This page has been archived and commenting is disabled.
Guest Post: Increasing Volatility: Prelude To a Crash?
Submitted by Charles Hugh Smith from Of Two Minds
Increasing Volatility: Prelude To a Crash?
The megaphone pattern in the U.S. stock market typically presages a major decline or full-blown crash.
Market observers have long noted that increasing volatility presages market crashes. If you glance at a chart of September-October 1929, just before the crash that started the Great Depression, you will note the same sort of manic swings of euphoria and fear that have characterized the U.S. stock market over the past few months.
Not only are the swings increasing in amplitude, the time between each move up or down is decreasing. Think of a series of wind storms that grow increasingly more violent even as the time between storms diminishes.
In stock charts, this widening of range traces out a megaphone pattern. The S&P 500 (SPX) has traced out a classic megaphone pattern over the past few months:
Note the eleven wild swings up and down in a mere two months. Does anyone seriously believe this sort of schizophrenia typifies a healthy Bull market?
From a technical point of view, the recent euphoric three-week rally is nothing but a last-gasp attempt to regain the critical 200-day moving average (MA), another classic sign of a market about to roll over big-time.
On the weekly chart, we can clearly see how the timespan between official "fixes" and renewed declines has shrunk from six months from the first "fix" in May 2010 to two days after the last "grand fix." Market participants are losing faith in the Status Quo's ability to effect a coherent, lasting "fix," especially as the rules governing hedges such as CDS are changed at will.
Last week I reprinted this chart from The Chart Store of the uncanny similarity of the current market to the 1907 crash. Notice the "secondary" crash that occurred right about now in the 1907 chart; history doesn't repeat exactly, and analog charts are not predictions, but it is certainly interesting how recent action has closely matched the 1907 price movements. Were the present to continue following the basic outlines of the older chart, this targets an SPX level around 900.
Technically, a re-test of the March 2009 lows around 666 is certainly possible, despite protestations to the contrary.
»
- 14375 reads
- Printer-friendly version
- Send to friend
- advertisements -
No don't be ridiculous when has that ever been the case?
Has the market ever crashed? Sorry, I have no memory past the last football season.
Shh, Rachael Ray is on soon. And I'm streaming my favorite MagicJack infomercial on Youtube.
time to load up on tvix. if you'd done it two days ago you'd already be up 100 percent. if this market crash happens soon you can take your several hundred percent gain, and throw it all inphysical gold and silver. the market price of gold and silver wil crash just like in 2008, but the rise after the crash will make the price rise since 2008 look like peanuts.
time to load up on tvix. if you'd done it two days ago you'd already be up 100 percent. if this market crash happens soon you can take your several hundred percent gain, and throw it all inphysical gold and silver. the market price of gold and silver wil crash just like in 2008, but the rise after the crash will make the price rise since 2008 look like peanuts.
I've got a bad feeling about this. /Star Wars
That's not a moon....it's a debt bomb!
"That's not a moon....it's a debt bomb!"
Your not being mooned, thats debt's Bum!
The dyslexic right brain reads very well thank you
Well, in a shutnell, fear wucked :)
"zero,zero,zero...destruct...zero"- captian Kirk entering the final code to destroy the Enterprise...
Soon, very soon...
:-))))
Someone let uber-intellgensia folks like No Mas know that we need his steady leadership and guidance during these turbulent times since he's so much smarter than all of us ZH readers.. *snickers*
Do we really need charts to tell us that it's all fucked and could collapse any moment?
The collapse is inevitable. The guessing-game is precisely when it happens.
Did the charts predict that G Pap would suddenly announce a referendum?
"Did the charts predict that G Pap would suddenly announce a referendum?"
No but they did predict a pullback was inevitable sooner rather than later.
Surf's please go back to working for taxes nothing is going to happen, just give it up
My I Ching said exactly that, just hours before he did. And my tea leaves, too. And my wife's astrologer.
Markets got hair on it fo sho!
No...prelude to a ramp maybe.
Yea.. a ramp off a cliff..
Yeah. Ben's got your back. He truly cares about you.
I am sure that Bernanke will do everything in hist power, including licking someone's dick to avoid another crash.
exactly, for if he were to allow a repeat of the Great Depression (which he dedicated his academic life studying), he knows he'll be the last FED chairman.
What people seem to be missing is Bernank was chosen to ENSURE the Greatest Depression.
His name is Ben Bernanke
He's the head of the Federal Banky
He loves thin air
He prints money from there
And from Nathan he gets a big thanky.
There once was a guy named Bernank
Destroys the world with dollars not tanks
One day he turned gay
And looked for a lay
And wound up with one Barney Frank
Good points baby_Blyth and SheepDog. Could you both be right? In other words reset the system, but only appear to be the last chairperson, while maintaining ultimate control?
if and when they own most of the land and gold, then the "system" has served their purpose. they can then let it crash and buy steal the rest.
It's no longer a market but a global poker table. That's the main problem with modern finance. It is no longer pairing buyers with sellers. Instead it pairs strong hands with weak hands.
government bank bailouts incentivizes this pernicious structural mutation.
#occupywallstreet
Really pithy observation. +1
- some 250 points up in Dow.... NOT RULE AT ALL. We can be all stupid we want and buy MF Global stocks.
- some 200 points down in Dow...Rule 48, rule 49, all the books-rule in place. Ohhh may be you can no go short in banks because political leaders are afraid of markets speculators.
So, SYSTEM IS CORRUPTED IN THE BASE. MF global is in bankruptcy althought some banks recommended to buy... WHY FED ACCEPT THIS ? WELL, I can imagine...they are thinking global economy is a BIG CASINO and they are the owners, good, very good, BUT the casino owners are not GOD.
Now China, USA, Europe...they think they are GOD. But they aren't, oh yes. How much time they are going to play this fucking game?
Bullshit, when I play poker there is a house ( government), that ensures winning bets are paid, and the rules (laws) are followed to the tee.
This is more like playing poker where the house (government) shows your cards to his friends (banks), refuses to let you leave the table as long as you have money left, and if you catch runner runner flush on the turn and river, changes the rules so 7 2 offsuit beats everything.
Based on that logic after the August/Sept massive down and upward volatility, Ocotober should have witnessed an epic crash, instead we had the best October in decades, I am not saying a crash wouldn't happen, but predicting such events ia crap shot at best.
Regards,
Nawar
Based on that logic after the August/Sept massive down and upward volatility, Ocotober should have witnessed an epic crash, instead we had the best October in decades, I am not saying a crash wouldn't happen, but predicting such events ia crap shot at best.
Regards,
Nawar
Full-blown crash, bitchez.
OH and 1 more thing, I dont know if you all caught this but in a few days the govt takes control of all internet thru 'black boxes' Chinese style...good luck and happy trade-timing!!
Huge Internet Power Grab November 9th 2011 By Fema/FCC - YouTube
I have not heard the Internet portion of this..
The EMERGENCY BROADCAST SYSTEM is to take control of the nation's airwaves on Nov 9th 2011.. All radio and TV and Cable/Sat broadcasts will be pre-empted by this 3 minute long test...
The internet aspect is HUGE if true.. The above is ABSOLUTELY happening. The internet portion I have not heard from anyone but this You tube video..
Ive heard it several other places as well.
Saw nothing about black boxes and internet providers.. This is strictly broadcast...
Not saying it isn't so, but want to have a difinitive yes or no, beside a you tube guy.
Thanks.
coincidentally some other things occur on 11-9 (or 9-11-11 if you live in europe):
Massive Tsunami Drill Coincides With Continent Killer Asteroids
sooner or later we'll get an east coast tsunami as well:
Mega Tsunami and catastrophic effects if CUMBRE VIEJA
toss in a new madrid quake and any market activity fades to the back pages.
not sure if this helps - you decide?
"Shock Report___the Known Unknowns"
Ref: "PrisonPlanet - Steve Watson & Paul Watson___12/16/08
http://www.prisonplanet.com/army-strategic-shock-report-says-troops-may-...
ps. rumsfeld/ cheney from famed nixonian era, and the "Kiss-of-death-inger" have made "Marshall Law" a sure bet, via, Bush#41/ Clinton#42/Bush#43 & Obama#44,...
Rule 1: Stocks only go up.
Rule 2: Rates will remain low forever.
Rule 3 corn always goes in your hole
In the pie hole? Or corn hole.
S&P 400 here we come.
There is a very good case to be made for that on multiple fronts...but being too bearish in the midst of TALF, TARP, TWIST, QE1, QE2, and maybe QE3 can be dangerous.
30 years living standards about to come apart within a few month time frame
World War is their best diversion at this point.
Yes - but HOW?
I don't buy the idea that nukes are part of some master plan, and that the 1% are going to live for a couple of years in hamster tubes under the ground to avoid fallout.
Why did they build them then?
Did somebody make money in their construction?
I mean no offense by this comment, but "a couple of years?" Nuclear war is very survivable. You just cannot be within the immediate blast effects, and then you cannot be in the open during the fallout period. It does not take that long for surrounding areas to be inhabitable again either. People would be able to come out of shelters within a matter of weeks for the most part depending on their exact location, prevailing winds, and risk of secondary attacks. Speaking of secondary attacks, a lot of people assume multiple strikes would all occur rapidly and then be over. It's simply not true. If your city is spared at first, you would immediately want to exit. Secondary strikes will occur, and sometimes they will take up to weeks to happen.
Really? Full scale thermonuclear war is really not such a big deal? I did not know that. Of course I've heard similar before; I live 20 miles from the Hanford Nuclear Reservation (they created the plutonium for the Nagasaki bomb).
Do you ever feel as if your mind has started to erode?
Likewise - no offense.
Already happened to this mo-fo, baby.
Ppl. would rather have their steak and eat it too.
Tail wagging the dog...
Get rid of the charts and the megaphone argument, substitute Gold for SP500, and ask yourself if gold is ready to collapse? Nice 70 minute 30 handle rally in xauusd should be sufficient for definition of volatility.
Is gold ready to collapse, in what, USDollar denomination? Or relative to stocks.
I'm not saying gold is going to collapse. My point is simply that you can take any market and say the same things he is saying about stocks. Replace stocks with gold in his article and you can make the same case. I'm saying that if you can do that, your argument isn't worth much if anything.
Right, well I look at all these articles and remember the 2 choices are ante up, or fold and safely be the first one out before the cards fall out of someones sleeve and the shooting starts.
Someones about to get a bullet in the mellon here real soon.
We'll see a ramp into year end then....the big woooshhh!
Fear is healthy, however we have increasing crisis fatigue (I fucking give up!). Its is the only thing thats going to bring this thing down.
bnbdnb
however we have increasing crisis fatigue (I fucking give up!).
Some do, but the majority has gone past FEAR, and into OUTRAGE mode.More to come .........................
The level of corruption, at EVERY level of our Fin system, has me more angry than I have ever been.
I am sure I am not alone.
I am sick and tired of getting screwed, and the main characters of the play are our supposedly MAINSTAY of confidence,I HAVE no confidence in anyone in the .gub.banking sectors.
I like it.
That 1907-2011 chart allows us to set a new yearly low sometime later this month, then get our regularly-scheduled "Santa Claus rally" into the New Year, then all hell breaks loose in January.
Fits in nicely with 2008-2009, as well.
VIX bitchez
Nice charts. The funny thing is we were in much better shape in the early 1900's compared to today. This collapse is going to be epic.
Good point, in the early 1900's, most people already provided for themselves, grew their own food...today there has to be 'an app for that' or people are helpless.
This is all the byproduct of the Bernanke printing machine, the Greenspan insanity and a total lack of experience on how free market work.
I say it was all by design. I mean, does any SANE person really think 'HELICOPTER BEN' was put there to FIX the economy? lol.
'I'll fix it, by dropping dollars from helicopters'...only lunatics would have put such a maniac in to FIX anything.
The alternative hypothesis is mass megalomania.
Seems plausible to me.
Plenty of historical examples.
Hey, why aren't the FEDS arresting Corzine? At least to question him where the F**** all the money is and why it wasn't segregated. And while we are at it, round up the people who were supposed to make sure cusomter money was safe. Oops, I forgot that we now live in the bizarro world where there are no consequences as long as you screw people for over 100 million.
I have come to the conclusion we all deserve the armageddon upon us.
Before the FEDS arrest anybody, some manufactured event will overwhelm the media to take everyone's mind off the guilty parties. Hearing anything about the phony Iranian plot to blow up the Saudi Embassy these days? That was what, 2 weeks ago? The short attention span of the average citizen assures they can get away with almost anything. And they are, obviously.
Yep, like a huge market crash and panic. Maybe even dirty nukes going off in a few major US cities, blamed on Iran of course. See? It was all THEIR fault...now sign your draft papers and get onboard WW3, americans.
A nuclear Pearl Harbor would get people lined up. They would commit suicide for being told they were not fit for duty in fact. Farm animals will remain farm animals for the most part.
The Count
RIGHT on,
if they do not prosecute him, and seend hom to jail, they should release MADOFF.
Enough of this #%&*!!!!!!!!!!!
The banksters and the Leeches have been trying to prevent the unpreventable and at levels that are not sensible for far too long.
ZH overplaying the bearish argument again. Greece will leave the Euro Italy wont .Stocks move onwards and upwards - firm close to end of the year . Then we start looking at US debt.
OH I see....a rather more orderly civilized collapse of civilization into full blown depression...uh huh.
1/18/2013? That's waayyyy to long.
I say this thing falls off a cliff earlier that that, mostly b/c gov't debt is going to be the anchor instead of your standard "market tilt" that occured in recent years past.
The smart people are the ones stockpiling food using dollars or credit, ahead of the coming global shortages
I think I'll pick up some Yuan in early 2012 too. Forex is advised if you live in the US in 2013. About $20k should do nicely. But food, ammo, water, medicine will be needed for at least three months. The Russkies told me to buy board games and have cards. Boredom and energy rationing were their biggest complaints and it seems we're landing just like the Russian Federation circa 1998.
It's the Chrome Plated Megaphone of Destiny - Who are the Brain Police? - Zappa
http://confoundedinterest.wordpress.com
Missing is the ISM Price collapse. Deflation?
This is getting scary! AGAIN!
To have a real crash, you need the banks to panic. That isn't going to happen with the Fed giving them free money--Not to the TBTFs anyway. Hyperinflation of the USD is still the main course on today's menu. The Dollar is still the weakest link, and it will take everyone down with it who tries to peg. That being said, you are insane to even try and trade currencies when central banks are trying to peg.
'Free money' only as good as suckers belief in it and I dont know anyone still believing in diluting currencies helps anything at all.
Halflife of all interventions now 24-48 hours max.
I live in California. I know we'll get a massive earthquake at some point, but I go on living...
It's the same thing, really. Sure, this will crash, but politicians and HFT won't let it happen easily.
Until they want it to happen.
Yeah, I agree. If you have any intuition you can feel the sickness.
I guess my point is this could continue a long time before we get the crash.
This is risky business..I do believe that we are facing a crash in the near future, but people def. need to be cautious. IF, and I am saying if, Germany agrees to ECBs moneyprinting plan to bail out PIIGS, we will have a rally in the stockmarkets which will last for a few months. Which means that shortterm, if you position yourself for a major decline in the markets, you might get really burned.
TBTB still control the vertical and the horizontal. May not be a smooth ride for us, but the ride is theirs and they only care superficially (but why expect else?). Notice that the Weimar collapse, WWII (throw whatever major event you want), never really changed their control. That's the lesson to keep in mind eye suppose.
"Not only are the swings increasing in amplitude, the time between each move up or down is decreasing"
That is EXACTLY what Marx said about Capitalism and it's crises.
Current picture shows this to be true - only time will tell if this is a longer term trend.
2 crises in 3 years - is pretty unusual - especially when you consider the size and scope of these crises.
I bet you wished you read your Marx and didn't spend the time checking out that girls legs in class.
repent at leisure folks.
This market is completely crazy and clueless, just on Fri the VIX futures plunged and Bloomberg reported that "VIX futures collapsed" on 10/28. It just takes 72 hours and loon talk by G-Pap to get VIX up...30%. The funny thing is bulls and bears are taking turns with the headlines too. Is it just a freaking co-incidence that on the day/night when Merkozy announce the deal we had great reports on economy, including China helping them news and so on.
Now when the ticker has taken a U-turn we get a close to contraction China PMI. Is this all a big scheme between institutional investors and media moguls (the 1%) to suck dry what is left of the 99%? Or am I just being paranoid?
Impossible is nothing.
Fully agree and little bit expand on this comparison:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=34896#p34896
The first hostilities start in 2017-2019, full scale WWIII 2024-2028. Not nice.