Bear Market

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

We don’t label many spots on U.S. equity charts as “make or break” for the broad market. However, the mid-430?s area on the Value Line Geometric Composite is as critical a level as we can give you in any index or security.

"... the fact that our International Index has rallied 2% from its lows and now has rallied for two days in a row has our interest and does give us  reason to pause in our bearish perspective."

"financial markets are NOT yet pricing for a recession, rather they are merely flirting with the idea. I suspect this largely reflects faith/hope in policymakers within market participants. The events of the past few weeks, both going into and after the most recent BOJ and FOMC meetings, should give those heavily invested in policymaker faith/hope a lot of food for thought...  the next Fed “put” is not likely until the S&P 500 is trading in the 1500s at least (so more likely to be a Q1 2016 item rather than Q4 2015); and in terms of what the Fed could do, clearly QE4 has to be in the Fed’s toolkit"

As of this moment the S&P is soaring and is set for the 8th best gain in 2015. Why? Here is one reason, from the latest Gartman letter: "Essentially repeating what we said here yesterday, there are still many who deny that this is a bear market, we fear that it has a good distance to the downside yet to travel. Merely to get to “The Box” shall take the S&P to 1420? 1550! Rallies are to be sold."

It takes ignorance on an almost unbelievable level to try to claim that “nothing is happening” in the financial world right now.

The S&P 500 is now only about 1% off Black Monday lows. Have the market internals deteriorated as much as the headline price index has?

For investors, the markets have been sending a fairly clear warning signal. Market topping processes take time to develop fully and, unfortunately, are only fully recognized in hindsight. The problem in waiting for "recognition" is that the destruction of capital is already far larger than previously expected. This leads to a series of "psychological" responses that exacerbate the problem such as "hoping to get back to even." The last point is critically important. In the world of investing, "hope" has never been an investment strategy that one could profit by. It likely won't be successful this time either.

When you tell people in self denial the market could drop 40% in a few months, they think you are crazy. They declare this could never happen. They would get out of the market before it would fall vertically. Their memories are conveniently short as their normalcy bias and cognitive dissonance blind them to what happened over three months in 2008/2009. We wonder how many willfully ignorant investors can handle a 50% to 70% haircut in their 401k, especially if they are over 50 years old. We wonder how much angrier the populace will become when the current recession results in more job losses, bankruptcies and revelations of Wall Street malfeasance. Beware of the bear.

Forget China, Volkswagen, Glencore, Noble, and pretty much everything else. The only catalyst that matters for today's price action has just been revealed. Earlier today, Dennis Gartman, whose flop-flip-flop-flipping calls on stocks, commodities and everything else have become a blur, just went mega bearish, and is predicting that the S&P has some 400 points of imminent downside.

This is an important story and shows how China and Russia are increasingly close and strong allies who are flexing their muscles and asserting themselves as rival superpowers to the U.S.

What has always separated successful professional gamblers from the "weekend sucker" is knowing when to step away from the table.

Absent some entirely magical economic developments, Janet Yellen looks set to be an unlucky Fed chairman. There is a growing risk that the fabric of the financial system may start to unravel during her tenure. Today’s investors are not exactly a lucky generation. Assuming they’ve survived two precipitous declines in stock markets in the course of a decade, they’re now faced with overpriced stocks, overpriced bonds, overpriced everything.

With Biotechs in a bear market, and Nasdaq having dropped back into negative territory for 2015, the year's leading equity index has now joined the rest of the majors and completed its "death cross."

It was all about China once again, where following a report of a historic layoff in which China's second biggest coal producer Longmay Group fired an unprecedented 100,000 or 40% of its workforce, overnight we got the latest industrial profits figure which plunging -8.8% Y/Y was the biggest drop since at least 2011, and which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue." In not so many words: a "hard-landing."