This page has been archived and commenting is disabled.
Saxo Bank Explains How Massive Stock Market Rallies End
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.
Read more about this... here.
»
- 31417 reads
- Printer-friendly version
- Send to friend
- advertisements -
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.
@slaughterer
GS said we'd end 2012 at SPX 1250. I thought you knew the GS playbook was doube secret reverse psycology.
You guys like calling tops in stocks but not gold: Right much?
Is there a chart setup which Gold currently bears a resemblence to suggesting a top or forthcoming waterfall decline?
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 ?
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.
The goose has been cooked, but not yet sodomized.
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...
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.
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 ...
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?
They end with a "BBBB". Banker Bailout Blitzkreig Bitches.....
I like the article but ben could care less about how his evil looks on a chart
Sorry John. This time it's different. Bernanke has spoken.
Well........in 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.
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'.
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."
http://armstrongeconomics.com/2013/03/13/the-224-year-cycle-march-22nd-2...
Question to all ZHers [at this point in the game]... Which is it softer to wipe your ass with?
~~~
A) FRN's
B) EURO's
C) TECHNICAL CHART PATTERNS
FRN's.
But only because the security strip woven inside resists tearing and the ink don't run.
He! He! You guys kill me.
D) Papers written by Krugman
Apparently we have 4 troll's clicking down votes today.
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.
Is there any silver in that security strip thingy?... I tried wiping my ass with bitcoins, but ended up with dirty fingernails...
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).
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).
...Because the more you wash them the softer they get.
I use iPad minis to wipe my ass with.
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.
Sorry, I thought they were asking the question. My answer --> With everyone being (at gunpoint if necessary) forced to buy war bonds.
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.
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.
DOW 36000 BITCHEZ!!
But we have much better financial engineering products now, not to mention more intelligent participants at all levels:)
"Wellllll We're waitiiiiiinnnnggggggg" -Judge Schmails
Don't sell yourself short Judge... You're a tremendous slouch...
my dad never liked you.
What? Do you get a bowl of soup with that hat? Oh, but it looks great on you!
In tears.
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.
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).
Ah...the old ending diagonal/throwover in a decelerating macro environment setup.
"66% of the time...it works every time."
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.
@madbraz
Exactly. What the hell yields chart is this guy looking at?
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.............
nickles for you...
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.
"...yet every year we are making lower lows on yields while the market creeps higher - deflation.
Make that "rigging" and I'd agree.
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.
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
only way they possibly rise is in relation to inflation. nominally they are still near the all time low of course. what is inflation now?13% so if inflation moderates to 10% then interest rates would only be negative around 8%
instead of 11% negative.
I've just taken delivery of a second hand paperback of Sorkin's, "Too Big to Fail."
Lehman, learning from the best!
I'd love to see that idiot come to work some day with 2 black eyes because someone punched him right in his unibrow.
ENDS IN WAR!!!!!!
{cue metal music}
Brought to you by Motorhead.
Brought to you by Megadeth. "Peace sells, but who's buying?"
Trick question — massive stock market rallies aren't allowed to end in the New Normal.
Satan himself could appear on CNBS to tell everyone he's going to destroy the world next Tuesday, and it would be good for at least +10 on the S&P.
LONG SATAN!!!!
{cue metal music}
Brought to you by AC/DC.
AND SLAYER!!!!!!
Pussies.
Funniest metal video ever.
Very funny! This one is my fav spoof though:
Horrible Histories - Literally: The Viking Song
https://www.youtube.com/watch?v=8qSkaAwKMD4
good for only +10 ? why so pessimistic ? lol
Obama......errr....I mean Satan appeared in the "Bible" on History and the markets broke to new highs. And now he's over in the Middle East trying to start a war. So I think you're on to something!! DOW 36,000 'bitzheeez' /S :-) ..........ok, it IS Satan, and Bernenke sold his soul for power over the peeps and THE perfect beard ........so make that DOW 100,000!!! :-)
They usually end in lulz
I see no mention of algos and POMO's therefore analysis is invalid.
curses ~ foiled again...
~~~
How must it feel to know that your lifes work, which involved studying more than 100 years of so-called behavioral patterns, was just a manipulated ponzi scheme all along?...
God, some people just don't like the truth being shoved in their face. The downvotes show that.
You got to admit though, the stock market has been the most lucrative scam ever devised.
"Am I calling a top?
I am not calling a top – I am suggesting that there are scary parallels in the current market setup relative to significant past market tops."
grow some balls and make a predicition...jesus.
'Predictions are tough... Especially ones about the future'
~Yogi Berra
Predictions are no more difficult than describing the past, when you get to write the past: "What really happened...". I believe (secular and religious) history teaches us that.
isn't not calling a top a prediction that this is not a top? I am not calling a cop.
lol someone's -1 ing all the posts.
Look at that chart of the 200 year history of bond yields.
Look at the bottoms of each decline in bond yields always lower than the previous bottom for 200 years. The current 'bottom' is actully bang on the 200 year declining trend line. Only the spike in inflation due to half the world population being trapped under communist control caused the spike up of the tops after WWII but otherwise the tops are also declining for 200 years as well.
Why is that multi century trend there? Is it industrial productivity, democracy taking hold across the world, growing populations due to discovery of vaccines and antibiotics, modern banking and finance, electronic communication systems diseminating information quicker?
Any ideas?
Central Banking Thieves
It is larger and larger proportions of the population up to their eyeballs in larger amounts of debt.
Think about what a bond yield is, or interest rate is. The higher the yield is, the more the debtor is able to pay. If they can't pay => bankruptcy(or rather, debt repudiation). So yields are always a little lower than the maximum people are able to pay.
Today everyone is up to their eyeballs in debt, so who can pay 15%?
So what you're seeing there is the enslavement of larger populations to the creditors.
"When things go wrong, just hold the chart upside down." --Bernanke
Putins payback already showing itself on poor Cyprus is it.
http://www.zerohedge.com/news/2013-03-12/which-patriotic-us-companies-in...
This time is [Never] Different.
thankyou for sharing your knowledge and expertise. i myself, wholly appreciate your kind and genre simplification indulgence regarding my own amateurish understanding-- i've always been mystified by chartist and how ones intrinsic 2D & 3D art can even challenge or compliment an (?) abstract picasso.
thanks again
The Austrians were demonstrably correct decades ago, but it didn't change anything or end corrupt action by bankers - merely explained the ultimate demise of economies into chaos.
Those late 70's early 80's bond yields of 12%-14% came after Nixon completely unhinged the Dollar from Gold.
Then, 30 years of off-shoring of production and employment necessitated lower and lower bond yields to create bubbles in housing, tech, and increasing debt levels.
The $1+ Trillion per year over the past ten years added to the debt has only created a bigger bubble in housing and equities and a debt trap.
The proposed confiscation of depositor savings by the ECB and IMF is part of the end game.
Black Tulips bubble, South Seas bubble, and now the Central Banking bubble.
and the social bubble, the property bubble, the student loan bubble, the sub prime auto bubble, the supply chain bubble, the oil bubble, the copper bubble, the corn bubble, the bitcoin bubble, the retail bubble, the bond bubble, the burrito bubble, the smartphone bubble, the content strategy bubble, the yoga pants bubble, the distrbuted media bubble...
What isn't a bubble? I guess if everyting is a bubble, nothing is a bubble, cause if you're in the bubble and can't see the surface, you don't know it's there.
So when do we hit the wall at the edge of the dome in the Bernanke Show?
Even though it's a break from cypriodic information, this article is one of the worst posted in awhile. Wasted my time perusing the responses and couldn't find anything interesting.
saxo = poor naive chicken little
this market can not and will not go down more than 0.00001% ever
Yields are a lot higher than they were. Obviously they are low in a general sense but what u see is that they have risen from their lows of 1.6 or so on ten yr to 2%. Might seem trivial but the point is speculators and tactical investors of any size see tht as a big move and ironically instrad of the great rotation bull sh&t u could make 5-8% buying the ten year here if it were to go back to 1.6%. So it sets up well as a draw from equities. Just on a little mean reversion if u road equities up here u may say let me jump i to the 10 year as we are bound to get a small rally even if it doesnt go all the way to 1.6% or whatever the low was. The point is compared to the past year. Yields on long duration bonds are higher and when yields are so low that means big price moves. Gross is a chicken but he is back buying treasuries but he wont go past 5-7 years in case he is wrong whereas jeffery gundlach has switched from no treasuries last quarter basically to loading up on duration the past month. If right he can make 8% in a few months on that trade. Hes rarely wrong on bonds. I agree with this guy that the set up is horrible and looks perfect for a crash but this thing might have another leg or two to go. I think cyprus being resolved will be the final pop in us equities whereas most of the workd already topped out.
the 10y T is going to 1% yield. it is a no brainer.
author = fool hardy
Looking at the charts the only conclusion one can reach is the stock market has never reflected the underlying fundamentals of the economy, nor accurately tracked the true distribution of commerce.
The stock market only tracks one upmanship and fools trying to sell to a greater fool for ever greater yield in order to obtain wealth without labor.
The stock market can generate greater returns and add more zeros to the funds of a well connected insider than all of true global commerce. Is it no wonder that financial "services" make up such a large percentage of GDP?
The question I have is how can financialized fraud be counted as production? I guess it is because the ill gotten gains can be used to purchase physical goods. As it has been throughout history, it is always far easier to steal than to create on your own.
"I like to look at historic patterns,particularly where the past might provide a historic parallel for the current situation."
I don't know what planet this knob lives on,but the current situation of Central Banks printing money to fund government defecits and prop up asset prices has never occurred before,so there is no historic parallel and as for technical analysis - it is totally worthless when you have the Bernanke Fed jumping in at every dip to launch the market higher.When this bubble bursts,it will also be different to anything ever seen before - it will be the biggest financial collapse ever and make previous disasters look mild by comparison.
My guess is that the collapse will start in Europe. That is where the weakest big banks in the world are concentrated.
In all those charts above, the major breech of the BOTTOM uptrend line started a sell-off. On the current chart, that bottom uptrend line is at around 1450ish. I dont understand why he thinks a breech of 1525 would cause ANY concern. RISK ON....BITCHEZ!
The birth of money from money.
"There are two sorts of wealth-getting, as I have said; one is apart of household management, the other is retail trade; the former necessary and honourable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another.
The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied for the breeding of money because the offspring resembles the parent.Wherefore of all modes of getting wealth this is the most unnatural."
Aristotle, 384-322 BC
Tyler, are you aware that the Danish press has called Saxo a "bucket shop"? Do you dispute that label? Or do you not care care? Do you have a fucking clue what the average return is on Saxo's CFDs? Here's a hint: worse than the return on a Cyprus bank account.
If the charts are correct and put out by a 6 year-old, would it matter?
That was an interesting read by Mr. Hardy. The equity market is so disconnected from [credit,bond,F/X] markets. I think the more disconnected it gets, ie; higher it goes, that the less people are using it as a guage for anything more than preparing for a bubble to pop. There is absolutely no reason why the markets should be positive, other than it's a POMO day.
Just re-read the story of John Law and the Mississippi Bubble. It was amazing how similiar John Law's Mississipi Company was to Ben Bernanke and the Federal Reserve.
The central bank cartel agents are out in force today on Zerohedge, your down arrows won't save you.
Got em on the run boys!
Tech analysis charting using analogs does not work anymore.
Infinite liquidity injections and HFT algos have changed the whole game.
The trolls are out en masse... thumbing down every comment written here.
big deal, you pay $1 to some indians and they will troll the shit out of you a few weeks
Man, the down arrows run rampant. Bernanke must be logging on with multiple IDs.
sho' is a lot of red-arrows for flimsy, if any, reasons... must be 3 or 4 assholes out there holding hands
Well, the DOW could definately pull back to 13700 without missing a step in the upwards trend. People are getting a little excited.
I was browsing in my local franchise bookshop just earlier and stolled past the Economics section and low and behold what am I greated by?
End This Depression Now! by Paul Krugman
Talking up the top section of books and you know what, I couldn't even find one book on Economic Crashes, nope, not one book as I had my eye on buying Currencies After the Crash by Sara Eisen
I wonder how long it's been like that if other bookstores are doing the same. Either the books on Crashes are constant best sellers that are out of stock or they are being removed on purpose. Check your local bookstore yourself and see.
I'm still reading the Roaring 2000's.
Just rid yourselves of the odious foul-smelling stench of fiat paper and replace it with anything else other than bonds because ALL currencies of the G20 are doomed. Which means stocks are going higher - period. Short sellers are getting barbecued bigtime forgetting that the replacement power of equities when the presses are running fullout.
I can barly read this web site any more. You guys have been calling a top for two fucking years -- eventually you will be right. Meanwhile, I've made a shitload on the long side.
Tyler, portuguese tv channel TVI24 is reporting deficit has surged from 205 to 247 M eur in ONE MONTH. More as they come.
From March 2009 to current, here's what $2-3B per day will get you in the Dow:
http://bullandbearmash.com/chart/dow-jones-weekly-week-record/
All because some politicians want to get re-elected.
14,500 is a pretty weak top given 85 billion a month in money printing and 5 TRILLION in spending don't ya think? They not only threw in the kitchen sink, but the dog, the kids, the pool, the garden hose, the mailbox etc.......
DOW 36K
They can't sell-off while everybody wait for the sell-off.... they need more suck*rs in.