Friday, August 21, 2015

Dow Plunges Below 17,000 Amid Latest Global Crisis!........TALK ABOUT CHAOS!

Fears Of Another Mid-East War After Israel Conducts Air Strikes In Syria.


Dow Plunges Below 17,000 Amid Latest Global Crisis!

It was an ugly Thursday for the stock market. The Dow lost more than 350 points, tumbled to its lowest level since February, and is now down 7% from its all-time high. The S&P 500 had its biggest one-day loss since February 2014.

The Dow and the S&P 500 are negative for the year. 

S&P 500 Crashes Near 2,000 "Maginot" Line - Gives Up All Post-QE3 Gains

The carnage continues to roll around the world as Asia and Europe react to US weakness which reacted to China weakness and now US is retumbling on fresh China weakness as the global carry trade unwinds across every asset class.

China's "Judgment Day" Arrives - Malicious Sellers Slam Stocks Below Communist Floor

Chinese media are describing tonight's market action as "Judgment Day" for China. Shanghai Composite has broken notably below its 200-day moving average - which six times before has been defended aggressively. Chinese Stocks are back at 7-week lows, just off the crash lows in July. It appears bad news in China is "bad news" for everyone. With Chinese authorities already in full liquidity spigot-mode, the fact that China PMI for August collapsed to its lowest since March 2009 strongly suggests that - unlike every talking-head's proclamation - a crashing stock market does (whether reflexively or not) impact the real economy. US equity futures legged significantly lower on the news - S&P 500 to 7-month lows, eyeing the stunning 2,000 level; and Japanese stocks also legged lower.

Crude oil came closer to $40 per barrel. West Texas Intermediate crude futures in New York fell to as low as $40.21 per barrel early in the day before climbing off the lows. Energy Credit Risk is at a record high 1110bps!

The last 2 days have seen the biggest surge in gold prices sicne 2014!

Bonds are now the best performer of 2015 (up very modestly) with gold and silver ahead of stocks.

But overnight, the Central Asian nation, 
Kazakhstan, a nation that does a lot of trade with Russia and China delivered another emerging market shock. It abandoned its currency peg, and in the blink of an eye, the tenge plunged 23% to an exchange rate of 257.2 per U.S. dollar. That means every one of its citizens just lost almost a quarter of their purchasing power — in an instant.

The move came within hours of news from the International Monetary Fund (IMF) regarding the Chinese yuan. The IMF said the yuan wouldn't be added to its basket of reserve currencies for at least a year, and maybe longer. That move is another kick in the teeth for China's markets and China's currency, and it clearly opens the door to more depreciation.

These developments set off yet another round of carnage across world markets. South Africa's rand currency dropped to its weakest level since 2001. Turkey's lira plunged to an all-time low. And Malaysia's ringgit sank to yet another 17-year low.

iShares MSCI South Africa ETF (EZA) to an 18-month low. The iShares MSCI Turkey ETF (TUR) and the iShares MSCI Malaysia ETF (EWM) both sank to their lowest levels in more than six years.

We seem to be stuck in a cycle where heavily indebted oil companies keep producing more oil to try and maintain cash flow to service debt. At the moment it looks like we may have a long way to the bottom.

Turkey Enters Bear Market As Erdogan Calls New Elections, Consumer Confidence Crashes To Six Year Low

The bulls on CNBS say you don't have to pay attention to this stuff. They claim it doesn't matter. But obviously these events are starting to weigh on investor sentiment and capital market pricing. The S&P 500 fell sharply today, and it is banging away at downside technical support with more vigor. At the same time, more and more sectors are continuing to wilt.

The concentration of too much money in too few hands has occurred twice in the past 100 years. First in the run up to 1929, and second in the run up to November 2007.

We are seeing worldwide deflation take the upper hand despite more than $15 trillion of fiat-based, paper-based money, debt and derivative printing. Canaries are all over the coal mine. This could be the worst set up for a deflationary crash in decades. It's THAT bad.

The post-2009 UP trendline in the broad Value Line Geometric Composite was violated today.

Most technicians and chartists have what they consider their important levels on a chart. Whether it is a prior low or high, a moving average, a trendline, etc., these are levels that, if violated, mark a significant change in character for that particular price series – or at least it marks a significant change in its interpretation. While our firm is generally more interested in analyzing more comprehensive measures pertaining to the market's structure rather than a single price point on one specific chart, there are a few undeniably important levels in our view. And perhaps the most important price point in the entire equity market was broken today.

When we consider what, to us, constitutes a significant chart level on a market-wide basis, it must be characterized by 2 things. First, it has to be an index or security of substantial influence. And second, the price level should preferably be of consequence on at least a cyclical (i.e., years) basis. Well, probably the single most beneficial force in the global financial markets for some time now has been the steady uptrend in the U.S. equity market. Other equity markets around the world have waxed and waned and other asset classes have varied between average (fixed income) and abominable (commodities). But U.S. stocks have been the rock – fortunately too as it is the largest stock market in the world.

And the most important barometer of the U.S. stock market, in our view, may not be the general consensus pick. In fact, many market participants likely have never even heard of it. The Value Line Geometric Composite (VLGC) is an index comprised of approximately 1700 stocks. It is also equally-weighted. Therefore, we feel it provides a better picture into the health of the broad U.S. stock market than a more mainstream pick like the S&P 500, for example. And despite the fact that there are no VLGC products actually trading anymore, it still adheres very well to most chart analyses.

That being the case, today's break of the VLGC's post-2009 UP trendline is one of those select price developments that we deem to be important to the macro market – and maybe the most 

Thus, this important development changes our interpretation of the chart, and potentially the market in general. The odds of the post-2009 bull market continuing unimpeded are now significantly reduced. The odds are much greater that the VLGC (market?) will enter some combination of a protracted decline or sideways pattern.

We don't get happy feet about too many lines on a chart – only the important ones. And this one is about as important as they come.


No comments:

Post a Comment