Posts Tagged ‘Black Monday’

Bearish Sentiment At 22-Year Low

Bearish Sentiment At 22-Year Low

Courtesy of Adam Sharp’s Bearish News

The latest sentiment reading by Investors Intelligence shows a disturbing trend. Only 15.6% of financial newsletters are currently bearish on equities.

Last time the bearish indicator was this low was April 1987. A few months later (Black Monday) the DJIA dropped 21% in a single day:

In other words – when everything seems peachy — watch out. Turns out that peaks and troughs in investor sentiment are pretty good contra-indicators. Bullish sentiment tends to peak as bubbles are near their top, and vice versa.

From the revamped and newly Bloombergesque Business Week:

Bull standing on pile of coins, snorting

Pessimism about U.S. stocks among newsletter writers fell to the lowest level since April 1987, six months before the equity market crash known as Black Monday, following the biggest rally in the Standard & Poor’s 500 Index in seven decades.

The proportion of bearish publications among about 140 tracked by Investors Intelligence fell to 15.6 percent yesterday from 16.7 percent a week earlier. Sentiment has improved since October 2008, when the financial crisis drove the figure to a 14-year high of 54.4 percent. After plunging 38 percent in 2008, the S&P 500 has risen 25 percent this year.

This is not to say markets wont’ run again in 2010. Irrational bull markets can last much longer than you’d think. The momentum they build up is impossible to fight. Gotta wait for that to break before getting seriously short. Example – After the bearish-sentiment index bottomed in 1987, the market rallied another 14% before crashing.

Smart investors like Bill Fleckenstein have been highlighting the credit bubble since the mid-1990’s. And today markets are more irrational than ever. Government intervention is preventing market cycles from proceeding like never before.

Industries like housing, banking, and commercial real estate have become completely dependent on government support. Their future (and that of our currency) depend on whether our leaders will extend or end this support. It’s a ludicrous, manipulated market.

So far America’s leaders have repeatedly demonstrated that they have zero tolerance for economic pain. Their support for the financial markets seems unlimited, no matter the long-term cost. I don’t see that changing without something drastic hapenning – another huge round of bailouts, a shift in the political landscape, or something…
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China is now on the same bubble path as Japan post-1987 crash

China is now on the same bubble path as Japan post-1987 crash

James Packer's 'City Of Dreams' Casino Opens In Macau

Courtesy of Credit Writedowns

This article by Peter Tasker, a well-regarded financial analyst in Asia, comes via the Financial Times (hat tip Marshall). He sees an enormous bubble forming in China – and parallels to Japan circa 1987:

Emerging markets, it seems, have had a good crisis. In contrast to the debt-ridden G7 economies, they have quickly resumed their growth trajectory. No surprise, then, that US emerging market mutual funds are experiencing record inflows. The stellar performance of the Brics markets – Brazil, Russia, Indian and China – is due to continue into the distant future.

Such is the narrative now forming among investors. To anyone who has lived through the rise and fall of the Japanese bubble economy, it should set off alarm bells.

Remember that it was in the years following the 1987 "Black Monday" crash that Japanese assets went from being expensive to absurdly overvalued and the Nikkei’s dizzy rise to 39,000 forced the bears to throw in the towel…

But what you saw was decidedly not what you got. The crisis, far from leaving Japan unscathed, exacerbated its structural problems and laid the groundwork for a far greater disaster…

Interest rates have been far too low for far too long. If the natural interest rate is, as the Swedish economist Knut Wicksell posited, around the level of nominal GDP growth, then China’s interest rates should have been close to 10 per cent for most of this decade. Alan Greenspan, former chief of the US Federal Reserve, has been criticised for holding interest rates too low and setting off a housing and credit bubble in the US. But if US monetary policy was wrong for the US, it was even more wrong for the high-growth countries that "imported" it. The result could only be a massive misallocation of capital…

At the 2008 peak, the price-to-book ratio of the Shanghai stock exchange was over seven times, well above the five times achieved by Japanese stocks in 1989. After the turbulence of the past 18 months, the ratio has fallen to 3.3 times, still the world’s second highest after India, and residential real estate trades at multiples of income that make the US housing boom look tame…

What is scary is that the current frothiness of emerging markets,


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Paranormal Activity to Another Black Monday?

Paranormal Activity to Another Black Monday?

Courtesy of Leo Kolivakis, publisher of Pension Pulse, h/t Zero Hedge

Simon Maierhofer of ETFguide.com writes Whats Next – Minor Correction or Major Collapse?:

Over the past few months, every attempt by the bears to depress prices has been met with renewed buying pressure, resulting in even higher prices. What goes up, however, has to come down and some subtle signs are indicating that this decline might be more than a simple correction, much more.

It was after midnight on April 15th, 1912 when the unsinkable did the unthinkable. Built and labeled as unsinkable, the Titanic was the most advanced and largest passenger steamship of its time.

Even though the Titanic’s crew was aware of the fact that the waters were iceberg-infested, the ship was heading full-steam for a destination it would never reach.

Being aware of danger is one thing; acting prudently for protection is another.

Today, investors find themselves in an environment that is infested with symbolic icebergs. For savvy investors willing to pay attention and heed warnings, this doesn’t necessarily translate into a financial shipwreck, while others might soon be reminded of the Titanic when they look at their account balance.

Iceberg cluster #1: Lack of leadership

a life saver from the titanic

Throughout the financial meltdown financials, real estate, and homebuilders fell harder and faster than broad market indexes a la S&P 500 and Dow Jones. Beginning with the miraculous March revival (more about that in a moment), the broad market rose while financials, real estate, and homebuilders soared.

Those three sectors led the decline and led the subsequent (mock) recovery. Since it is reasonable to assume that those sectors will continue to lead the market throughout this economic cycle, it behooves investors to watch such leading sectors closely.

The S&P 500 recorded a closing high on October 19th at 1,097. The Financial Select Sector SPDRs reached their closing high a few days earlier on October 15th. Since their respective closing highs, the S&P 500 has dropped 2.82%, while XLF has already shed 5.64%.

A more pronounced performance slump is visible in the home builders sector. The SPDR S&P Homebuilders ETF peaked on September 16th and has fallen 9.97% since. Keep in mind that XHB’s lackluster performance comes on the heels of the biggest monthly increase in total


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Black Monday: Ancient History Or Imminent Future?

Take a look at the ominous headline and chart from 1929 into 1930. – Ilene

Black Monday: Ancient History Or Imminent Future?

By Nico Isaac, courtesy of Elliott Wave International

The following article includes analysis from Robert Prechter’s Elliott Wave Theorist. For more insights from Robert Prechter, download the 75-page eBook Independent Investor eBook. It’s a compilation of some of the New York Times bestselling author’s writings that challenge conventional financial market assumptions. Visit Elliott Wave International to download the eBook, free.

Once upon a time, the term "Black Monday" was to Wall Street what the name "Lord Voldemort" was to Hogwarts. It turned the air freezing cold and sent traders flinching around every corner in fear of a repeat of the October 19, 1987 or October 28, 1929 meltdown.

Case in point: The 2008 "Black Monday" anniversary. At the time, the U.S. stock market was locked in a ferocious downtrend that included regular, triple-digit daily declines of 400 points and more. Needless to say, when the final two Mondays of October arrived, the least superstitious investors surrounded their portfolios with more good-luck talismans than a Bingo player. See October 19, 2008 AP headline below:

"Black Monday: Stocks Sink As Gloom Seizes Wall Street. Prolonged Economic Turmoil" is seen.

That was then. Today, the usual dread surrounding the back-to-back string of "Black Mondays" is nowhere to be found. In its place, media reports abound of a new, global bull market "shrugging off," "ignoring," and "making a distant memory" of the event.

For one, "gloom" hasn’t "seized" the U.S. stock market in quite a while; from its March 2009 low, the Dow has risen more than 50% to above the psychologically important 10,000 level. For another, the mainstream experts insist that today’s financial animal is unrecognizable to that of 1987, and especially 1929. In their eyes, it’s a completely different — i.e. safer, smarter, and sounder system.

We beg to differ.  

See, while the usual experts want to put as much mental distance between today’s market and those that facilitated the 1987 recession and 1929-1932 Great Depression — the physical similarities are impossible to ignore; more so, in fact, to the latter scenario.

Here, the October 2009 Elliott Wave Financial Forecast presents the following news clip from the October 25, 1929 New York Daily Investment News.

Now, take a look…
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Phil's Favorites

Recession

 

Recession

Courtesy of 

The bad news is piling up. The recession that people are looking for may already be here.

We heard about inventory buildup at Target and Walmart last week and the stocks responded with their worst day since…1987.  Those were not isolated incidents. This week we heard the same from Kohl’s and Abercrombie, whose stock is cratering 30% on the news.

In other news, Snap just warned of an imminent slowdown.

From The WSJ :

“In a surprise announcement, Snap Inc., the ...



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Politics

The big exodus of Ukrainian refugees isn't an accident - it's part of Putin's plan to destabilize Europe

 

The big exodus of Ukrainian refugees isn’t an accident – it’s part of Putin’s plan to destabilize Europe

Ukrainians fleeing the war walk toward a train in Krakow to bring them to Berlin on March 15, 2022. Omar Marques/Getty Images

Courtesy of Mark A. Grey, University of Northern Iowa

More than 6.3 million Ukrainians have fled their country since Russia first invaded in late February 2022.

The European Union h...



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Zero Hedge

JPMorgan Trading Desk Commentary: "The Supply On Our Desk Is Starting To Dissipate"

Courtesy of ZeroHedge

After another market rollercoaster session, here are some thoughts from JPMorgan's trading desk, starting with Ron Adler, TMT [Trend-Momentum-Trendline] trader, who is seeing what may be the start of a reversal in bearish sentiment in the TMT space...

The transcript on many conversations goes like this: “So I know WHY X is down, but WHY is X down SO MUCH?”

The supply on our desk is starting to dissipate. Some are trying to pick a bottom in names like SNAP, FB, and UBER...but that strategy has been futile.

  • INTERNET: IT FEELS LIKE YOU CAN’T OWN ANYTHING IN INTERNET RIGHT NOW – CHANGE MY MIND....
  • E-COMMERCE: If AMZN, WMT and TGT are having issues, I don’t think ...


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ValueWalk

The Shocks Which Have Ripped Through The UK Economy During The Queen's 70 Year Reign

By Anna Peel. Originally published at ValueWalk.

  • 1956 – The Suez canal crisis in 1956 led to an economic crisis and capital flight
  • 1975 – Consumer price inflation reached 24% during the oil crisis
  • 1984 – Unemployment soared to 11.9% amid miners’ strike
  • 1987  – FTSE All Share drops 22% on Black Monday
  • 2001 – Dotcom bubble burst and markets fall by more than 50% over 3 years
  • 2008 – Financial crisis hits with housing market falling 15% by February 2009
  • 2016 – The vote for Brexit sees the pound fall sharply on currency markets
  • 2000 – The pandemic sees record fall in output, with GDP falling 19.6%
  • ...


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Kimble Charting Solutions

Can Treasury Bonds (TLT) Reverse Higher From Historic Oversold Level?

Courtesy of Chris Kimble

It’s been an ugly couple of year for US Treasury Bonds. T-bond prices have dropped sharply as yields have risen.

This has been an added pressure on retirement portfolios as treasury bonds are no longer trading like a conservative asset.

Time for a bounce in T-bonds?

Today, we take a look at the long-term “monthly” chart of the 20+ Year US Treasury Bond ETF (TLT).

As you can see, 2 years ago bonds peaked and formed a historic bearish reversal pattern at the highest momentum reading ever.

...

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Chart School

Powell has a debt problem

Courtesy of Read the Ticker

The last time the US entertained debt this high (relative to GDP) was post World War 2.


The prior US high debt years were between 1936 and 1954, back then the public understood why the high debt existed (WW2) and why the public had to suffer high inflation to allow deflation of the debt to a manageable level. This question was not as political as it is today.   


Current US debt levels are the result of 'end of empire' spending, simply spending on steroids beyond one means. The FED needs inflation for the same reason as the post WW2 period to deflate away the debt.


The current political talk of 'fight inflation' will be short lived and the FED will be forced to accept higher inflation levels over the 2% (say b...

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Biotech/COVID-19

What is monkeypox? A microbiologist explains what's known about this smallpox cousin

 

What is monkeypox? A microbiologist explains what’s known about this smallpox cousin

Monkeypox causes lesions that resemble pus-filled blisters, which eventually scab over. CDC/Getty Images

Courtesy of Rodney E. Rohde, Texas State University

On May 18, 2022, Massachusetts health officials and the Centers for Disease Control ...



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Digital Currencies

Stablecoin volatility shows an urgent need for regulation to protect consumers

 

Stablecoin volatility shows an urgent need for regulation to protect consumers

Shutterstock/David Sandron

Courtesy of Matthew Shillito, University of Liverpool

Some cryptocurrencies have always been fairly volatile, with values soaring or plunging within a short space of time. So for the more cautious investor, “stablecoins” were considered the sensible place to go. As the name implies, they are designed to be a steadier and safer bet.

At the moment though, that stability is proving hard to find. The value of o...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.