Skip to comments.Impending Crash?
Posted on 08/31/2009 9:21:06 AM PDT by FromLori
You have to wonder when you see statistics like this (through 9:30 this morning):
Remove SPY, ETFC and LEHMQ (none of which trade on the NYSE) from the list and you get 606 million shares.
How many shares have traded in total with one hour in?
Forty percent of the volume is comprised of four used dogfood stocks, just as we've seen for the last couple of weeks - all people passing shares back and forth among each other, many of it being "computer HFT games."
The other used dog-food stocks (LEHMQ and ETFC) are really no better; they just don't trade on the NYSE. Lehman is particularly ridiculous as that's a formally-bankrupt company!
Fannie and Freddie are two of the most outrageous abuses I've seen in a long time, second only to AIG. All three of these should be delisted as their equity value is quite literally bupkis.
This just goes to illustrate - the market is currently being levitated on literal trash. Again today we see the Casino trying to suck in people; I got emails from two more associates over the weekend telling me that their "advisors" are telling them "you have too much cash allocated; now is the time to buy."
Now is the time to buy, after a 50% move?! Where the hell were these so-called "advisors" at SPX 666!
Nobody - and I do mean nobody - is talking about what this sort of volume pattern means. Well, I will: this is the sort of pattern that precedes an all-on equity market collapse. It strongly implies that the only volume support that the market has is from "hot money" speculators. Lest you think this is sustainable let me point out that just a few weeks ago the very same so-called "commentators" said the same thing about China's market. Here's what happened:
The white box down below is the target on the break downward out of that flag last night - the top of the box is the critical "must hold" level from the first retrace off the bottom and the bottom of the box being the the start of the entire move. If they're lucky the market holds around the 250-275 level, but I wouldn't bet on it.
That's nasty - The Shanghai market has already lost roughly 25% from its recent peak, and it took just three weeks to lose what required roughly three months to put on.
How do you like those odds folks? Pay close attention to the lessons from the East, least you get to learn them the hard way right here.
A 25% loss from the recent highs on the SPX places the S&P 500 around 775.
I smell a repeat of 2001/2002, when the very same "analysts" said the bear market was over and everyone jumped back into the pool going into the end of 2001, only to get destroyed in the collapse that followed and took out the 2001 low.
Heh, I might be wrong on this, but those who "believed" in the Shanghai market are missing 1/4 of their money - so far.
FEATURED ARTICLE | AUGUST 3, 2009
Why Default on U.S. Treasuries is Likely
Jeffrey Rogers Hummel*
Home | Articles | Featured Article
“Buried within the October 3, 2008 bailout bill was a provision permitting the Fed to pay interest on bank reserves. Within days, the Fed implemented this new power, essentially converting bank reserves into more government debt. Now, any seigniorage that government gains from creating bank reserves will completely vanish or be greatly reduced.”
Almost everyone is aware that federal government spending in the United States is scheduled to skyrocket, primarily because of Social Security, Medicare, and Medicaid. Recent “stimulus” packages have accelerated the process. Only the naively optimistic actually believe that politicians will fully resolve this looming fiscal crisis with some judicious combination of tax hikes and program cuts. Many predict that, instead, the government will inflate its way out of this future bind, using Federal Reserve monetary expansion to fill the shortfall between outlays and receipts. But I believe, in contrast, that it is far more likely that the United States will be driven to an outright default on Treasury securities, openly reneging on the interest due on its formal debt and probably repudiating part of the principal.
TrimTabs Investment Research reported that selling by corporate insiders in August has surged to $6.1 billion, the highest amount since May 2008. The ratio of insider selling to insider buying hit 30.6, the highest level since TrimTabs began tracking the data in 2004.
“The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon,” said Charles Biderman, CEO of TrimTabs.
TrimTabs’ data on insider transactions is based on daily filings of Form 4, which corporate officers, directors, and major holders are required to file with the Securities and Exchange Commission.
In a research note, TrimTabs explained that insider activity is not the only sign the rally is about to end. The TrimTabs Demand Index, which tracks 18 fund flow and sentiment indicators, has turned very bearish for the first time since March.
For example, short interest on NYSE stocks plummeted by 10.3% in the second half of July and margin debt on all US listed stocks spiked 5.9% in July, while 51.6% of advisors surveyed by Investors Intelligence are bullish, the highest level since December 2007.
“When corporate insiders are bailing, the shorts are covering and investors are borrowing to buy, it generally pays to be a seller rather than a buyer of stock,” said Biderman.
TrimTabs also reports that the actions of U.S. public companies have been bearish. In the past four months, companies have been net sellers of a record $105.2 billion in shares.
“Investors who think the U.S. economy is recovering are going to get a big shock this fall,” said Biderman. “Companies and corporate insiders are signaling that the economy is in much worse shape than conventional wisdom believes.”
TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity—including mutual fund flows and exchange-traded fund flows—as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. For more information, please visit www.TrimTabs.com.
I hate to say it but I agree with this assessment in almost every possible way.
You can’t spend your way out of debt, and you can’t build a house on a foundation of Jell-O. Not one that’ll hold up to a wind storm, anyway.
Pray that we learn from our mistakes, and that the coming financial meltdown lays bare the lie of “green jobs” while instilling a hard day’s work as virtuous in our current generation of selfish entitlement-mentalitied brats.
Wonder what Hedge fund this guy is tied to? These “Doomsday Guys” always have a big stake in the market going lower.
~~Harvard Economic Society, May 17, 1930
This sort of thing kind of blows the bubble up during the day, but the curve since february looks to have peaked.
So, yeah, there's really not much money to be made in this market (in the broadest sense) although some individuals have seemed to have done well ~ we'll find out about that in a few weeks. I'm guessing now they may have made 10% ~ maybe less.
This will be the ‘emergency’ obama uses to gain total control over the country....
Nothing like a little colorful reporting to perk up dreary financial news!
crash ping !!!
let’s hear the counter argument if there is one. Green shoots, etc...
They like a normal market correction better:
Except they are wrong just go through the post and you will see China yikes!!
Market-timers AlphaKing and Quacera agreed as of last week (their updates are due prob. tomorrow after the monthly close of business).
Todd Harrison at Minyanville.com has had his bear suit on since April, but the Fed's been driving him backwards step by step. He is a short-term trader, selling blips to buy the ensuing dips as he says, with his "bear suit half-way on".
At some point, however, with declining resistance overhead about to bonk us on the noodle and having completed a Fibonacci 50% retracement of the prior airsickness-bag loss into the infamous March 666 SPX low, we will be so vulnerable that the Fed won't be able to keep painting porn pictures for the momentum players with our Platinum Card, and we should revert to full secular-bear blow-down mode. We are overdue a full-monty Chicken Little here.
(Can anyone think of any more cliches we could use here? )
Yeah, I saw China, and I agree that international markets offer us ~ BIG FAT ZERO diversification any more, so yes, a technical breakdown in Chinese averages is very ominous, given the tenderloin district the U.S. market is in right now, as I just posted above.
Shanghai is down now relative to a few weeks ago, but if you had put your money there in January you are still standing on huge gains.
but ask yourself...how does a country with so much debt..trillions of dollars...with a communist running things, and Medicare,Caid, and SS and all those govt pensions going to pay for this debt?....answer is that they probably don't plan too...
Don't you expect the ceasation of these programs will cause social unrest?
Yep. At the peak, the SSI was up 95% for the year (I bailed in late July, about 10% from the peak). It’s still up 75% for the year.
The DJIA? Up 5%... So far. And only if you value it in USD. Valued in EUR, GBP, or CAD, it’s up 1% - that’s T-bill territory!
I keep forgetting, because the media wants me to, that under Obama the DJIA has hardly moved.
I am supposed to praise Obama because of how far up we are from the lows — the lows that happened after a month of seeing what a disaster Obama was going to be, which happened after the market stabilized because of the actions of Bush.
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