Posts Tagged ‘stock market crash’

Building Financial Danger – February 2, 2012 Update

Thursday, February 2nd, 2012

Strains in global financial markets continue to pose significant downside risks to the economic outlook.

-an excerpt from the FOMC Statement of January 25, 2012

On October 17 I wrote a post titled “Danger Signs In The Stock Market, Financial System And Economy.”  This post is a brief fifth update to that post.

My overall analysis indicates a continuing elevated and growing level of danger.

My views of this danger, and its implications regarding the financial markets and economy as a whole, were last discussed in the post of January 11, 2012, titled “Building Financial Danger – January 11, 2012 Update.”

In that post, I said :

…my analyses indicate that the danger inherent in the financial system has reached a level at which a stock market crash – that would also involve (as seen in 2008) various other markets as well – has reached a level at which a near-term crash is (at least) a significant concern.

Additionally, since that January 11 update, several new factors have been added to a rather long list of problematical fundamental, technical analysis, and other considerations.

Currently, the overall situation is somewhat reminiscent of the days leading to the “Flash Crash” of May 6, 2010.   I wrote of that situation on April 19, 2010, in “S&P500 at Extremes – Technically and Fundamentally.”  While now and then share certain similarities, my analysis indicates that our current economic and financial situation is of far greater peril.

As reference, below is a 1-year daily chart of the S&P500, indicating both the 50dma and 200dma:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1324.07 as this post is written

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Building Financial Danger – January 11, 2012 Update

Wednesday, January 11th, 2012

On October 17 I wrote a post titled “Danger Signs In The Stock Market, Financial System And Economy.”  This post is a brief fourth update to that post.

My overall analysis indicates a continuing elevated and growing level of danger.

I continue to believe the October 4 1074.77 low on the S&P500 will not be a “lasting bottom”, and the dynamics as described in the October 20 post (“Thoughts On The Next Stock Market Decline“) and the likelihood of longer-term substantial “downside” still apply.

Furthermore, as I mentioned in that October 17 post:

Of further concern is whether, and when, the above-mentioned problems might reach a point at which another (financial system) crash occurs.  I am particularly concerned about the prospects of the next crash for a number of reasons, of which I will elaborate upon shortly.

(The elaboration on this “next crash” was subsequently addressed in the post of January 6, 2012 titled “The Next Crash And Its Significance.”)

Predicting the timing and extent of a stock market crash is always difficult, and the immense complexity of today’s economic situation makes such a prediction even more challenging.  That being said, my analyses indicate that the danger inherent in the financial system has reached a level at which a stock market crash – that would also involve (as seen in 2008) various other markets as well – has reached a level at which a near-term crash is (at least) a significant concern.

As reference, below is a 1-year daily chart of the S&P500, indicating both the 50dma and 200dma:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1292.08 as this post is written

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The Next Crash And Its Significance

Friday, January 6th, 2012

In the October 17 post (“Danger Signs In The Stock Market, Financial System And Economy“) I wrote the following:

Of further concern is whether, and when, the above-mentioned problems might reach a point at which another (financial system) crash occurs.  I am particularly concerned about the prospects of the next crash for a number of reasons, of which I will elaborate upon shortly.

“The next crash” is a topic of great importance.  In the October 13, 2010 post (“Comments On The Next Crash“) I stated:

In the past I have commented that I view a future crash as certain.  Like that of 2008, such a crash would include not only equity markets but many others as well.

also:

…this next crash should be accorded great importance as it is likely to be severe, i.e. outsized by historical standards.

I also mentioned similar aspects in point #9 of “10 ‘Front and Center’ Problem Areas That Pose a Threat to the Economy.”  Also from point #9:

Have we, as a nation, taken appropriate steps to avoid further financial and economic “crashes?” I would argue we have not, unfortunately.

Perhaps the main reason this next crash should be of paramount importance is its capability to usher in severe economic weakness, i.e. what would widely be considered a Depression.  History has shown that stock market (and overall financial market crashes) often precede periods of pronounced economic weakness.

For many reasons, a Depression at this point would present inordinate challenges and hardships.

The economy needs a certain level of momentum, a level which it must maintain in order to function properly.  If it doesn’t maintain such a level, many different ill-effects are felt, not only from a strict economic sense but from a societal one as well.  Some of these societal impacts were mentioned in a February 15 2010 post titled “America’s Economic Future.”

Due to the enormity and complexity of our economic problems, there is a high likelihood that we would go into what I have termed a “Super Depression.”  As defined in my June 23, 2009 post (“The Concept Of A “Super Depression“), a Super Depression is :

…a severe Depression embedded with highly complex, difficult-to-solve problems.

While no one likes to contemplate an economic future rife with adversity, the resolution of our current economic problems should be feared and respected.  Absent proper economic policy, one shouldn’t underestimate the downside of the resolution of our economic problems, especially given both apparent and unapparent evidence.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1281.06 as this post is written

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Thoughts On The Next Stock Market Decline

Thursday, October 20th, 2011

In my post of October 10 (“Near-Term Direction Of Stock Market“)  I stated with regard to the S&P500:

The question now becomes whether that 1074.77 was a “lasting bottom,” or whether there is more near-term downside.  I believe that the 1074.77 low will not be a “lasting bottom” – i.e. it will be breached to the downside in the near-term.

In my post of Monday, October 17 (“Danger Signs In The Stock Market, Financial System And Economy“) I further highlighted a variety of building risks.

Near the end of that blog post I commented:

Of further concern is whether, and when, the above-mentioned problems might reach a point at which another (financial system) crash occurs.

I have come to the conclusion, based on my overall analysis of the growing risk, that the next leg down in the stock market might not be “orderly.”  In other words, it may be a stock market crash.  At this point I would assign the probability of such a stock market crash in the near-term being (at least) 50%.

Here is an updated chart of the S&P500, on a 1-year daily basis through the present, with price labels, for reference:

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1202.83 as this post is written

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Comments On The Next Crash

Wednesday, October 13th, 2010

I am aware of no recent warnings by others of a possible stock market crash in the near term.

In the past I have commented that I view a future crash as certain.  Like that of 2008, such a crash would include not only equity markets but many others as well.

Pinpoint timing of crashes is always very difficult.    However, I have been seeing various signs of such a crash coming together.  I have commented upon the direction of the stock market in posts on May 19, June 2, and September 16.

I am awaiting a few more signs confirming such a crash event before making any prediction as to its timing and extent.  However, this next crash should be accorded great importance as it is likely to be severe, i.e. outsized by historical standards.

I will likely elaborate upon this crash issue as conditions warrant…

A Special Note concerning our economic situation is found here

SPX at 1169.77 as this post is written

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Danger In The Markets? Part I

Monday, November 2nd, 2009

This series of blog posts represents a periodic Technical Analysis of the markets.  My last series of posts (5 parts) of this nature was titled “Peril In The Markets?” and started September 13.  At the conclusion of that series of posts, I wrote this blog post summarizing my thoughts:

http://www.economicgreenfield.com/2009/09/17/extreme-peril-in-the-stock-market/

Although a stock market crash did not occur in September or October, as I thought likely given the overall situation, my overall assessment of the markets (and the economic situation) is that the level of risk has increased.  There continues to be an extreme degree of peril embedded in the financial markets – as well as the economy in general.  In my opinion, from these price levels this peril can only be resolved via a crash of possibly extreme magnitude.   

Before displaying some charts, I would like to make a couple of disclaimers.   First,  an extensive overview of all of my Technical Analysis observations would be very lengthy, and it would also infringe upon some facets I consider to be proprietary.  As such, I will limit my observations, but I think most people will still get a clear overview of my thoughts.  Second, I am aware that many people don’t believe in Technical Analysis.  Even though I use Technical Analysis extensively, I will readily admit it is not infallible.  As readers of this blog are aware, the majority of my focus is on fundamental aspects of the markets and the economic situation.

Now, on to Part II and some charts…

 

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SPX at 1036.19 as this post is written

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Extreme Peril In The Stock Market

Thursday, September 17th, 2009

Please note – some might find this post disturbing

In this post I will summarize my thoughts on the markets, particularly the stock market.  As has been the case since the Economic Crisis began, any stock market weakness will most likely be mirrored in a variety of other markets as well, such as commodities, credit, etc.

As seen in the previous five posts, from a Technical Analysis perspective I believe there is cause for considerable concern.  As those who are familiar with Technical Analysis know, rising prices aren’t necessarily strongly indicative of market health.  That is where we are now – strongly rising stock prices but deteriorating underlying technical conditions.  There are many more charts that I could post along those lines.  I will likely post more charts on an intermittent basis.

As I believe there is extreme peril in the stock market, the logical question would be how such a condition would be resolved.   I believe that a future stock market crash is certain, for a variety of reasons – one being that the fundamental value of the stock market is considerably less than that indicated by the price of the S&P500.    Another is that there are many technical indicators that seem to indicate a future crash. 

Timing of a crash is always difficult to gauge; however, for a variety of reasons I believe that a stock market crash is likely now through October. 

Severe economic weakness is often preceded by a stock market crash, and as I stated on my September 1 blog post, found here:

http://www.economicgreenfield.com/2009/09/01/are-we-going-into-a-depression/

“I do believe we are heading into what will inarguably be classified as a Depression.”  One should note that is a condition that I certainly do not want to happen; however, that is the conclusion drawn from my analysis of our economic situation.   Hopefully I am wrong; however, my analysis is well-grounded.  It should be noted that no one that I am aware of has even mentioned the possibility of a stock market crash. 

 

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SPX at 1071.63 as this post is written

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