Guest Post: Attention Passengers on Global Equity Flight 2011: Assume Crash Positions
Submitted by Charles Hugh Smith from Of Two Minds
Attention Passengers on Global Equity Flight 2011: Assume Crash Positions
An array of evidence suggests that a crash in equities might be just ahead.
I know, I know, retail sales are up so everything's wunnerful, but the captain of Global Equities Flight 2011 just instructed the passengers to assume crash positions. It seems the captain has the distinct advantage of being able to see what's just ahead, not to mention being able to monitor the engines and fuel levels. (Hmm, did the starboard engine just conk out? Not good....)
Levity aside, there are unnerving similarities between the present and the pre-crash 2008 equities market. To make the case, let's turn to some excellent charts from The Chart Store and Ron Griess.
In the first chart, Ron has traced out the basic pattern and the percentage of stocks above their 200-day moving average (MA). Notice how weak that is compared to price.
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Next, a chart which shows we're right where the 2008 rally topped and tanked.
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Last up, one of my favorites, an analog chart that overlays the present-day rally over the 1907 crash and rally. It is uncannily similar until QE2 saved the day for a few months. That pushed the present out beyond the 1907 line, but then current prices began falling until the most recent "6-week wonder" prop job once again saved equities from collapse.
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Apparently we're supposed to believe that channel-stuffing auto dealers and Americans-self-medicating-with-shopping-on-credit are really going to power the economy to ever greater heights of sales and profits. Anything's possible, but despite the cheer and the constant calls for a year-end rally to end all rallies, the market is looking a little uncertain here.
Consider the broad-based Russell 2000, which seems to have traced out a beautiful head and shoulders pattern, as good a precursor to a crash as you can get.
The last time the RUT looked this ugly, the Powers That Be pulled one save after another out of their bag of tricks. Despite brave talk from Fed lackeys that "we have more amazing stimulus plans right here," everyone knows they've shot their wad and have been reduced to playing around with Treasury yields that won't do anything for the real economy. So all that brave talk about the next big Fed-rides-to-the-rescue is just that, hot air and paper-thin bravado.
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For a very insightful chart of the RUT from a razor-sharp analyst, please see Technical Perspective: Repetition in the Russell 2000 (Chris Kimble).
Zooming in a bit, let's take a look at the S&P 500, where we see a classic wedge/pennant, the sort of thing that breaks big up or down. Given the abundant evidence of weakness, not to mention the potential for outright panic in global credit markets, does anyone not being paid to lie really think the probabilities favor a breakout here to the upside? Based on what? I know, I know, "seasonal patterns." In other words, we're depending on Santa to deliver the rally everyone needs to stay solvent.
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It doesn't take much imagination--none, really--to see the similarities between the July topping-out and the present. If volume is the weapon of the Bull, then everyone betting on the next big rally has to explain why volume has been declining.
Rather than get distracted with how much low-quality crap gets sold at loss-leader prices on November 25, we might be better served to focus on the U.S. dollar. As everyone knows, equities and the buck have been on a see-saw for a long time. If the dollar rises, equities drop. If the dollar rises a lot--for any reason, or no reason, it doesn't matter-- then equities crash.
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If the euro weakens, the dollar rises. If the dollar rises, equities weaken. If there is anything else to know about the current equity market, how much can it possibly be worth?
He who sells first sells best. Something to ponder in the weeks ahead.
(19 votes)
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Ummm. Ain't happening.
Agreed. Apparently this correlation no longer works. You know, just 'cause Fraud Street changed the rules. Didn't you get the memo?
Junk all you want. They're about to take it green. Again. What do you think is gonna happen when the Euro rebounds? *then* the correlation will magically work again.
I did not junk you. I would like to make a remark. These charts look good and factual.
Yes they will make it green all day on NO volume. Volume verifies the rallies. Not forced short covering.
I am and will remain 100% cash. All we have to do is wait for the trigger and credit event.
It will happen because it is real. This will be a financial crash.
There is nothing to debate. Dr. Copper has spoken. Bond yeilds have spoken.
All we need now is for reality to set in. Hope is not a investment theme.
Forget charts.
Not every European bank is going to implode, but just about every european is priced as if they are.
Find the ones that will weather this storm (read: their government bond holdings are beating bunds) and exceed tier 1 capital targets and take a risk.
The buy the good bank stategy did not work in 08 and it will not work in 2011-2012. The baby will get thrown out with the bathwater. All banks will fall.
You could be right of course, but QE is out of the bag. And even those morons at the ECB know they have to do it to save the financial system.
Hope you are truly in cash and not in MMKTs cause a lot of MMKTs are invested in EU Banks. I was all in Bond Funds when the original crash hit and I made out. This is not a reccomendation just free info and this and $4.95 will get you a cup of coffee at Starbux.
Yep. 3 Accounts all Cash. Just Waiting. They may push this around till after Xmas.
Who knows, right now hedge funds are burning shorts. A bigger drop when they do this.
One morning we could see a 400/500 drop at the open which will cause a down ramp.
I am beginning to believe that is what they want.
Short interest has dropped. If will take a lot more this time to force a short-covering rally, unlike a few weeks ago when everybody & his brother was short.
I guess we will see soon, but the upside from here looks very limited, while the downside looks....well, it looks like it could go down a long way.
The Santa rally is facing European headwinds that even the jolly old Bernake can't tame. I don't know what tomorrow may bring, but the Europeans are having discussions now about things that were unmentionable a few months ago. The more they talk, the worse it looks for the Euro/European Union retaining the same character of the past. Regardless how hard I look, finding positive things to get excited about is almost impossible. Seems like for every plus, there are at least 2 minuses.
Hows that 'takin it green' workin out? And even if and when they do 'take it green' so what?
Assume the fetal position & start suck your thumb. Somehow i feel less pain when i do this!
Bennie and the Inkjets dont give a fuck about your charts (BTW I DO), he will Penn St fuck all shorts beyond imagination....or so he thinks
it will take a boatload of new debt, because more QE here won't mean much if Europe blows up....so to insure the Ponzi extension, Ben will have to print for the ECB, too. If it comes to light that the FED is bailing out the US banks and the Euro banks at the same time, all hell will break lose. The politics of it all would be unbearable.
yeah that's right...and go long Lehman and MF Global...and all that jazz....
Yup sometimes the board where things are supposed to balance from one side to the other, well this board breaks and two sides get down. It will take more time than most people think but the USD will break.
On a long enough timeline....and all that jazz. The USD will beak against what? Really, what breaks first? EUR or USD?
Well open a history book and all that jazz... Assignats, Rettenmark, Continental dollars, Greenback introduction.... yeah I know too much jazz probably, boring... History started in the 1980, on hte first day God gave Ronald Reagan to the USA on the seventh day God sent his an angel to the USA (= earth) and music was invented by Madonna... Currency crisis are just business as usual if you take a longer perspective, there are hundreds of crisis, which are either sovereign, banking, currency, just hundreds of them in history. USA already defaulted three times (continental dollars, Civil war 100% inflatipon), 70s inflation and now it is the fourth time. Currency crisis, severe inflation, banking crisis or sovereign crisis are business as usual from historical point of view. Forget about fiat, at that point they will all break in a different ways, they can break through printing (long time scale) or in shorter time scale... Take your pick
Oopsss forgot the devaluation of 1933 against Gold...
Well, if you know so much, why didn't you answer my question?
Stock Market Non-Insider Participants = Crash Test Dummies
It can't happen, because this time is different.
I want my mommy!
I want your Mommy too
Ummmmm......so you're in to necrophelia?
Awwww. That's sad.
Snap!
Gold, bitchez
I had your mommy and she tasted pretty good!
Great timing for this post, just as US equities commence on yet another ramp job.
Dow spikes nearly 60 points in 10 minutes.
I'd say it's too early.
First the EURUSD has to touch 1.30 (December, latest),
then (according to Gonzalo Lira) the Big Raid on EZ Sovereign Bonds might to begin in earnest (he says tomorrow's French Auction),
then we have Xmas & the biggest Bonuses of All Times
and then we have a decoupling of US Equities (down) from all Euro-related things.
See you at EURUSD 1.5 at Easter
Who put your Dr. Evil hat on today?
you are right, I'm slightly down the wind today - not my usual cheerful self
but the fact that the masters of the universe have found a way of having the Dutch Debt now with consistenly higher yields than Germany really makes me angry
it's not only too manipulated - it's grossly manipulated
too much hot USD searching some quck killer bets and all on "seasonal themes"
usually I'm skeptical of all conspiracy theories - idiocy explains 99% of the cases, IMO
Was this before or after Mercury entered alignment with Uranus?
lol no actually this was the next day after a full moon and an astroid the size of a battle ship grazed past earth :o)
There's Klingons circling Uranus.
I brought this up because it was within a technical market posting. I'm calling for a plunge come friday's open bitches!
Well you are a bit too specific, BUT....
Hard to deny that moon has behavioral impact on people, same goes for Sun apparently. There is a statistical sample of 34,000 people over 30 years that show that people commit suicide more often in Spring. There is apparently nothing in litterature or culture that spring is a sad time, or some sort other variable.... maybe it is because tax are due in April there and Sweden has a very high rate of taxes (that could be actually the reason...) Joke on teh side, assuming that Moon and Sun has 0 impact on what goes on the earth?? Hello??? Women menstrual cycle length, reproduction cycle following moon cycles, tides, inability to sleep on full moon (documented stastically). Well about zero impact of the Sun on earth, well it that would be case, we would not be blogging here on hte first place, because there would be no light and no life. That is was is powering all that is there to see, and the amount of power varies across time... There are credible evidence that total absence of sunlight on people has impact on people sleep cycle, mood ect... That is put a human being in a cave for months without sunlight and watch.... not pretty.
So while I can not accept that Sun and moon are telling us when the crash will be, it is also imprudent to accept the hypothesis that there is no impact on human behavior from stellar objects, given the ample evidence that those two somewhat massive objects have large influence on life cycles on our planet
From that point to predict when teh market crash on a given day at a given hour... yeah right...
Silver barely holding 34 now.
Why would you want silver when you can buy some delicious CRM stock?
long clouds...lol
Well I guess if I listened to my broker I'd be buying all sorts of useless shit right now.
They're on instruments. The copilot is losing air, and everyone had fish but the kamikaze pilot.
Well done, could not agree more. Nice to see you pick up the possible head and shoulders with RS forming here. Weekly fractaling nicely to '07 top. Only difference - the Fed and crony capitalism are out of control here. We may have to wait this one out till they literally implode the whole system.
market coming back nicely
Coming back to what, 1995 levels? DOW is 12,025, so all is well I guess.
These sky falling headlines get tiresome. It is especially irritating reading them while the market bounces back for the day
Then you behave as they intend. Or not. It is not a question of if, but of when.
The leading indicators will move after the system collapses, not before.
3 weeks 6 days.
Hows that 'market bouncin back' goin now that its back to days lows?
I am so happy to be wrong. I truly I am. I am so sick of watching the same show.
"Apparently we're supposed to believe that channel-stuffing auto dealers and Americans-self-medicating-with-shopping-on-credit are really going to power the economy to ever greater heights of sales and profits."
Quote of the day!
I put on my crash helmet jus tin case....a bigger cash position since i dumped last bounce....on sidelines now....
All I want for Christmas is accurate price discovery...or a shit ton of gold. Never mind, just get me some not money gold - it's tradition!
Too many technicians are pointing to this similarity between 2008 and 2011 chart pattersn. Question is:
where are the failures?
where is Bear Stearns?
where is Lehman?
where is FnF?
where is AIG?
where is wamu?
where is Wachovia?
We need a few catalysts (runaway disasters) still to get to 2008.
Too many politicians are seemingly rescuing the world and the MSM is not tuned to disaster yet.
Dexia, MF Global, Unicredit, Jefferson County... and despite ISDA, Greece debt "haircuts" ARE actually real losses on the balance sheet (a catalyst for a future catalyst).
Agreed. Talk to any retail insiders and they will tell you their business is great. Some say better right now than has ever been. Sorry, no 2008 redux here. We have got a recovery on our hands.
Not sure what to make of the WTI spike. The reversing of the Gulf-Cushing pipeline that COP just sold is probably related. WTI-Brent spread has collapsed. Anyone have another explanation?
I could care less until it affects the price of gas. Gas prices remain the lowest since Feb '11.
Santa Rally on tap next. Get long.
Use the Euro induced volatility to add to positions. BTFD.
so you think Bernanke really saved us from a repeat of the Great Depression? The very same man that has been wrong about every economic prediction he has ever made?
nO CRASH MORE PONIES AND UNICORNS BRO BUT REALLY NICE CHARTING....
Charts schmarts..... oil ain't payin attention to any of it
Unless of course Oil has gone rogue because it's operating under it's own fundamentals due to decreasing total production...
Spreads between bid and ask government bond prices indicate markets are “frozen,” said Franco Passacantando, Bank of Italy’s Managing Director for Central Banking, Markets and Payment System in Milan today.
The European Central Bank is “almost exclusively buying Spanish and Italian bonds,” he added.
The European Central Bank is “almost exclusively buying Spanish and Italian bonds,”
Hmm. A central bank buying sovereign debt. Sounds vaguely familiar.
For all of my lifetime, the American Right hated European Socialism, and wanted Europe to be more like the USofA.
Well, now it is.
I guess the American Right must be happy now, huh? Victory is theirs!
EURUSD heading to 1.20 or less... stock markets should follow... I share this view: it's about time, crash time.
I'm more like 1:1, but it won't matter cause it'll be German marks to USD anyway, but it won't matter cause we won't buy their cool shit, but it won't matter cause ...
I've been reading ZH for some time now. The articles appear to be factual and well researched.
Some of it I do not understand. I am not the only one.
The "sky is falling" syndrome has been going on since I starting reading ZH, and yet, life seems to be going on.
Am I missing something? Is ZH the prophet of an eminent financial collapse or will things still be the same five years from now?
Good luck....we're all counting on you...
We are in the collapse. See National debt 15 Trillion that we know about, Banking sector propped with bubblegum and hope, European debt crises, 16% unemployment, etc.... It just takes a while for our collective heads to feel the brick and morter crumble around our ears. Be patient..the pain will come.
Relax and just BTFD
I believe a lot of assumptions have been proven wrong.
QE to infinity
Fed has no more bullets in the gun
Sensationalist headlines encourage the more ignorant of us to make bad investment choices(see the deflation blows doors open for QE) really?
logic says that the markets can't continue to do this. however if all governments collude together to keep the ponzi going and there is no media(that the normal person watches) to blow the whistle, well then this can go on until the powers that be want it to end. It appears to me that they hold all the cards and as George Soros said in, was it 08? "We will have a managed decline of the dollar"
I am sitting on my stacks, tending my gardens, raising my newly bought goats etc, preparing for the end.
if all governments collude together to keep the ponzi going...then it is not, by definition, a "market". Merely a government sponsored game of three card monte.
Those goats will go right into the stomach of the starving armies.
Apart from the National debt, endless and ongoing wars (at least 4 of them), devaluation of the dollar, real unemployment rates, home price deterioration despite dollar devaluation, mark to unicorn accounting gimicks utilized by the banking industry to create the illusion of solvency, the perpetual bombardment of misinformation, disinformation and outright lies by the mainstream media and our "elected officials" and the levels of protest sweeping the nation and the globe...everything is, in fact "just fine".
Don't worry...go shoping.
They laughed and mocked Noah too, use this time. Develop skills that have been lost due to specialization of tasks and division of labor. Most prepping is just good sense, good times or bad.
Cherry Picker - Here is the thing - even if you ignore all colorful commentary and just look at the facts that are talked about here at ZH you will see for yourself that the world economic condition is very perilious.
Carefully see how the corporate and economic numbers are routinely fudged and are clearly exposed here at ZH, when you look at any expecatation be it corporate or economy number you will see a downward revision and then the big bold news that "XYZ beats estimates". The same is true with economic data. ZH rightly predicted about the Italy bond/bund breakout even before the market shifted focus to Italy and now ZH is talking about Spain again..
The market is reacting slowly - this may not be a plane crash but a slow and gradual ship wreck that started in Sep 2010 (yes not 2011), though the seeds were sown 5 years ago when debt situation began to worsen the world over.
And yes I will buy S&P but not until it has corrected 20% from today, this may take upto 6 months in my view, but might happen sooner.
Spot f*ckin on
Agreed. We are all waiting for the "EVENT!!!" when in fact this collapse happens in stages.
Here is a link to the bears explaining how it happens.
http://youtu.be/Fkk95XLXW0I
We around around stage 8 although it is not a totally linear event.
@ cherry picker
True. However, I see ZH as an alternative medium to find out what is happening on the other side.
Like something good to look into while holding trading positions .. :)
The sky is falling, you just can't see it through the manipulated markets.
Financial collapse is inevitable.
You have the correct question, though: is it "eminent"? (except you got the wrong word - you meant "imminent" didn't you? They have completely different meanings)
I don't believe so, myself. I don't even think it will be a "crash" per se, just a looooonnnnggggg slllloooooooooowwwww grind into oblivion over the next several decades.
I have faith in humanity, and its ability to improvise and adapt to any situation. We'll collectively get through this thing eventually, but probably not in my lifetime. We are in the "new normal" where things just slowly and constantly get worse and worse. Two or three more decades of that and I'm dead anyway ("on a long enough time scale ...") so it won't really matter to me.
Collapse via sudden crash? Nope.
Long slow grind into oblivion? Ayup!
Just my opinion, I'm only The Sarge, I have no high level, insider intelligence on this matter.
ZH came to notariety during the financial crisis that is (seemingly) winding down, by giving the non-stop (24-7) play by play with the excitement of a sports announcer with lots of charts and wily commenters.
If the euro thing ever gets resolved, I am thinking TD will have to realign the 'sizzle' somewhat to reflect the less liklieness of fiat ponzi collapse. The euro thing keeps us guessing about potential contagion though.
It is compelling reading nonetheless as TD does a fantastic job of drawing the crazies and some of the shit you read here is really funny. A lot of the commenters are highly intellectual and clever. Fun place IMO.
Mr. Picker:
Thank you for your support of The System! We appreciate your efforts to counter negative thoughts and doubt in this, The Greatest Country the World Has Ever Seen! As you so rightly point out, indeed everything is fine and getting better every day! Any false allegation of a "soft patch" or "transitory bump in the road" that the Mexi-Muslim-Controlled Liberal Media try to make you believe will in any way diminish your "non-negotiable American Way of Life" is simply designed to confuse you! Your Government and Leaders are in Full Control of the Situation and America is poised to soar to ever greater heights! You are Safe and Protected and have nothing to worry about! Please follow the Official Advice and Directives below, and know that by doing so, you are Supporting and Defending the Homeland!
1) Drink Alcohol (if a little is good, a lot is better) and, with each swallow, know you are stimulating the economy.
2) Watch your Television Regularly (because everything on TeeVee is true; that's why it's on TeeVee!!), and Buy As Directed.
3) Enjoy an All-You-Can-Devour Buffet at least once a week (because if Big is Good, Larger is Better, and Huge is Best!!).
4) Accept Every Generous Credit Card Offer You Find in your Mailbox (because when you swipe, your show you Love America.)
5) Take your Medication as Directed, and ask your Physician for More (because, as your know, if a Little is Good, a Lot is BETTER!!)
6) Spend Quality TIme in your BarcaLounger (because you can best Defend the Homeland when you are reclining).
7) Give Generously to Your Television Preacher (because they love America more than You Do, and remember that the Bible is in English and Jeezus was really American).
BUT ABOVE ALL, YOU MUST HAVE . . . . . .
F A I T H & C O N F I D E N C E I N T H E S Y S T E M !!!!
Sincerely,
Department of Homeland Security
Bureau of Compliance, Control, and Credibility!
The chinese are definitely finding value. Shandong gold just bid for Jaguar mining for $1 billion which is double it's current market cap.
TZA bitches.
So I suppose the question is do they finally let is collapse and let us decend to global chaos and New World Order or do they prolong the agony and misery continue a slow burn with QE3 Final Release? I'm going with slow burn. They haven't bought the whole entire world just yet.
No need to worry, the HFTs will just implement the "Bernanke Algorithm" and up we go.
looks like the /ES is about to go on yet another inexplicable rip fest.
Options expire in two days, they can't lose it. They will throw in all they can to support this fraud market.
You have been calling for a crash for quite some time. I don't see how zerohedge manages to retain so many readers. Perhaps fearmongering is popular.
Please exit left then to the CNBC propaganda room please as it better suits you - you appear to enjoy a no truth zone!
keep up the good work Tyler of exposing the truth.