Skip to comments.The Stock Market's Long Decline Has Begun
Posted on 10/20/2010 7:03:54 AM PDT by blam
The Stock Market's Long Decline Has Begun
October 20, 2010
Charles Hugh Smith
The Fed's campaign to boost the risk-trade in equities by destroying the dollar has reached its limits. Now gravity will take hold as stocks enter a Long Decline. On Monday, Daily Finance published my article Is the Market Ready to Roll Over? These Signs Say Yes. On Tuesday, October 19, the market did roll over.
Is this merely a brief hiccup on the way to S&P500 1,500 and Dow 15,000, or the first stages in a Long Decline? Here is the evidence to support the idea that stocks are entering a Long Decline.
Back on October 8 I looked at some of these issues in Look Out Below (I've got a bad feeling about this).
As always, please note this is not investment advice, it is merely the musings of an amateur observer; please review the HUGE GIANT BIG FAT DISCLAIMER below.
First up, the U.S. dollar, which the Fed has been destroying to prop up equities before the election:
Alas, there is pushback from various forces against this destruction of the dollar, and as the dollar climbs then the see-saw tips and equities decline.
Those predicting the continued destruction of the dollar see a double-top pattern suggesting "the top is in;" I see a long-term uptrend line and a line of resistance around 90 that will eventually be broken to the upside. Time will tell who is right, the dollar Bears or the dollar Bulls.
Mr. VIX is waving the yellow flag of "crash ahead." Complacency in the face of sobering financial realities is not just unreal but completely deranged. To note but a few:
1. A Eurozone debt crisis which has not been resolved, despite the propaganda.
2. A massive credit/real estate bubble in China which will burst, just like every other bubble in history, despite the many voices claiming "there is no bubble in Chinese real estate."
3. A foreclosure/MBS/bank insolvency structural crisis in the U.S. which has barely started.
Note that the VIX is marking out a long-term uptrend of higher lows, meaning increasing volatility is the backdrop against which the market acts out its various dramatics.
The broad-based S&P 500 (SPX) is looking toppy and vulnerable on the weekly chart. Note the declining volume as retail investors continue pulling tens of billions of dollars out of the pump-and-dump charade known as the U.S. stock market. Also note the bearish cross of the 20-day MA dipping below the 50-day MA, signaling the start of a downtrend, and the weakening MACD trend.
I haven't gotten mine!
I predict a market bump up on November 3.
" Short every rally. Such is the word pronouncement from investor Doug Kass"
Buy on the rumor ... sell on the news.
I am pinging
Hey, listen...short-term, NOBODY knows nothin’.
If you are shorting this market, you’re not investing, you’re gambling.
Rallies are almost always built on disbelief.
Careful out there.
Hurry up! We’re waiting on you so we can lose our shirts.
I have concluded that throwing darts is as effectively a way to predict the market as all of the wonks combined.
Better yet, when you see the herd heading one way, go the other way.
I'm doing 10-1 put/call straddle hedges on everything.