Is the Market Primed For a Major Collapse?

Phoenix Capital Research's picture

Today the markets face a number of major headwinds.


They are:


1)   Abenomics is failing. Inflation has risen in Japan, increasing the cost of living. At the same time period, incomes have fallen, as has household spending. And Year to Date the Nikkei is down over 14%, making it the worst performing stock market in the world thus far for 2014.


2)   We are entering a period that has historically been very poor for stocks. According to the Ned Davis (NDR) database, had you invested $10,000 in the S&P 500 every May 1st starting in 1950 and sold October 31 of the same year, your initial position would only be worth $10,026 today in 2007. Put another way, by investing only from May through October, a $10,000 stake invested in 1950 would have only made $26 in 57 years.


3)   The regulators are beginning to crack down on High Frequency Trading. While this is overall a very positive development for the capital markets, it will be removing one of the primary props for asset prices over the last five years.


4)   The Federal Reserve is tapering the pace of its QE purchases. This is also very positive for the capital markets in the long-term as it lowers the Fed’s manipulation of the world’s risk profile. However, short term the tapering of liquidity will generally be market negative.


5)   The market is sharply overbought and overvalued with a record number of investors bullish, margin debt at record highs, record high profit margins, and a forward valuation that matches that attained during the 2007 peak.


All in all, the market is facing an increasingly negative environment. Historically speaking April and May have not been big months for crises, but the number of negatives the market is facing today is rather unique.


Watch the key support line below. In particular, the key issue is how the market reacts if we break it. A sharp drop below followed by a strong bounce would maintain the momentum of the last two years. But if we break this line and fail to reclaim it… we’re in more serious trouble.



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Best Regards

Phoenix Capital Research




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Philalethian's picture

Better to ask, is the plan to kill America almost complete?

pupdog1's picture

After extensive analysis using huge models and supercomputers loaned to me by NASA, I have proven that support is support until it isn't.

Zero guest's picture

Then market may be flat from May to October but I earn six months of dividends in that time.

dunce's picture

The idea that certain months are more likely to coincide with market movements is to me a little like believing in astrological signs. Coincidence is not confirmation. When Jupitor is in line with Mars does not strike me as a logical decision point.

DeadFred's picture

Well of course not, It's the oppostion of Saturn with Uranus that's important. (Never neglect any opportunity for a Uranus joke). The problem with this article is that if the market fails to correct quickly from a break in support it will be confirmed in a 20% market-closing flash crash. You can make over 1000:1 profit on short term puts IF you call such a crash correctly. Of course I'm on about my one thousandth time to call the crash... but it happens next week. :)

atthelake's picture

If you can, buy fuel, food, drink, supplies, meds and organic seeds. 


It's better to wonder why the hell did I buy all these supplies than to wish to God you had.


CYA, if you can.

rsnoble's picture

I have to admit this 'break the line' thesis is getting old and would be like finding gold at the end of the rainbow if it were to break and not recapture.

Oh precious, beloved stock market!  I hence forth give you more trillions!  My cock is hard!!  Ben Bernanke.

EveningInAmerica's picture

The only way we get a real correction, let alone a collapse, is if Old Yeller wants to whip inflation. She has thus far showed little interest (rimshot) in doing so.

Iam_Silverman's picture

The collapse happens only when "THEY" are ready.  They will "fix" HFT and then the market will no longer be rigged.  Perfect time for the retail investor to wade back into the market - and be eaten by sharks once more.

Winston of Oceania's picture

Look at you giving sharks everywhere a bad name...

Iam_Silverman's picture

Heh.  Sharks do what sharks gotta do - to just stay alive.

AdvancingTime's picture

For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Most investors think that even if things go downhill fast that they will be smart enough to get out of the markets. But what if it hits like the flash crash on steroids?

We know that can't happen because circuit breakers have been put in place to arrest panic style moves, but imagine a market that falls, trade is halted, and the market simply does not reopen for days, or even weeks. We have set up a house of cards based on debt and contagion is the cancer eating at the foundation. the article Flash Crash On Steroids can be found below.

Pickleton's picture

And, of course, while it's closed for weeks, the power players will all be able to get theirs out while the serfs are left hanging in the wind.

Winston of Oceania's picture

My dear Pickleton it is one thing to figure things out, but quite another to let THEM know you have done so. It has been nice knowing you...

no more banksters's picture

"Banksters : [...] When money start to spread in the society "above acceptable limits", we create financial crises to take them back. We dictate governments to take measures and apply austerity policies directing money back to us. We keep money valuable to everyone and secure our profits."

Fuh Querada's picture

My dog craps better stuff than this.

MeelionDollerBogus's picture

move along, move along

nothing to see here

Flying Wombat's picture

Marc Faber is looking for a market crash worse than 1987:  click here.

Das Capitalist's picture

Oh, this is new. Phoenix Capital predicting market collapse.

The Wedge's picture

The headline says "major collapse" but the information contained means sharp pullback or needed correction. This will be a buying opportunity!

tardball's picture

That beautiful chart at the end really drives the message through!!!

Fuh Querada's picture

yeah like the blue line touches a maximum of 2 points on the chart and in July 2013 these numbnuts were using the same line to predict an imminent market collapse.

Redneck Hippy's picture

As long as Phoenix Capital keeps posting this "collapse is imminent" garbage, I'm long.  Doubling down with all the margin I have available. Even Faber looks prescient compared to Phoenix Capital.

zaphod's picture

How can there be a market collapse when the FED is printing like a mad man. The market up ramp perfectly matches the expansion in M0.

Now if you mean a collapse of the real economy, yes that is possible, but the fake "market" and the real economy are two different things.

Savyindallas's picture

unless they want   to destroy the dollar (which I believe they do) they will have to quit printing. They have no choice. The dollar is about to be destroyed   -and they know it. 

Zero guest's picture

At this rate the Fed will not be printing at all by October. That is sooner than you think.

AdvancingTime's picture

Never before has mankind diverted such a large percentage of wealth into intangible products or goods and made the claim this is the primary reason that inflation has not raised its ugly head. Bottom-line much of what happens in our economic future depends on inflation or deflation. The modern economy that has evolved over the last several decades is loaded with interwoven contracts reeking of contagion. I contend that if faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar.


Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply. The timetable on which events unfold is often quite uneven and this fact supports the possibility of the following bizarre scenario. A key issue is one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment? Answer, it could be months before your car is repossessed so you buy gas. It is important to remember that debts can go unpaid and promises be left unfilled. The article below delves into how and why inflation may bring economic chaos.

Buck Johnson's picture

Thanks for the link, it really drives home the whole thing.