fabric of the American finaincial system only to enrich a few people on Wall Street.


Fri, 06/10/2011 - 21:21 | 1360269 Trajan
Trajan's picture

1937, live it, love it,  embrace it. I am runing a sale on apple boxes...

Fri, 06/10/2011 - 22:02 | 1360359 Buck Johnson
Buck Johnson's picture

This is getting nastier and nastier.

Fri, 06/10/2011 - 22:40 | 1360435 Bananamerican
Bananamerican's picture

nasty, brutish, and SHORT

Fri, 06/10/2011 - 23:18 | 1360483 johngaltfla
johngaltfla's picture

This could be just oh so much fun if we could just short the Robot bitch off this board.....


Say to S&P 800 should do it.

Fri, 06/10/2011 - 23:39 | 1360509 Ned Zeppelin
Ned Zeppelin's picture

This is simple.  For QE to be "allowed," and not trigger a currency crisis, there must be what  I have dubbed a "Decent Interval" between QE 2 and QE 3.  For that reason, the equities markets, and the risk on trade MUST take a hit for the summer at the very least. The Eurocrisis is good for the Treasury issuance post QE 2 - there is even a chance that market demand, the search for the riskless return in a time of declining markets, will fill the gap (in terms of buyers for Treasuries) during the Decent Interval.  

However, this cannot last, as the lack of liquidity will cause the TBTFs, who own the Fed, much pain and consternation.  Wait for the signs that QE 3 is coming - in the meantime, looad up on gold, and be ready to buy equities when the time comes to ride the markett up for a bit.  But this leaves open the very real question of how long this game can continue. 

Sat, 06/11/2011 - 01:05 | 1360651 qussl3
qussl3's picture

The fundamental issue is too many people not enough resources. If a billion or so Chinese and now Indians want to enjoy similar standards of living as in the western nations, someone else has to take a cut in theirs. This dollar devaluation and eventually euro collapse is just a controlled descent rather than the more historically consistent cathartic resolution. If the US or euro decide not to accept this , then the only resolution is some kind of conflict. Already we have proxy wars throughout MENA, it's probably just a matter of time before we get an "incident".

Sat, 06/11/2011 - 00:26 | 1360586 jimhalpert
jimhalpert's picture

shall I do the obligatory " that's what she said" here?  OK, done.  Have a nice collapse...

Sat, 06/11/2011 - 00:31 | 1360595 jimhalpert
jimhalpert's picture

Re: China saying we have already started defaulting...If I were China, I would launch every ship I had into the Pacific until you couldn't see the water anymore and send them straight to LA to start the invasion.  China's not gonna get paid.  So much for keeping the stockholders happy.  If you bought stock in America ( US Savings bonds)....I R pissed!

Sat, 06/11/2011 - 08:57 | 1360929 Ned Zeppelin
Ned Zeppelin's picture

Intersting but one thing is true: we are the most armed and dangerous debtor on the planet, and there are no means of collection of unsecured debt in this circumstance. All the paper is unsecured and if we default there is no recourse to the borrower. 

Sat, 06/11/2011 - 09:13 | 1360944 Urban Redneck
Urban Redneck's picture

China is the world's largest gold producer, and they hold enough Bernanke Bucks to torpedo the USD whenever they choose.  If they torpedo the USD and simultaneously float CHY (thereby giving the DC ass clowns exactly what they have been begging for), the US won't be able to afford OIL for consumers, producers, and the military and will turn on ITSELF. Meanwhile the price China pays for oil goes remains relatively flat.  All they have to do is keep the EU afloat awhile and grow the third world consumer's borrowing capability a bit.  Then the weakness of out sized US share of the Chinese exports is diminished and the economic shooting range can go hot.

It is much more efficient to allow your advesary to destroy himself, then to expend your own resources to do so.

Sat, 06/11/2011 - 09:40 | 1360972 Cdad
Cdad's picture

If they torpedo the USD and simultaneously float CHY (thereby giving the DC ass clowns exactly what they have been begging for), the US won't be able to afford OIL for consumers, producers

While I agree with your point about DC getting exactly what they have been asking for [a weak dollar to inflate away debt], your point about not being able to afford oil omits the counter measure known as the Strategic Petroleum Reserve.  While folks who include the SPR in their analysis of daily US oil consumption ALWAYS cite that it only represents a two month supply, the fact is that releasing oil from this facility, in earnest, would quite literally break the price of oil and, hence, the oil trade.

There is enough oil there, and with a capacity to release more than 4 million barrels per day, to arbitrage to death entities bent on driving oil parabolic.  And if "break" is too strong a word, the SPR makes the move that you are suggesting VERY RISKY...and expensive.

If you then add to this part of the argument the reality of collapsing economic activity around the world [ie falling demand associated with what is clearly an impending global recession], the stake to the heart move of driving the US under with oil prices is not likely at this time.

As for China "floating" its currency, there are a whole seperate set of economic consequences to that which you are also not considering...but to which I say, go ahead and float it, China, so that we can see what the world wide market has to say about that.  Of course, the consequences to which I refer speak to the domestic problems that would crop up within China were it to make that move.

My point ain't as simple as your post would seem to suggest.

Sat, 06/11/2011 - 10:47 | 1361074 Urban Redneck
Urban Redneck's picture

I wasn't suggesting that it was easy or that China would have all the preparations completed in the immediate future.  However, opening the SPR is very risky for purely economic reasons, especially while having the military active in three theaters already.  The SPR calculations I recall were about 3.5 mbpd average draw-down, but that was a while ago and it took into account the decline in w/d rate as the SPR empties.  Hopefully number of active theaters will be reduced by the time China completes phases 2&3 of its SPR.  The problem is that the US isn't strengthening its position over time, it's weakening its position.  Once the American consumer is tapped out of wealth to feed the Chinese exporters the cost benefit equation changes for them.  

Sat, 06/11/2011 - 11:10 | 1361106 Cdad
Cdad's picture

opening the SPR is very risky for purely economic reasons

Not sure I understand what you are suggesting.  Considering the comparatively low basis established on the per barrel number, the opening of the SPR and the selling of that oil would be profitable...for the US govt.  

If the SPR were opened, in earnest, and sold down to counter any scheme to drive oil up prices, it would have the effect of flooding the market with oil for around 200 days.  There is not an oil trader alive that could withstand that pressure, and via futures contracts, the price of oil would collapse.  Of course, the US govt could then reverse the entire process and buy forward at collapsed prices [which would cause them to rise again...but probably in a more timid fashion].  This is the very basic premise I am suggesting here.  It has nothing to do with a "tapped out American consumer."  

Not sure what you mean by Chinese exports of oil, either, as China imports oil.  Perhaps, you misunderstood me to suggest that it was China's SPR that I was talking about.

About the weakening of America's forward position regarding domestic oil production, that process is now beginning to reverse DESPITE the current govt's ineptitude regarding US energy policy.  In North Dakota and Colorado, enormous energy supplies have been discovered, and the process of exploiting those has begun.  As well, the amount of oil in the Gulf of Mexico is far greater than anyone talks about, notwithstanding the pooch screw by BP.  On this count, it will take time to get to where America needs to be on the domestic oil.  Thankfully, however, Canada continues to help ease the pain for US needs.

It is very complicated, I grant.  My point, specifically, was to the very fragile nature of the current price of oil, and how the SPR could be used [in accordance with its express purpose] to insulate the US from foreign influence on the price of a barrel of oil were it the case that some entity decided to use that oil price as an economic weapon.  I thought that was point of your posted comments.

Sat, 06/11/2011 - 12:19 | 1361188 Urban Redneck
Urban Redneck's picture

The Chinese exports I was referring to were manufactured goods. 

I think if China were to engage in economic warefare with the US the primary weapon would be the value of the USD itself, and using it to drive US inflation and domestic instability. 

A rising nominal USD oil price would be a reflection of that inflation, which could be mitigated within the US energy complex by the US SPR with a host of caveats or unknowns on timing, duration, % of the global oil trade then denominated in USD. 

The Chinese would then have the option of revaluing the CNY offset their rising domestic oil price with a host of caveats or unknowns on timing, duration, % of the global oil trade then denominated in CNY/RUB.  

The whole thing is a big "what if" outside of contingency and strategic planning, but the US hasn't reduced foreign energy dependence since the Energy Department was created in '77.  The US continues to ship its manufacturing base overseas and increase its trade deficit.  Even the existing debt load is unsustainable with historically average interest rates, and no one is even seriously talking about balancing the budget much less significanlty reducing the debt load.  So as time passes the battlefield inherently favors the Chinese more and more.

They also have the advantage of experience in sacrificing welfare or lives of tens of millions of citizens in pursuit of their five year plans. 

Sat, 06/11/2011 - 11:00 | 1361098 Ying-Yang
Ying-Yang's picture

I dunno Ned...

Bet we won't host the Olympics anymore.

Sat, 06/11/2011 - 00:45 | 1360621 glenlloyd
glenlloyd's picture


Sat, 06/11/2011 - 06:05 | 1360833 Highrev
Highrev's picture

What did the CBOE Options Equity Put/Call Ratio look like at that time?


Comments on this?

BTW, it's Free Gold Access Weekend on TickerForum

Sat, 06/11/2011 - 07:28 | 1360873 Alex Kintner
Alex Kintner's picture

This is why Obomba has stared bombing Yemen now. We will "Bomb Our Way Back To Prosperity"©. Or do we make the Daisy Cutters in China now? It gets so confusing -- our gifted leaders will figure it out.

As always, "Bomb the Dip".

Sat, 06/11/2011 - 09:43 | 1360977 snowball777
snowball777's picture

General Dynamics is in CT...they'll make the parts in China, while getting their uncle to borrow from China, until we have to use them on China.

Sat, 06/11/2011 - 11:30 | 1361121 Alex Kintner
Alex Kintner's picture


Sat, 06/11/2011 - 10:55 | 1361092 Ying-Yang
Ying-Yang's picture

I have a dream that one day this nation will rise up and live out the true meaning of its creed: "We hold these truths to be self-evident, that all men are created equal."

Oh well......

Sat, 06/11/2011 - 12:13 | 1361182 lizzy36
lizzy36's picture

One of the sad facts of life is that not all men are created equal. And life ain't fair.

The true meaning of anything is perception. Substantive equality is but a dream.

Sat, 06/11/2011 - 12:22 | 1361195 Highrev
Highrev's picture

Is that to say the U.S. doesn't have a creed to live up to?


Sat, 06/11/2011 - 23:41 | 1362310 longorshort
longorshort's picture

How is Tyler gonna afford all that hair gel for his outdated dew?

Sun, 06/12/2011 - 07:45 | 1362723 WillieG
WillieG's picture

I have read several times that this is the longest weekly losing streak for the S&P 500 since 2002.  I am seeing six consecutive down weeks ending the week of 7/11/2008 and 7/23/2004.  One happened in the context of a cyclical bull and the other a cyclical bear.

Do NOT follow this link or you will be banned from the site!