Saxo Bank Explains How Massive Stock Market Rallies End

Tyler Durden's picture

Submitted by John Hardy of Saxo Bank,

Now that I am convinced we’ve moved into totally unjustifiable extremes of complacency in risky assets, I am having a look at some historic stock market breaks and how they have unfolded. In that light, the current setup is rather ominous.

Note: All charts are courtesy of Bloomberg – kudos to them for keeping such long data sets on the major US market indices.

Disclaimer: I’m an FX strategist and not an equity strategist. But I also fancy myself as a bit of a chartist and I like to look at historic patterns, particularly when the past might provide a historic parallel for the present situation. In this case, I’m interested in what many historic major equity chart tops look like in a technical sense now that if feels like we’ve entered into a blow-off territory technically. Somewhat to my surprise, I found that many major market tops had remarkably similar traits as the one we have just posted.

What is in this post?
A look at big stock market tops in the S&P500 that resemble the current situation (with the assumption that the current situation risks proving a major top), including the all-time classic 1929, but also 1969, 1973, and 1987. The resemblance is not only technical, but also due to the fact that in all instances, bond yields were rising.


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slaughterer's picture

Fed will pump AAPL to take ES above 1600.  GS ES 2013 price target: 1625.  GS AAPL 2013 price trget: 660.  The two go together.

Cursive's picture


GS said we'd end 2012 at SPX 1250.  I thought you knew the GS playbook was doube secret reverse psycology.

Dr Paul Krugman's picture

You guys like calling tops in stocks but not gold: Right much?

bullionbaron's picture

Is there a chart setup which Gold currently bears a resemblence to suggesting a top or forthcoming waterfall decline?

whatsinaname's picture

Like I said on another thread Wilbur Ross, Meredith Whitney, Warren Buffett, Larry Fink, David Pepper, Alan Greenspan and Jack Lew have all come out and said that equities are not in a bubble. So why are they telling everybody that ?

And why do all the "retirement" fund companies telling them to sell their bonds and buy equities ?

Is the goose about to be cooked ?


Meme Iamfurst's picture




These days, No one in America goes to jail for 'bad judgement calls'.  Just try to find a lawyer who thinks otherwise.

Now, in the old West,they just hung you without further ado.

Mad Mohel's picture

The goose has been cooked, but not yet sodomized.

smlbizman's picture

and whtas... the bernank also said he has 15 phd economist in his stable

you just cant argue with the all-star line up they have...

gjp's picture

Bubble is reasserting itself after very brief hiatus, with overvalued tech stocks that had lagged a little shooting out of the gate today like CRM (up nearly 2% on  an already-announced split - 1999 anyone?) and LNKD (up nealry 3% because a broker launched with a buy and a $190 target picked out of his ass, which is in any case less than 10% upside, but no worries, because tomorrow he'll raise his target for no good reason except momentum which is why it's a buy in the first place).  The farce machine still firing on all cylinders.

gjp's picture

LNKD now +4%, AMZN now joining the party too.  I keep thinking one day momo investors will pay for their shallow and valueless wasting of capital, but I keep being wrong.  The more we ZHers wait and expect reason to assert itself, the more outrageously it's all thrown back in our faces.  What a world ...

mind_imminst's picture

ZHers more than everyone else should have learned over the last 4 years that this time is different. How many times does one have to get their (investing) face ripped off expecting the bond bubble to burst, stocks to crash, bankruptcies to happen, etc... This time is different. The action of central bankers and politicians around the world are now highly coordinated. There is no longer a market or class of investors that can bet/invest against the central banker put, no matter how illogical it all is. The concept of a "bond vigilante" is now meaningless. As far as I can see, we are no where near a blow-off top. Governments have been captured. Populations are sedated on handouts. Seems like stocks have a long way to go before crashing (big). Time to get on the Central Banker escalator to the top. This, of course, ends in wheelbarrows, but why lose money betting against the highly coordinated unstoppable central planners on the way to a (potentially) far off future collapse?

Timmay's picture

They end with a "BBBB".   Banker Bailout Blitzkreig Bitches.....

max2205's picture

I like the article but ben could care less about how his evil looks on a chart

Bryan's picture

Sorry John.  This time it's different.  Bernanke has spoken.

Cognitive Dissonance's picture many ways it is different if only because of the various ways and methods used to manipulate the market higher.

I have no doubt that reality will eventually return to the market. And there is no doubt in my mind that the market(s) was also manipulated during all the examples shown in this posting. Manipulation is a fact in the markets, not an exception.

But........this time is different. That just means more fuel will be put on the fire and the resulting explosion will be that much larger.

Bryan's picture

I tend to agree with you on that, CD.  Bernanke has shown that he has more will power than the rest of the pawns that manipulated the market in the past.  But that doesn't mean he's right.  Time will tell.  Personally, I think he has lit a fire that neither he nor any other central bank will be able to put out when they think it's 'time'.

Debt-Is-Not-Money's picture

Today is the turning point according to Martin Armstrong:

The 224 Year Cycle – March 22nd, 2013

"The 224 Year Cycle is Due to turn March 22nd, 2013. We have prepared a special report on this cycle 44 pages in all that covers this cycle from ancient times to the present. Included are the primary targets the USA, Russia, and China. There is a stark difference between all three.As for the United States, it is time to take the mask off of what has become the Obama Deception.

China NEVER lost any territory so she is booming and has nothing to prove but that she is entitled to respect and that is clearly demonstrated by her new Aircraft Carrier – the “Liaoning”. China is coming of age, but she respects the new game is economic power. To this end, she has already defeated the United States for she is its greatest creditor. Not bad from a broke Communistic backwater nation of 3rd World status just in 1989.

In the case of Russia, this is a nation tormented by her loss. The politicians merely change titles and never leave, while keeping the pretense of democracy. She lost all her territory and the Iron Curtain fell revealing the nation behind the Iron Mask was impudent – unable to manage an economy. Yet Russia has not learned nor is she free of the stains of Communism. She remains the greatest risk of all for as Europe and America crumble under debt laden economies refusing to mend their ways, the Russian bear merely waits in silence watching for the right moment. She can take an economically weak Europe in less than one week and will do so for she can also turn off Europe’s energy in the blink of an eye. The political winds of change have appeared.

This Cycle Turns March 22nd, 2013. We will begin a new decline and the mask of the Obama Deception will be removed. Welcome to 2013. We will begin a 72 year decline from which a new world will emerge for our posterity. China will emerge as the largest economy in the world and the US will turn against its productive segment reducing its long-term economic viability."

francis_sawyer's picture

Question to all ZHers [at this point in the game]... Which is it softer to wipe your ass with?


A) FRN's



Cognitive Dissonance's picture


But only because the security strip woven inside resists tearing and the ink don't run.

camaro68ss's picture

D) Papers written by Krugman

notbot's picture

Apparently we have 4 troll's clicking down votes today.

Doña K's picture

God o mighty the down arrows are orchesrtated very well I bet all the secretaries there at the fed have logged in to ZH and have been told to go down the list and put down arrows.


francis_sawyer's picture

Is there any silver in that security strip thingy?... I tried wiping my ass with bitcoins, but ended up with dirty fingernails...

NoDebt's picture

That's a good question.  Throw one in the microwave on a  bacon rack.  If it's got metal it'll do weird things (sparks and stuff). 

Key-Rick's picture

It's lead so that if you try to take a sack full of cash through security at the airport, the x-rays and the metal detector catch you.  In other words, real easy for Big Brother to find people with large caches of cash (pun intended).

gwar5's picture

...Because the more you wash them the softer they get.

slaughterer's picture

I use iPad minis to wipe my ass with.


Lordflin's picture

The respondents on ZH are a vulgar lot... not all, but many... a thing I am not much inclined towards. On the other hand, they are among the most insightful and best educated group on the web... so I will take the good with the bad...

btw... didn't down flag this... it contained a modicum of humor.

LawsofPhysics's picture

Sorry, I thought they were asking the question.  My answer --> With everyone being (at gunpoint if necessary) forced to buy war bonds.

Alpo for Granny's picture

Better yet..

"Sorry, I thought they were asking the question.  My answer --> With everyone being (at gunpoint if necessary) forced to buy Patriot Paper".

IMO, gunpoint won't be necessary. Just cue up a false flag and get a film crew to Ryan Seacrest, Ray Lewis, and a life-sized group people dressed up like the Angry Birds, for a PSA letting us know it is our...civic duty to purchase them.

The fucking sheep will trample each other to get the first 1,000,000,000,000,000,000,000,000 limited-edition autographed ones.

BooMushroom's picture

No, gunpoint won't be necessary. Everyone's "money" is already just zeroes and ones, and deposited neatly in their 401(k) accounts, which the Feds already have a list of and a legal nose under the tent.

A choice: change your 401(k) to t-bills, or lose all tax advantages, and pay the penalty, which by the way, is now 25%. And taking the cash is racist or something, too.

astoriajoe's picture

But we have much better financial engineering products now, not to mention more intelligent participants at all levels:)

EmmittFitzhume's picture

"Wellllll We're waitiiiiiinnnnggggggg"  -Judge Schmails

francis_sawyer's picture

Don't sell yourself short Judge... You're a tremendous slouch...

Bicycle Repairman's picture

What?  Do you get a bowl of soup with that hat?  Oh, but it looks great on you!

NoDebt's picture

So.... you're laughing so hard at the comments that you're crying, I assume?

Oh, wait, you mean the other thing.  Got it.  Carry on.

Is it you down-arrowing the shit out of every post today?  It's you, isn't it, Doc.  Come on now, fess up.

sockratte's picture

chart 1 indeed resembles a bull trap (chart formation that has a high probability). if one would apply a so called wolfe wave (a special variant of a bull/bear trap), you would get a price target below 1300 (connect high march/april '12 with low november '12).

Glass Seagull's picture



Ah...the old ending diagonal/throwover in a decelerating macro environment setup.


"66% of the works every time."

madbraz's picture

Bond yields are not rising and there is absolutely no evidence that they will.  Every pundit said the same thing in 2011 and 2012, yet every year we are making lower lows on yields while the market creeps higher - deflation.

Cursive's picture


Exactly.  What the hell yields chart is this guy looking at?

akarc's picture

And at the risk of numerous down votes. If this is true and since I believe in gravity I just can not wrap my head around any number of charts that point strait up then a lot of dollars are going to dissappear when gravity reasserts itself. Many of the folk I know are existing on plastic dollars or IRA statement dollars.   A market crash will not bring on inflation and gold will take a hell of a hit too.

So I begin to wonder if my little stash needs to consists of mattress dollars, cigarettes, booze, sugar, pain killers............. 

LawsofPhysics's picture

No deflation, the correct term is "a loss of pruchasing power".  Don't engage in false language it's like arguing with an idiot, "they will drag you down to their level and beat you with experience" - Mark Twain.  Providing for your family at the same standard of living has very much become more difficult for the vast majority.

Rip van Wrinkle's picture

"...yet every year we are making lower lows on yields while the market creeps higher - deflation.


Make that "rigging" and I'd agree.

Cursive's picture

What if we are on the cusp of a big "C" wave and there will be little to no retrace?  And what is John Hardy looking at to say that yields are rising?  I wouldn't buy bonds here, but I don't see where rates have risen.

HelioCentric's picture

He Never said they would he was analyzing the relation of bond rates rising and equities tanking. Probably because as yields rise in bonds, jnvestors pull earnings out of equities and buy bonds