On October 17, 2011 I wrote a post titled “Danger Signs In The Stock Market, Financial System And Economy.” This post is a brief 19th update to that post.
My overall analysis indicates a continuing elevated and growing level of danger which contains many worldwide and U.S.-specific “stresses” of a very complex nature. I have written numerous posts in this blog of some of what I consider both ongoing and recent “negative developments.” These developments, as well as other highly problematic conditions, have presented a highly perilous economic environment that endangers the overall financial system.
My analysis continues to indicate that there are many reasons for tremendous concern, as seen in almost innumerable fundamental economic, financial-market, and proprietary measures.
Two recent disconcerting signs are the weakness exhibited by broad-based economic indicators, and from a global standpoint the implications stemming from the continual decline in the Shanghai Stock Exchange Composite Index, now at a level less than 2000, compared to its 2007 high above 6000.
Also of ongoing immense importance is the existence of various immensely large asset bubbles, a subject of which I have extensively written. While all of these asset bubbles are wildly pernicious and will have profound adverse future implications, hazards presented by the bond market bubble are especially notable.
Predicting the specific 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. With 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 – continues to be at a level at which a near-term crash is of tremendous concern.
(note: the “next crash” has outsized significance and implications, as discussed in the post of January 6, “The Next Crash And Its Significance“)
As reference, below is a one-year daily chart of the S&P500, indicating both the 50dma and 200dma as well as price labels. The current price is 1407.05 :
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1407.05 as this post is written