Building Financial Danger – February 2, 2012 Update

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; chart creation and annotation by the author)


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1324.07 as this post is written