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Anatomy Of A Market Collapse

Tyler Durden's picture




 

Via Michael Naso of FBN Securities,

On August 14, I penned a Daily Missive which outlined the various fundamental and technical characteristics of each of the three stages of a standard rally such that one could use the blueprint in identifying an imminent top which I officially called for on September 7.  The piece received more positive feedback than most such that the 6.6% drop in the S&P 500 from the September 14 peak merits a similar commentary on the different phases of a market pullback.  The chart below leverages statistics compiled from the prior decade from various selloffs (i.e. > 7%) which have produced consistent patterns that help traders ascertain the potential depth and duration of the current downward move:

 

Negatively skewed prices mark a key hallmark of selloffs in that stocks descend much faster than they rise.  Although the duration of a rally may last months or possibly years, a soft market may only exist for a few weeks or less.  Consequently, when a decline lasts for several months or longer, such as the collapses of the Dot Com bubble and the financial crisis, shares suffer massive dislocations.

No sustained drop in equity prices ever fits perfectly into one of these three pockets; however the current pullback appears close to crossing from Mid-cycle to Exhaustion.  The average monthly NYSE Closing TICK has dipped to +87 which I would classify as oversold albeit not excessively so.  This represents my most reliable buy signal such that without this trigger, I will remain negative for the days ahead even though the average intraday TICK has fallen solidly below +15.  Open interest has now increased by 150K E-Mini equivalent contracts over the prior two sessions indicating that long-short managers have panicked somewhat and subsequently reduced the beta of their portfolios.  The average intraday range over the prior week has increased to over 20 handles while the difference in intraday volatility between the cash index and the E-Minis decreased sharply yesterday.

Fundamentally, earnings have stumbled, but have not worsened as we have progressed through the reporting season.  The economic data has improved, but I anticipate a negative inflection point in these statistics as the effects of Hurricane Sandy and the fiscal cliff start to make their presences felt over the next several weeks.  Most analysts foresee the FOMC will supplant Operation Twist, which expires on December 31, with unsterilized Treasury purchases totaling $45B.  While the fiscal cliff looms as a massive exogenous shock into year end, additional selling may entice buyers with attractive valuations since Congress and the President still has nearly two months to arrive at some resolution.  I expect the risk associated with the event will not heighten dramatically until after the Fed meeting on December 12 such that investors would judge a forward P/E that drops to 12.0x in the near term as reasonably cheap to engage in bottom fishing.

 

Extrapolating the current landscape from this historical reference yields a market not too far off from a significant trough such that I currently estimate a bottom for the S&P 500 between 1355 and 1360.  For many, the current index level is close enough to this target to start picking away from the long side.  I am a bit more demanding when calling for an official turn, such that I will use my aforementioned test associated with the average monthly NYSE Closing TICK as my guide.  Fundamentally, if and when I do call for a reversal, it will be modest and cyclical within the context of a larger pullback that arises from a butting of heads in trying to assuage one of the most serious fiscal crises facing the Federal Government in its history.

 

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Fri, 11/09/2012 - 09:42 | 2964052 GetZeeGold
GetZeeGold's picture

 

 

Better drive home....we're too screwed up to walk.

 

Fri, 11/09/2012 - 09:43 | 2964060 disabledvet
disabledvet's picture

I thought you were going to the gym for your "work out"? back so soon?

Fri, 11/09/2012 - 09:43 | 2964063 Spirit Of Truth
Spirit Of Truth's picture

The stock market is currently following an analogous pattern to the 1929 and 1987 stock market crashes. If the parallel holds true, then we are about to enter a free fall:

http://thespiritoftruth.blogspot.com/2012/11/extreme-danger-immediately-...

The question is: Why?

Let's hope and pray it's just Greece to worry about.  My concern is high regarding Syria and the potential for all-out war to erupt in the Middle East:

http://www.haaretz.com/news/diplomacy-defense/israel-warns-assad-over-st...

Fri, 11/09/2012 - 10:01 | 2964131 Chupacabra-322
Chupacabra-322's picture

@ Spirit Of Truth, "then we are about to enter a free fall:"

Got news for ya, we're already "off the cliff" and in free fall speed.  Rule number one.  Remember, these Criminal Politicians talk in double speak.  Whatever they say, think and interpret in terms of exactly the opposite. 

Fri, 11/09/2012 - 10:06 | 2964158 holdbuysell
holdbuysell's picture

"Subprime is contained" - Chairman
Bernanke

Fri, 11/09/2012 - 11:16 | 2964400 I am more equal...
I am more equal than others's picture

While the fiscal cliff looms as a massive exogenous shock into year end, additional selling may entice buyers with attractive valuations since Congress and the President still has nearly two months to arrive at some resolution.

Gee, a whole two months.  I feel secure knowing that politicians are serious folk and willing to make hard decisions.  /sarc off

What possible solution is there to the massive debt?  The Wiermar Solution - Bernakes a studen of history of the depression.  Does that includes Germany's?


Fri, 11/09/2012 - 11:24 | 2964445 eatthebanksters
eatthebanksters's picture

Aslong as Bernanke keeps printing there won't be a top...just sayin'

Fri, 11/09/2012 - 13:31 | 2964903 TruthInSunshine
TruthInSunshine's picture

As a factual matter, measured in real terms, we're already in a depression. The majority of MSM watching sheeple could never realize this (cognitive dissonance). Peope don't understand that the 47 million Americans on SNAP (as well as the 1 in 4 Americans on other direct transfer payment government assistance programs) are the new soup lines that were seen in the 1930s. Most people believe that the unemployment rate is what the MSM headlines say it is, when in reality its close to 25% (using U6 calculated the way it was prior to 1994, when the real manipulation of employment data began), and the compensation of those Americans who are working, whether full or part time, and with or without benefits, is stgnant or falling in real terms.

Governments are papering over the real decline in productivity, while papering over (or up) the real decline in consumption, through credit/debt/fiat expansion, and in the process of this massive increase in indebting themselves & their citizens, governments all across the globe have already ensured the depression will go on for some considerable time.

As this takes place, governments are also ensuring that the fall will not only be inevitable, but will be far steeper than it would have been had they let they let market based mechanisms continue to purge the toxins in the system (akin to letting the forest fire burn, so that the scrub and dead wood be consumed), rather than prop up the diseased institutions and mark assets (or liabilities) on balance sheets to unicorn levels.

The majority of people won't realize that everything I've mentioned is what's actually happening until either their standard of living falls at a pace that's so significant that it hits them over the head like a hammer and/or creditors attempt to call in their notes and other debt/credit instruments.

As these things are realized and the faith in the system is lost by the majority, those who do have equities or other assets in the form of ostensibly redeemable paper instruments will rush to liquidate them in order to trade the proceeds for necessities of life, and this is what will produce the 1932-1933 style market crash (part of the crash will be attributable to a generational/demographic trend whereby those about to retire or those retired attempt to convert more of their paper assets into purchasing power for necessities, as well).

The entire gobal economy is a true ponzi scheme built on pillars of faith in government printed fiat that has zero value and is whose volume is spectacularly disproportionately higher than the amount of real, inherent wealth it's alleged to be correlated to or with.

 

Fri, 11/09/2012 - 14:16 | 2965170 prains
prains's picture

TIS

very true words, the initial 2008 crash caught the boys at the helm napping and in order to delay long enough to arm,drone build, train suppression teams TIME was the necessary ingredient. What's even more ridiculous is the majority of Amercians still believe there is a RED/BLUE paradigm still operating. Since Glass Steagall was repealed by Clinton the entire operation has been corporately controlled to crush workers pensions and living standards. A hungry,angry,broke,over indebted, dispossessed (and young) unemployed workforce can eventually be manipulated into a long protracted oil seeking war. This too takes TIME to build both the propoganda and disenfranchised energy required to false flagg a skeptical populace to do the bidding of major corporations.

if the last 30-40 years is calculated around the rise of american corporate control of government and their singular need to control the globes diminshing energy supplies in order to survive, the entire plan starts to lay out quite clearly.

Fri, 11/09/2012 - 11:26 | 2964450 leftcoastfool
leftcoastfool's picture

"Deficits don't matter" - V.P. Dick Cheney

Fri, 11/09/2012 - 12:05 | 2964602 madcows
madcows's picture

we are not monitizing the debt

Ben

Fri, 11/09/2012 - 10:06 | 2964160 GetZeeGold
GetZeeGold's picture

 

 

I thought you were going to the gym for your "work out"? back so soon?

 

that was someone else...and I did warn him against it. If you're really going to do this you need to work on your focus.

Fri, 11/09/2012 - 11:10 | 2964368 DeadFred
DeadFred's picture

You ain't seen free fall if you think this is free fall. It can get lots diceier than this but this is the type of environment that can lead to real exciting times. I half expect today to be one of those Wile E. Coyote moment where the market hold still for the day before realizing there is nothing but air below. I have a bad feeling about this weekend, Monday could be memorable. (my bad feeling plus $1.50 can still get you a cup of coffee at the Starbucks down the street)

Fri, 11/09/2012 - 10:03 | 2964141 falak pema
falak pema's picture

You know President Hollande evoked that to explain current uncertainty in the market according to French media last night. It surprised me to see a french president being quoted about potential war in IRan as reason to explain current market slo-down...normally these guys never talk real issues before they occur, only afterwords to say it was an unforseeable expense...bla bla bla.

Made me think was he raising a false flag to divert debate from his own weak economic package...but I wonder if Obammy has not given the green light on Syria/Iran/Lebanon cauldron, after all. 

We'll soon find out.

Fri, 11/09/2012 - 10:05 | 2964155 vast-dom
vast-dom's picture

I call for SP at 650! And that's using those purdy charts too! But.........you have no clue nor do I....well I do....but....the QExcrement......

Fri, 11/09/2012 - 11:21 | 2964428 Robot Traders Mom
Robot Traders Mom's picture

"I currently estimate a bottom for the S&P 500 between 1355 and 1360."

 

Not sure how that equates to the anatomy of a market collapse, I tend to agree with you that we could see 50% off the recent highs.

 

 

Fri, 11/09/2012 - 09:48 | 2964080 falak pema
falak pema's picture

better crawl home, we're too wormed to drive.

Didn't have my apple 'cos its full of worms, and now they love my insides. 

Is this what a rotten apple feels like? I am all a goggled. 

Fri, 11/09/2012 - 10:01 | 2964130 HD
HD's picture

This guy got lost on the way to the CNBC site...

Fri, 11/09/2012 - 10:11 | 2964184 TideFighter
TideFighter's picture

Next buy sig: Hillary 2016. Forward.

Fri, 11/09/2012 - 10:40 | 2964269 DanDaley
DanDaley's picture

It is Forward, Soviet!  (http://www.google.com/imgres?imgurl=http://i43.tower.com/images/mm109430...)

 

 Comrade, perhaps you are needing vacation to re-education camp.

Fri, 11/09/2012 - 11:36 | 2964492 Nobody For President
Nobody For President's picture

You mean Hillary Swank, right? Good idea.

http://en.wikipedia.org/wiki/Million_Dollar_Baby

Fri, 11/09/2012 - 09:45 | 2964059 LawsofPhysics
LawsofPhysics's picture

Where is this "market" they speak of.  Stop it, just stop it already.  There is no fucking spoon and there is no "market".  Technical analysis of the "mark to fantasy" accounting numbers doesn't mean shit. 

Henceforth, there will be a "paper" price and a physical price.  hedge accordingly.

Fri, 11/09/2012 - 09:46 | 2964073 SilverDOG
SilverDOG's picture

Paper is as paper does,...Bitchez.

Fri, 11/09/2012 - 10:02 | 2964135 krispkritter
krispkritter's picture

It's good for fires and covering the bullet holes in the walls...

Fri, 11/09/2012 - 09:55 | 2964103 malikai
malikai's picture

The market will win. Even if it dies in the fight.

Count on it.

Fri, 11/09/2012 - 10:42 | 2964280 JPM Hater001
JPM Hater001's picture

That was deep.

Fri, 11/09/2012 - 12:07 | 2964609 aerojet
aerojet's picture

But it was the truth--real people need real things and the markets were created to support that, not to support a bunch of bots making sub-microsecond trades and politicians maniuplating numbers to paint some rosy picture.  We're headed for a major collapse, we've been headed for it ever since 2008, and papering over reality isn't going to change a damn thing.

Fri, 11/09/2012 - 09:44 | 2964061 TideFighter
TideFighter's picture

The designated driver flew home in his helicopter.

Fri, 11/09/2012 - 10:03 | 2964144 pods
pods's picture

With Groupon puking out the window!

pods

Fri, 11/09/2012 - 09:43 | 2964062 cowdiddly
cowdiddly's picture

ZZZZZZwake me up at SP 600 then after the market is priced right, I might try to frontrun an alogo.

Fri, 11/09/2012 - 09:45 | 2964068 Cursive
Cursive's picture

I agree that any reversal will be modest and tempororay.

Fri, 11/09/2012 - 09:46 | 2964072 AU5K
AU5K's picture

Why do i get the feeling all the bad news that's been suppressed is suddenly going to come out, in order to justify even more government action.

Fri, 11/09/2012 - 10:06 | 2964162 crusty curmudgeon
crusty curmudgeon's picture

This isn't brain surgery.

If capital gains taxes will go up sharply in 2013, as appears likely, I'm going to go out on a limb and guess people will sell more stocks before January 1st then they otherwise would.  I'm thinking that might have an adverse effect on the stock market.  Me thinks this, without even considering the other myriad reasons for lack of optimism in the stock market, will be significant.

Fri, 11/09/2012 - 10:45 | 2964284 JPM Hater001
JPM Hater001's picture

Said it 2 days ago.  You will not believe the shit they will release in the next 60 days.

Elections over ladies.  Looks like it's rape for everyone.

Fri, 11/09/2012 - 09:46 | 2964075 Lost Wages
Lost Wages's picture

We all know the "fiscal cliff" is bullshit right? 

Fri, 11/09/2012 - 09:59 | 2964124 SheepDog-One
SheepDog-One's picture

For that matter, its ALL just bullshit. But everyone still pretending 'I got this!' when last week it was 'Obama win good for stocks, Romney win buy bonds'....LOL already totaly flipped the script on that one. Well, I dont have any money near this machine so they can go do what they want.

Fri, 11/09/2012 - 10:03 | 2964147 overmedicatedun...
overmedicatedundersexed's picture

covered my shorts end of day, now I wake up to a red market ...WTF..I know if I put the shorts back on I am screwed, but but the zh buzz is this is the big one everybody on the down escalator..i must fight the urge to short i must fight the urge..

Fri, 11/09/2012 - 11:44 | 2964526 overmedicatedun...
overmedicatedundersexed's picture

did not short today, ben came thru as I have learned over the last few years..go short be very very nimble. end of day it may break i will tip my toe in for another short but I never learn stupid is as stupid does..con fident I am.

Fri, 11/09/2012 - 09:47 | 2964077 Ljoot
Ljoot's picture

I'm long Debbie Wasserman Schultz.

Fri, 11/09/2012 - 09:49 | 2964083 GetZeeGold
GetZeeGold's picture

 

 

Sick and twisted.......nice.

Fri, 11/09/2012 - 09:53 | 2964096 Oldballplayer
Oldballplayer's picture

I would be long if the ear plugs stayed in, and as long as I could keep my eyes closed.

Fri, 11/09/2012 - 09:59 | 2964126 krispkritter
krispkritter's picture

Debbie 'Was Her Name' Schultz? "I know nothink!" I wouldn't fuck that with Bernanke's dick...if he had one...

Fri, 11/09/2012 - 12:36 | 2964726 madcows
madcows's picture

No, but she'll pork us with hers.  I'm wondering if I spread oralgel around down there if it will ease the pain.

Fri, 11/09/2012 - 10:03 | 2964145 JohnnyBriefcase
JohnnyBriefcase's picture

Ugh, that's got to be one of the least pleasant images (and audio) ever.

Fri, 11/09/2012 - 10:19 | 2964207 Translational Lift
Translational Lift's picture

Uhhh....you enjoy eating dog shit too??

Fri, 11/09/2012 - 10:52 | 2964305 mess nonster
mess nonster's picture

From the Palm Beach new Times....

 

One of the major rules of party décor is that you show up to your own shindig. Just don't tell that to Fort Lauderdale Congresswoman Debbie Wasserman Schultz, who skipped her victory bash last night for the national spotlight in Chicago.

She left her supporters, dizzied with political victory, to feed on stale corn chips and goldfish crackers. Not that anyone seemed to care that much. Except us, apparently.

Instead, the party was all about Obama, who defeated M. Willard Romnom last night. And though supporters at the Signature Grand admitted the enthusiasm of 2008 had faded, something more real, more visceral had replaced it. Pragmatism has trumped idealism.

"This time we're not just buying into the hype," said Erin Wood, who had traveled from Dallas for the party. "It's not about his charisma or his immediate appeal. It's faith in his accomplishments and it's now less about the honeymoon period."

But here's to hoping he'll get one this time! With the Romneytrons vanquished once and for all, perhaps a peace will settle over the land, some party attendants mused. "The Tea Party has lost a lot of momentum, which may free up the more moderate Republicans to vote more with their heart and how they actually feel without fear of reprisal," Kyla Cole said.

Such analysis, while we sincerely hope comes to pass, was disappointing for one reason -- it was offered by a surprisingly sober person on a surprisingly sober night. This was a major problem with the Democratic fiesta. Everyone was drinking coffee and tea. It was like you crashed your mom's book club halfway through a rousing discussion of Tuesdays With Morey.

Meanwhile, in a conference room next door, at Broward County Sheriff Al Lamberti's postelection party, Republicans got their party on with beer, meats, and wine. We accidentally wandered into this party at first, under the misguided assumption it was for local Democrats. We suspected something was amiss, however, when we noticed only white people were in attendance. But at least these were drunk white people.

Among the Democrats, it was a diverse, coffee-swilling crowd. This was also confusing, but perhaps it was because the bar was cash-only -- and there wasn't an ATM in sight. (Who plans these things???)

Things began to get desperate among several partygoers.

"I love beer!" explained a forlorn Gene Ouellette.

We all do, Gene. We all do.

But at least at this party -- unlike the one thrown by the Republicans -- there were kegs of vindication to guzzle from.

Fri, 11/09/2012 - 12:23 | 2964661 vato poco
vato poco's picture

"......'It's faith in his accomplishments (!) and now less about the honeymoon period', [the silly whore] gushed."

Translation: "We're hoping he'll use lube this time!"

Fri, 11/09/2012 - 12:33 | 2964712 madcows
madcows's picture

Is that you Janet Nepolitano, or Rosie ODonnell?

Fri, 11/09/2012 - 12:38 | 2964734 DosZap
DosZap's picture

I am LONG Nullification.....................sick of their shit.

Personally I see no other way except a MAJOR confrontation.

Fri, 11/09/2012 - 15:56 | 2965704 I Feel a little...
I Feel a little Qeasy's picture

God made them ugly for a reason.

Fri, 11/09/2012 - 09:48 | 2964079 Orly
Orly's picture

Very reasoned arguments.  The US equity markets will then start to resemble the Nikkei Average, in that there will be  bullish turns inside of a much larger bear trend.  Obviously, this is not the end of it, as the law of diminshing returns comes back to haunt the Fed after QEs 7, 8, 9...

:D

Fri, 11/09/2012 - 09:49 | 2964082 LawsofPhysics
LawsofPhysics's picture

"Beating expectations", all... the... way... down...

Fri, 11/09/2012 - 09:53 | 2964094 Orly
Orly's picture

Exactly.  It's going to be the exact same pattern.  It would be helpful to overlay a chart of Nikkei and SPX and play it accordingly.

Fri, 11/09/2012 - 10:00 | 2964127 madcows
madcows's picture

That's why there is so much money in the bond markets, regardless of the rate of return.  401k $ has to go somewhere, and it sure ain't looking to be in equities.

We are now in the "preserve capital" phase of the collapse.

Fri, 11/09/2012 - 10:04 | 2964152 LawsofPhysics
LawsofPhysics's picture

Personally, I have been in a "preserve capital/purchasing power" for 20+ years, it's just that the relative percentage of my capital flowing toward such investments is increasing. Looking to put up some more rental units for sale and owner finance. If you have any physical assets in your possession, it's time to become the bank boys and girls.

Fri, 11/09/2012 - 11:10 | 2964365 crzyhun
crzyhun's picture

Yes to your thoughts and raise you to the fact that if you want an image of what markets will be like soon, look to the euro markets now.

Fri, 11/09/2012 - 09:48 | 2964081 buzzsaw99
buzzsaw99's picture

I currently estimate a bottom for the S&P 500 between 1355 and 1360.

Does he know jamie dimon? because if not Naso is just guessing.

There is no market, there is only the bernank.

Fri, 11/09/2012 - 09:53 | 2964098 fonzannoon
fonzannoon's picture

I am torn on the issue of the Bernak Buzzsaw. Equities are now calling the QE bluff, but treasuries are doing just fine. The only question now is what "good news" is going to make equities catch a bid? My guess is some Draghi type pre announcement where a few dems and repubs claim to have "reached a preliminary agreement" to Punt the fuck out of the cliff. No one will care about the second part. But equities will celebrate the first part.

Fri, 11/09/2012 - 09:59 | 2964125 Dr. Engali
Dr. Engali's picture

Any celebration at all should be used to get out. I don't think people quite grasp everything that is about to hit next year.

Fri, 11/09/2012 - 10:02 | 2964138 fonzannoon
fonzannoon's picture

I hear you. The only credibility I give to the possibility of a rising stock market is the idea that it rises in nominal terms and gets crushed in relation to gold. I think (correct me if I am wrong) that you are predicting the deflationary crunch that will ultimately be met with massive inflation. Is that right?

Fri, 11/09/2012 - 10:08 | 2964172 Dr. Engali
Dr. Engali's picture

That's the way I see things working out. I do reflect on kito's most cash is digital/ paper cash is rare deftlation theory, but my belief is still that once the digital cash blows up and collapses that our paper won't be accepted for products and services.

Fri, 11/09/2012 - 10:10 | 2964176 overmedicatedun...
overmedicatedundersexed's picture

any good clear pics of valarie Jarrett, you know the Iranian born true chief of staff for mr soerto um obuma um ...

Fri, 11/09/2012 - 11:18 | 2964398 hangemhigh
hangemhigh's picture

@ DR E

but my belief is still that once the digital cash blows up and collapses that our paper won't be accepted for products and services.

that happened once before.....in the 1970's....i think at time of '73 oil war.......i was out of country then......for 3-4 days you could not exchange $ for any local currency..... 

Fri, 11/09/2012 - 10:05 | 2964154 krispkritter
krispkritter's picture

Had a friend toss high 6 figures into the market and is taking the broker's advice year after year and leaving it sit. When it was down 50% they were telling him 'Just wait, it'll get better.' No telling what he's doing now, and I quit telling him to pull out. Looks like the 'Hope-ful' are going to get creamed soon...

Fri, 11/09/2012 - 11:02 | 2964332 Non Passaran
Non Passaran's picture

Nothing will happen. The same shot will continue for a number of years.
Sorry.

(I am long PMs and short broad indexes, but clearly that hasn't been the optimal approach...)

Fri, 11/09/2012 - 10:03 | 2964134 buzzsaw99
buzzsaw99's picture

zh had an article a few days ago about margin. i read that rochdale bought $1B in aapl shares with very little money in the bank. how many more rochdales are there? add that to hedge fund redemptions and the selloff could be severe if not for the fact that jpm steps in front of every flash crash. the day they don't look out below.

Fri, 11/09/2012 - 10:00 | 2964128 TideFighter
TideFighter's picture

"There is no market, there is only the bernank."

Exactly. And...Obama is either killing something or saving something. "He" saved the market and now will allow it to bleed out down the blood trail, only to come our emotional rescue in 2015 or 2016. Hillary saved his ass, and her payback will be in 2015 or 2016 when she is running. Us muppets will be so enthrawled that Hillary is running that S&P will come roaring back.

The market has been reduced to an election tool. I hope they swing and miss and it becomes a revolt machine gun. 

 

Fri, 11/09/2012 - 09:53 | 2964095 richard in norway
richard in norway's picture

why is the german market leading the way down, thankfully im short the dax, but i think i just lucked out

Fri, 11/09/2012 - 09:54 | 2964102 SheepDog-One
SheepDog-One's picture

Gee...I guess re-electing that Obama guy with the 'Obamas good for equities' thing isnt so much after all. 

Fri, 11/09/2012 - 09:56 | 2964109 Dr. Engali
Dr. Engali's picture

If anybody starts going long at 1350 they are going to get creamed. This pig is toast. Tax selling and the liquidity need is going to overwhelm Ben's printing. There are a lot of people who were waiting until the last minute to get out. They are making their move now.

Fri, 11/09/2012 - 09:59 | 2964122 fonzannoon
fonzannoon's picture

Doc I have waivered back and forth on that one for so long now. Big fan of your consistent viewpoint.

Fri, 11/09/2012 - 10:03 | 2964146 Dr. Engali
Dr. Engali's picture

I can tell you this fonz...I moved clients to the sidelines in September. We have about 10% market exposure right now.

Fri, 11/09/2012 - 10:13 | 2964178 fonzannoon
fonzannoon's picture

I was having a rough year up until very recently because I was too bearish too soon. But I had them set up across short nasdaq, long treasuries (it killed me to do it), Gold miners etc. to go along with the widows and orphans and some individual corporates (bought a few years ago, when yield was possible) which were the only things working. The ship finally got righted....Whew!

Fri, 11/09/2012 - 10:35 | 2964264 GCT
GCT's picture

Hey Doc.  I look at this as a selloff because of the capital gain tax increase.  I do respect your opinion.  Am I looking at this wrong?

Fri, 11/09/2012 - 10:49 | 2964287 Dr. Engali
Dr. Engali's picture

Capital gains, dividend income treatment, estate taxes,lifetime gifting reduction , and then you throw in Obama care and the dreaded fiscal cliff . There is just too much changing in 2013 that will overwhelm the sytstem.  

Fri, 11/09/2012 - 12:44 | 2964761 DosZap
DosZap's picture

Dr. Engali,

I can tell you this fonz...I moved clients to the sidelines in September

Into what Dr.???

Fri, 11/09/2012 - 10:48 | 2964297 JPM Hater001
JPM Hater001's picture

"If anybody starts going long at 1350 they are going to get creamed."

Yeah, just write me the check directly and lets get on with this thing.

Fri, 11/09/2012 - 13:04 | 2964830 Galactic Superwave
Galactic Superwave's picture

Agree Doc.

The average monthly NYSE Closing TICK has dipped to +87 which I would classify as oversold albeit not excessively so.  This represents my most reliable buy signal such that without this trigger, I will remain negative for the days ahead even though the average intraday TICK has fallen solidly below +15.

This article is very misleading. It mixes days with months when doing the analysis. They use an average (I assume 9 mo) of monthly TICKS but then projects the bottom to be near in terms of "days". The fact that this is an average on a monthly basis will mean that the TICK could go highly negative intra-month before breaking into his range for buying. Meanwhile you could lose a shitload of money.

For example, they use the monthly TICK to get a trend and then the intraday TICK for the trigger. So does this mean the 1st day of the month, after calculating the average, and that it is below their magic number, (plus they already know the intra-day number from the previous day) they suddenly fire their big BUY signal. Looking at the data myself, this might actually work most of the time but the months leading up to the trigger could have huge swings that a better system would have taken advantage of much better.

Bottom line: their technique is probably best for investors with long term horizons and can stand huge drawdowns. Personally, I will stick with trading on a shorter time frame with stops and some core cash and metals because this so-called "market" is ripe for the mother of all dislocations in the next 6 months.

Fri, 11/09/2012 - 09:59 | 2964123 youngman
youngman's picture

Bloombergs guest for Tom keane´s show said about HFT´s ....that the market is rigged...and everyone just agreed...lol...so cheating is the new  normal..wait until Obama gets our tax returns...there is not going to be this huge capital gain revenue he thinks he is going to get...

Fri, 11/09/2012 - 10:30 | 2964248 Juan Wild
Juan Wild's picture

I think a gambler in Vegas has better odds now than a "trader" on Wall Street. And better showgirls too.

Fri, 11/09/2012 - 10:00 | 2964129 Robert-Paulson
Robert-Paulson's picture

It's all about this....why doesn't anybody talk about this

 

http://www.marketwatch.com/investing/index/dxy/charts?compidx=DJIA&ma=1&maval=50&uf=7168&lf=1&lf2=4&lf3=0&type=2&size=2&state=8&sid=0&style=1013&time=12&freq=1&startdate=1%2F4%2F1999&enddate=5%2F23%2F2012&height=444&widht=579&random=2022950553&arrowdates=0

Fri, 11/09/2012 - 10:14 | 2964192 Orly
Orly's picture

What is there to talk about that?  The DXY has been purposefully kept in a range to keep commodity prices as stable as possible since 2008.  (I know!  Can you imagine if there weren't this "stability"?)

Fri, 11/09/2012 - 10:14 | 2964193 LawsofPhysics
LawsofPhysics's picture

Many of us have been going to more dollar cash holdings since 2008, gonna be some fireworks when this "trade" unwinds. I suspect many around the world are in the same boat.  You want inflation America?  You will get it.

Fri, 11/09/2012 - 10:19 | 2964206 fonzannoon
fonzannoon's picture

Laws to your point about wages....if the majority of people are broke, pummeled in debt and getting laid off or having their salary and benefits reduced, then where does the inflationary tsunami kick in? To me it seems more like some nasty stagflation/biflation that just crushes everyone. Unless Ben starts cutting up those QE's and sending out individual checks....

Fri, 11/09/2012 - 10:22 | 2964224 Orly
Orly's picture

I never understood the inflation argument on these boards for just that reason, fonz.  The hyperinflation scenario is really quite funny.  Some may surely believe it but a lot are just spouting words.

There can be no sustained inflation in an economy without upward wage pressure.  End of story.

:D

Fri, 11/09/2012 - 10:28 | 2964241 fonzannoon
fonzannoon's picture

I hear you. I am starting to think that gas at $4.50 and food costs right where they are can probably be considered hyperinflation for those who are just trying to get by.

Fri, 11/09/2012 - 10:42 | 2964277 Greenhead
Greenhead's picture

Gee, what is it then when gas prices go up, food prices go up, some commodity prices go up and wages remain stagnant or decline?  Let's not get caught up in semantics, but there is definitely pocket inflation.

 

Fri, 11/09/2012 - 10:59 | 2964326 Orly
Orly's picture

Pocket inflation, yes, but that's because the USD is at very low exchange rates vis-a-vis other currencies, which means that our USD is weak, making gasoline prices rise.  As the dollar increases in strength (already seeing that, by the way...), oil prices and gold prices will come off significantly, especially as it relates to the GBP and the Euro.

This is not sustainable inflation, however.  All it means is that you take fewer trips to the grocery store and when you get there, substitution kicks in and you buy the ground beef instead of the filet mignon.  That trip to Disneyland has been put off for another year.

The problem in our economy (actually with the banks that hold trillions in over-priced assets...) is clearly deflation and the Fed is going through extreme measures to re-flate the markets as best it can, hoping you'll feel richer about your 401 and will go to Disneyland after all.  They forgot that while most people follow the herd, they aren't stupid.  No one's buying it.  No one's buying anything.

So how can there be inflation if no one is buying anything?  There can't be.  It is, in fact, more evidence of a deflationary environment than an inflationary one.

:D

Fri, 11/09/2012 - 13:08 | 2964849 All_Is_Well
All_Is_Well's picture

Wake the hell up! Look around you! Ground beef? People can't even afford a happy meal! The worse it gets the more they will print. The price of gold tells you all you need to know!

Fri, 11/09/2012 - 14:09 | 2965108 Orly
Orly's picture

That's silly.

Fri, 11/09/2012 - 10:47 | 2964294 LawsofPhysics
LawsofPhysics's picture

Don't know why you are getting junked, but think of it this way;

Any "flation" debate is pointless when paper assets go bidless and physical assets of real value are hard to come by because people are not selling (for a host of reasons).  This isn't the 70's and there can only be so many "japanese economies" in the world.

Ask yourself, how did America get out of the 70's?  Go ahead raise interest rates, I double dog dare you.

Fri, 11/09/2012 - 11:03 | 2964334 Orly
Orly's picture

No worries, that's my fanboy Flakmeister.  Silly little one he is...

I say you're right about that but as long as the model is going to be to try to increase the asset value of holdings by the big banks, then the Fed will throw everything at it, until it doesn't.  We can go on for twenty years in this deflationary cycle like Japan did but I don't think Dr. Bernanke and the boys and girls in the Fed want to see that happen.

They are going to make Jamie Dimon, et. al., take their medicine one of these days.  Then, magically, all these "economic" problems will disappear overnight.

Fri, 11/09/2012 - 11:13 | 2964385 LawsofPhysics
LawsofPhysics's picture

"We can go on for twenty years in this deflationary cycle like Japan "

------------------------------------------------------------

I don't think we can and keep the the dollar as the world's reserve currency.  So I take it you are teaching yourself and you children Mandarin then?

Fri, 11/09/2012 - 13:01 | 2964819 aerojet
aerojet's picture

The Chinese are in no way ready to take over the world's reserver currency.  The dollar is still the only game in town, so yes, we have decades of ugly stagnation ahead, I guess.

Fri, 11/09/2012 - 14:32 | 2965269 LawsofPhysics
LawsofPhysics's picture

Decades?  I don't think so.  Wages matter.  Real inflation in things you need is running between 11-15% by my caluculations.  What have wages been doing?  Nothing nada, zip. Not sustainable.  If you meant "dacades of stagfaltion with major social unrest, then yes, you may be correct."

Fri, 11/09/2012 - 11:37 | 2964499 fonzannoon
fonzannoon's picture

Orly if the fed actually wanted to fight deflation then why give billions to the banks only to watch it get clogged up? Why not send checks to the people? You know that no one will pay down debt. they will spend the shit out of it. I think the fed knows we are toast. they are giving that money to the banks and they are probably giving it amongst themselves and buying hard assets with it.

Fri, 11/09/2012 - 11:55 | 2964567 Orly
Orly's picture

"...and they are probably giving it amongst themselves..."

Your questions are very simple and direct.  The answer is because they are all buds and no one wants to see their friends go down in flames.  That's all.

Don't forget, the cocktail party circuit, the people you see every day.  They're real people, nice people, kinda cool to hang out with.  Out here, in the perimeter, we are numbers.  That's all.

Try to put a human face on this clique of criminality and I think you come closer to understanding the whys of what is going on.

:D

Fri, 11/09/2012 - 13:04 | 2964833 aerojet
aerojet's picture

I believe it is referred to as the "Monkeysphere"--our monkey brains associate only a small number of people as "tribe" and we are unconcerned with the rest.

Fri, 11/09/2012 - 11:11 | 2964370 mess nonster
mess nonster's picture

I think we're seeing a peak in the commodities cycle. The pressure is on for a drop in prices. But that drop in commodities may be the pin in the bubble. Those inflated commodities are all that let folks keep their min-wage jobs. Wages always decrease faster than prices. If the wage can't fall fast enough, the job disappears, same diff.

Put the cash in the mattress, deflation is the fastest.

 

 

 

 

if

Fri, 11/09/2012 - 13:06 | 2964842 aerojet
aerojet's picture

Are there still tankers loaded with oil sitting offshore near a lot of port but not scheduled to be unloaded?  If so, then yes, we are still waiting for the commodities bubble to pop. 

Fri, 11/09/2012 - 14:35 | 2965298 LawsofPhysics
LawsofPhysics's picture

Bullshit.  Go talk to an Engineer at a major oil company about the capital and resource investment that has to be made in order to bring that oil to the market.  Input costs with respect to both capital and resources are going up.  unless you think these companies are going to intentionally bankrupt themselves, commodity deflation will not occur (and isn't BTW).  Not to mention the massive printing and balance sheet expansion by all central banks.  Please, wake the fuck up.

Fri, 11/09/2012 - 14:38 | 2965316 akak
akak's picture

Orly, this is one of the most idiotic arguments I have ever read in this forum:

There can be no sustained inflation in an economy without upward wage pressure.  End of story.

Yes, there can, and it has been seen hundreds of times throughout (monetary) history, most especially in the last century, the benighted Age of Fiat.  It is called "declining standard of living".

Really, wake up from your Keynesian-induced coma.

Fri, 11/09/2012 - 15:29 | 2965583 TheFourthStooge-ing
TheFourthStooge-ing's picture

The inflation/hyperinflation confusion most often arises from the labels used to identify these two distinct phenomena. Because the spelling of "inflation" and "hyperinflation" is identical across nine letters, a common mistake is believing that the two phenomena are related, differing only in degree.

Inflation has been described in a variety of ways, from an increase in the supply of currency (and sometimes credit) to a trend of rising prices (and sometimes wages) to a simple increase in the velocity of "money". Nevertheless, it is generally considered primarily an economic phenomenon.

Hyperinflation is a rapid loss of faith, by some significant portion of a society, in the worth of a currency. It is this loss of faith which prompts rich and poor alike to dump their currency in exchange for anything of tangible value. This currency dump results in a huge increase in the velocity of "money", the effect of which is skyrocketing prices of goods in terms of the hot potato currency. Thus the label of "hyperinflation", which is primarily a political phenomenon, is derived from an effect of the phenomenon rather than the phenomenon's defining characteristics.

Naturally, confusion ensues.

Fri, 11/09/2012 - 10:37 | 2964246 LawsofPhysics
LawsofPhysics's picture

"then where does the inflationary tsunami kick in"

--------------------------------------------------

When people refuse to sell real assets (because they are using them to survive - just because people are broke, they still need to survive and they don't fucking dissappear) or the currency collapses.  Think weinmar.  You don't need velocity of government paper if there are no sellers of real assets, period, and the entire economy has shifted to a barter/trade/black market world.  You are thinking of the 70's, how did we get out of the 70's? We raised rates on American Paper and increased commodity production on American resources.  Can we do that now?  Go ahead, raise interest rates, I double dog dare you.  Maybe, as far as producing more coal and natural gas etc. but it comes down to the Energy returned on Energy invested.  If the latter is greater than the former, companies won't make the investment.

Take all your texbooks on modern economics and burn them.

Fri, 11/09/2012 - 10:47 | 2964290 GCT
GCT's picture

I understand where your coming from Law.  I look at inflation being caused by the rise in commodities as people invest in commodities because of the government programs and there is not alot of places to invest or save right now.  So as a consumer I am indeed seeing inflation in the every day things I purchase.  Am I missing something here?

Fri, 11/09/2012 - 17:26 | 2966141 Gadocat99
Gadocat99's picture

Commodity prices are not rising due to investment.  Gold is not rising due to widespread demand.  Commodities are rising because sellers won't part with their real goods for today's paper dollars without an increasing adjustment in prices.  Some Sellers see the worthiness of the dollar evaporating because the dollar is being created today without associated work.  That is Weimar.  It will accelerate and be obvious to all soon.  As long as prices are in the control of the unmotivated seller, normal inflation tomes will be misleading.  If I won't sell to you without a premium, even in a low volume market, even if your wages are falling, that is inflation. 

Raising taxes in this environment will not motivate the sellers, and will reduce the ability of buyers to offer premiums -- it is exactly the wrong thing to do and is childish bordering on stupid.

Fri, 11/09/2012 - 12:04 | 2964600 madcows
madcows's picture

Your comment doesn't make sense.  You imply stagnance and inflation, and then say we don't have inflation.

Inflation comes in several forms.  Too much money chasing too few items is one(iPods).  Devaluation of the dollar is another(QEInfinity).  Insufficient supply is another (oil, food)

Real YoY inflation steadily around 11%.  At 11.4% this month by my calcs.

Note, Iran, a collapsing economy, has hyperinflation due to printing.  And, you could call that stagflation.  We have stagflation as well.  Stagflation is a stagnant economy with inflation.  Hence, stag-flation. 

Fri, 11/09/2012 - 10:32 | 2964251 Mad Mohel
Mad Mohel's picture

Quite the predicament, stuck between Skynet and the Bernank. You'd have to be meshugener to stay in this trap.

Fri, 11/09/2012 - 11:09 | 2964354 q99x2
q99x2's picture

Where's the missing 43 trillion that killed the CNBC children? Holder, Hillary and Geitner to quit Obama and head for hills. It's a hard rain a gonna fall. The middle men are pulling their chips off the table. It's supposed to be a cold windy rainy day for the Santa Barbara International Marathon. What cliff? They will re-write the laws retroactively. It is soo easy.

Fri, 11/09/2012 - 11:10 | 2964364 forwardho
forwardho's picture

One cannot veiw the current market with historical perspective. We find ourselves in completly uncharted territory. the market has never been as distorted and manipulated as it is today. The past bares no relationship on our future. This post is a veiw through the "old" paradigm, and therefore of very little worth.

Fri, 11/09/2012 - 13:48 | 2964996 zebrasquid
zebrasquid's picture

Dude, "i" before "e".....

Fri, 11/09/2012 - 11:36 | 2964485 Sweet Chicken
Sweet Chicken's picture

American Eyes

American Eyes

See the world through American Eyes

Bury the past 

Rob us blind

and leave nothing behind!!!!

Fri, 11/09/2012 - 11:56 | 2964564 vix is for kids
vix is for kids's picture

How can a 7% decline be identified as a "market collapse"? It may turn out that this two month drop is just a correction, and next year will see new highs in the indexes.  If that's the case, the author is using the wrong template to calculate it's length and depth.

But if we get any sort of significant, trade-able, intermediate decline, we should expect to witness:

1. The VIX getting above 25, and more likely above 30

2. The  bullish point-and-figure ($BPSPX) dropping below 30%

3. All indexes experiencing at least 10+ percentage drops, with the NDX and SPX dropping at least 15%.

4.  Foreign markets down at least 15%, challenging their 200 day moving averages, at a minimum.

Anything short of this is just a dip.

Fri, 11/09/2012 - 12:19 | 2964646 Silversinner
Silversinner's picture

Deflation in real economy.

Inflation in "money" supply.

Negative real intrest rate,

value of paper money decreasing

faster then economic growt.

Salaries stagnant,with price of basic

needs skyrocketing.

Deflation? versus inflation? depends

on wich side of the coin one is looking at.

Me just like the golden and silver ones.

 

Fri, 11/09/2012 - 13:06 | 2964840 sink critically
sink critically's picture

The market is the same as it ever was, a giant complicated shell game with the same result as the street scam. Oh sure, they've managed to apply technology to create robots to move the cards around faster than the human eye can see, but you can bet that even if they're shut down a new game will spring up right around the corner, equally as rigged.

The real question is, what happens when the person or corporation on the street no longer has any cash in their pocket to play? Then watches and other tangibles (real estate, homes, cars, unborn children, etc...) will be accepted.

Long barter and belligerence.

Fri, 11/09/2012 - 15:39 | 2965628 CitizenPete
CitizenPete's picture

Anatomy of a collapse:

 

 

Due to the results of the recent election, orders for ammunition and related products have increased exponentially. This has resulted in majority of our products advertised on our previous sales flyer email to be sold out. Unfortunately due to supply and demand has our suppliers and importers have increased their price to us and this is completely out of our control. Due to this and our increasing backlog, sale prices will revert back to normal price as inventory begins to return to stock.

We apologize for any inconveniences and encourage you to check our website on a regular basis to check what items are back in stock.

Click Here to View our Online Store

 

Fri, 11/09/2012 - 16:56 | 2966045 BeerGoggles
BeerGoggles's picture

the title of this thread is misleading...it's about some twat who appears to want to buy the market?!

Sat, 11/10/2012 - 07:44 | 2967427 Grand Supercycle
Grand Supercycle's picture

WILE E.COYOTE update:

SP500 head & shoulders formation on daily chart continues.

SP500 weekly chart also shows likely head & shoulders.

DOW monthly chart shows bearish rising wedge.

The current bearish price action comprises the first installment of the very overdue Wile E. Coyote sell off.

As mentioned, the previous SPX meltup - devoid of healthy retracements - has caused the coming crash.

One can only stretch the bungee cord so far before it reacts...

http://trader618.com
http://tinyurl.com/ZH-Forum

Sat, 11/10/2012 - 13:16 | 2967762 Orly
Orly's picture

GS, that is so not a head and shoulders formation!  A head and shoulders is essentially a "mesa," Spanish for table.  It means it is flat.  In the H & S formation, the table has a centerpiece.  Sometimes it has one of the leaves taken out of the middle (reverse h & s...), sometimes, it is simply flat as a pancake.

You are about to enter Wave D down-cycle.  That's all.  But it's not a head and shoulders.

:D

Sat, 11/10/2012 - 19:10 | 2968696 ZFiNX
ZFiNX's picture

The dark side clouds everything.

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