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What Happens Next?

Submitted by Tyler Durden on 07/10/2013 22:53 -0400

Each time the S&P 500 has traded more than 12% above its 200-day moving-average, the following correction has not ended until the average itself was breached by price action. Fundamentally, one can tie 'events' to each of these exuberance spikes - in this case, liquidity-turns-into-a-taper - but sometimes historical prices can be a better guide to the human biases for extrapolating trends and building fragility. Given current levels that would mean a 10% drop from current levels to 1516.

(h/t @RonnieSpence)

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Wed, 07/10/2013 - 22:57 | 3740218 eXMachina

First!

Oh and GOLD bitchez

Wed, 07/10/2013 - 23:08 | 3740258 ACP

Speaking of 1516...just for shitzes & giggles...in July 1516, Selim I of the Ottoman Empire declared war on the Marmeluks and invaded Syria.

It's a sign dammit!

...this QE bullshit is driving me nuts...

Wed, 07/10/2013 - 23:13 | 3740281 RockyRacoon

As well it should. That may be a feature of the economic regime authored by the Fed, rather than a bug.

Wed, 07/10/2013 - 23:24 | 3740312 flacon

I'm still bearish, perhaps to a fault. Yes my puts are getting crushed, but honestly, one of these (unknown) days we could GAP DOWN 900 points on the Dow or 150 poins on the S&P.... just like in 1987.

I will nurse my wounds tomorrow morning by eating some of my gold.

Wed, 07/10/2013 - 23:34 | 3740336 Its Only Rock N Roll

ahhhh....special healing powers this gold has???

Wed, 07/10/2013 - 23:35 | 3740341 flacon

It brings out the barbarian in me because it's not edible and it has no dividend. A perfect cocktail of rebellion.

Thu, 07/11/2013 - 00:03 | 3740376 flacon

SPY 500 Flash Crash May 6, 2010

http://www.youtube.com/watch?v=0aUJ8uTnjuk

S&P didn't even stop at $1,100.00 just blew right through it. Incredible.

Thu, 07/11/2013 - 00:29 | 3740444 Al Huxley

I actually happened to own some SPY puts, AND happened to be watching the real-time price action as the flash-crash occurred. It was memorable alright.

Thu, 07/11/2013 - 02:36 | 3740594 old naughty

"10% drop from current levels to 1516"

sounds BANKable.

Thu, 07/11/2013 - 02:57 | 3740610 Bear

I bookmarked this ... so when I get too low, I can listen to it again. I lost 50% of my 2010 profits when ES turned at 1058 and headed north to 1135

Thu, 07/11/2013 - 06:01 | 3740682 fredquimby

But you can drink it :)

Thu, 07/11/2013 - 09:22 | 3741113 Translational Lift

That would make for some colorfully enhanced shitz..............

Wed, 07/10/2013 - 23:52 | 3740368 Obchelli

Painful as futures are already up 17 - they where never down this much for past 20 months

Wed, 07/10/2013 - 23:53 | 3740370 random shots

1929 and 1987 were proceeded with DJIA/S&P 500 rising 20% above the 200 Day MA. Long way up before the trade you want sets up.

Wed, 07/10/2013 - 23:57 | 3740372 flacon

At the rate we're going it could be by next Thursday.....

What was the rate on May 6th, 2010? It could happen at any time. Go out for a cigarette break and come back with Dow down 900 points!

Thu, 07/11/2013 - 01:15 | 3740439 random shots

I remember sitting at lunch with the boys from the office when one of them got a call from their mother. The conversation went something like this..

Co-Worker: Huh? It crashed?..its on the news?..ok *hangs up* Hey guys, the stock market crashed.

Random Shots: Dafaq?

Co-Worker: Down 10% Percent

Co-Worker 2: Smoke if you got em.

The mobile app crashed so we could not pull up any data and just finished our lunch. By the time we got back the market had mostly rebounded. Glad I was not at my desk when it happened or I might have shat myself.

Wed, 07/10/2013 - 23:57 | 3740374 playnstocks

I feel your pain,, I got slammed myself over the last 3 days, and then Benasslick comes out and FN LIES some more.. Taper on.. no i didnt say that. uh maybe... uh no dont sell... uh keep buying.... FN ridiculous.... and then dont forget Alcoa beat.... I hate when CNBS trots out all those morons that say buy buy buy.. "who doesnt want to be in this market"....what to do?

Im gonna have gold with my eggs in the morning with a side of silver!

Wed, 07/10/2013 - 23:59 | 3740384 flacon

Cheers for breakfast! Johnnie Walker and Goldschlaeger for breakfast for me. (see my post (video up there) about May 6th flash crash).

Thu, 07/11/2013 - 00:37 | 3740462 playnstocks

Great video! I watched it twice, the guys voice reminds me of Trading Places....All the panic.... Suckers..... OJ Futures... LOL

Thu, 07/11/2013 - 00:38 | 3740463 playnstocks

Thu, 07/11/2013 - 01:36 | 3740537 Lets Buy The Dip

when you see a chart like that, I mean.....go from the bottom left to the top right, how is that BEARISH like everyone out there keeps saying. if you have been tryign to short this market, you would be getting killed. But people still are...top calling. What I think this is ...is the MOST HATED BULL MARKET EVER SEEN! SEE HERE ==>http://bit.ly/15hvKkO

Thu, 07/11/2013 - 01:54 | 3740552 eXMachina

Holy moley!

Silver currently smashing through $20

WTI past $107

Gold approaching $1,300

Wed, 07/10/2013 - 22:58 | 3740224 thismarketisrigged

i dont want a correction. i want a fucking crash.

corrections mean nothing now. they pump stocks up so high that any correction still brings it to extremely inflated levels.

this thing needs to fucking crash, bernanke needs to be punished.. this man is fucking satan

Wed, 07/10/2013 - 23:12 | 3740277 Blazed

Eh, I think all we get is another correction this time, have to wait till end of Q1 next year for anything substantial.

Wed, 07/10/2013 - 23:31 | 3740328 thismarketisrigged

ill take the correction now and then a crash come q1 next year, thats fine.

i just cant take this shit. its one thing to have a very overvalued market with real people buying it up.

its another thing to have a fucking criminal fed keep proping it up and never letting it fall too far down, that is what ticks me off.

at least let the game be semi fair, let free markets prevail, 5 fucking years of this shit already.

i totally was against this shit since they began in 09, but whatever, we had a major crisis and they wanted to try and calm it down a bit, i disagreed but ok, fine. However as seen, it has not done anything for the real economy so obviously its a failure, yet the fed fails to see that and thinks the best option for all of this is to continue inflating stocks.

Wed, 07/10/2013 - 23:23 | 3740296 MythicalFish

thismarketisrigged, It's a noble wish. And may I add, not a 'Dragon King' drawn-out crash like 2008, but a shock-and-awe, out-of-the-blue, HFT-cannibalizing, feedback-looping MOMO mother of all flash crashes kind of thing that sets matters right for good. PRETTY PLEASE.

edit: ES futures hit 1666 as I type this - could it be an Omen??? ;-)

Wed, 07/10/2013 - 23:27 | 3740320 thismarketisrigged

@mythicalfish, we can only hope

Thu, 07/11/2013 - 02:48 | 3740602 Bear

Sorry ... on to 1667.50

Thu, 07/11/2013 - 06:46 | 3740709 BandGap

Under these conditions if the drop is steep enough it could blow past 1516 in a heartbeat. Careful what you wish for.

Thu, 07/11/2013 - 08:09 | 3740876 wallstreetapost...

I agree with that, but this market looks like it will go much higher before it happens. Its gonna crash and it will be a bigger crash than anyone expects, but currently the markets can only go higher. Nothing matters anymore.

Wed, 07/10/2013 - 22:58 | 3740230 Divine Wind

Some insight is provided in an earlier article published by Tyler et al.

Now Assume No Fed

http://www.zerohedge.com/news/2013-06-20/now-assume-no-fed

Wed, 07/10/2013 - 22:59 | 3740233 BandGap

This is an easy question, as I am really close to an answer.

I lose my fucking mind.

Wed, 07/10/2013 - 23:01 | 3740240 wisehiney

Time for the funds to take some profits to pay granny's annuity, along with the other 10,300 boomers that retired today. At least granny don't gotta live with me.

Wed, 07/10/2013 - 23:05 | 3740253 sunny

Problem is this time we have the Fed printing like there is no tomorrow. All the other times there was no QEternity, no ZIRP, no POMO. This Time Is Different! (Cute phrase, someone should write a book....).

There will be no correction of any significance until the Fed stops printing.

sunny

Thu, 07/11/2013 - 03:56 | 3740633 Thorlyx

We have a winner here....

Wed, 07/10/2013 - 23:06 | 3740256 kito

Drop? Huh? Ben released the doves today and zh puts up an article on a correction? Really?

Wed, 07/10/2013 - 23:08 | 3740261 BandGap

All for the sake of chaos. His voice is stronger in those scenarios.

Wed, 07/10/2013 - 23:19 | 3740301 Fail2Deliver

@kito I am with you on that headline What Happens Next is that the market goes up about 500 points over the next two days. Will it take two days is the question.

Wed, 07/10/2013 - 23:06 | 3740257 JohnG

Suddenly SPXU looks attractive for a short term trade. These markets won't be allowed to fall more than 10% until it REALLY crashes.

And crash they will.

Wed, 07/10/2013 - 23:10 | 3740267 Chief Falling Knife

Anyone else marveling at the plethora of bearish divergences on this beast? (Tomorrow's open should amplify said divergences) Of course they haven't meant much in the last 4-6 months or so.. but how long can this thing defy everything logical and keep going up? I know, I know... stupid question.

Wed, 07/10/2013 - 23:39 | 3740347 Its Only Rock N Roll

yes

and they do matter

Wed, 07/10/2013 - 23:16 | 3740290 Royal Fleming

who gives a shit about stocks. us forex traders love the chaircreature. fuckin beta ben

Wed, 07/10/2013 - 23:17 | 3740293 wisehiney

Cramer, please tell us!

Wed, 07/10/2013 - 23:18 | 3740299 Mr. Hudson

I predict that ZH will have an article that exposes collusion between the Central bankers where the Central banks are not only propping up their own markets and currencies, but they are printing money and propping up other countries’ markets and currencies as well. The Yen plummets; Central bankers print more money and buy the Yen, thus propping it back up. The dollar plummets; the same thing. They are scratching each other’s backs, and by doing so they can keep this shit going on for a long, long time.

Wed, 07/10/2013 - 23:31 | 3740329 whisperin

Yes, they can....until the next war breaks out (caused by CB's of course). Now with the total distrust of governments every where, I'm wondering if the next skirmish will be the one that spins out of control. You know something like a ship parked sideways in the Suez Canal!

Wed, 07/10/2013 - 23:56 | 3740377 garypaul

I thought that was common knowledge already????

Thu, 07/11/2013 - 03:07 | 3740616 Bear

Global hyperinflation ... all fiat goes bad simultaneously ... banks recoup losses ... and .gov pays back bonds with old money then declares new one world global currency conversion ... it's called the SHTF time

Wed, 07/10/2013 - 23:32 | 3740330 max2205

Fragility. ...

Wed, 07/10/2013 - 23:34 | 3740339 thismarketisrigged

its going to be too funny not to laugh when the market spikes higher on absolutely no volume once again.

also, tomm morning will deff be interesting to hear santelli go on a rant probably about what bernanke just did again. that will be must watch tv, before the bullshit ramp up in stocks begins.

Thu, 07/11/2013 - 00:36 | 3740459 Saving Peace

Meh <-- that's my best reaction to the whole thing really.

I analyzed and rationalized that the S&P can't be that hight, put money where my mouth is and shorted it, got out at a loss a bit later.

Rinse and repeat several times and now I'm out for good. I'm not gonna touch these indices with a 10 foot pole. Fuck the whole thing really. Now all I do is buying Gold and AUD. I'm out of rational ideas.