Black Tuesday

I'll give you 10:1 odds.

 

You don't bother testing this thesis do you? I've seen sizeable price fluctuations in these thought of "low volume" days.

 

Try this guy

A Market Forecast That Says ‘Take Cover’

By JEFF SOMMER
Published: July 2, 2010

WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely.
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Tami Chappell for The New York Times

If Robert Prechter is right, one market analyst said, “we’ve basically got to go to the mountains with a gun and some soup cans.”

Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.

In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor.

Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.

“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”

His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opportunities ever,” he said.

Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted.

For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”

The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.”

Mr. Prechter is hardly the only market hand to advocate prudence now, but nearly everyone else foresees a much rosier future, once current difficulties are past.

For example, Ralph J. Acampora, a market analyst with more than 40 years of experience, said he moved entirely out of stocks and into cash late last month. Now a partner at Alverita, a wealth management firm in New York, he said recent setbacks suggested that the market would drop another 10 or 15 percent, probably until September or October, before resuming another “meaningful rally.”

Over the next several years Mr. Acampora expects an “old normal market,” characterized by relatively short-lived swings that will provide many opportunities for smart investors — one that resembles the markets of the 1960s and 70s. “I’ve lived through it,” he said.

Like Mr. Prechter, he is a past president of the Market Technicians Association, the leading organization of technical market analysts, and he said that his colleague has done “some very good work.” But Mr. Acampora doesn’t agree with Mr. Prechter’s long-term theories, either intellectually or emotionally.

The “mathematics don’t work,” Mr. Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, “I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over.”

Still, on a “near-term” basis, he said, “We’re probably saying the same thing.”

Similarly, Larry Berman, who co-founded ETF Capital Management in Toronto and recently ended his term as the president of the technicians association, says he sees a “classic” short-term negative market trend developing now. But he doesn’t use the Elliott Wave theory, saying Mr. Prechter is trying to “measure the market in decades, which is too long a time frame for practical trading purposes or for risk management.”

Mr. Prechter, 61, lives in Gainesville, Ga., where he runs Elliott Wave International, a forecasting and publishing firm. He graduated from Yale as a psychology major in 1971, dabbled as a singer, drummer and songwriter in a rock band and became a technical analyst for Merrill Lynch.

He became fascinated by Mr. Elliott’s writings, which suggest that the market moves in predictable if complex patterns. Along with A. J. Frost, Mr. Prechter wrote “Elliott Wave Principle,” a 1978 book that predicted the emergence of a great bull market — a forecast that was largely fulfilled. By 1987, he was widely regarded as an expert in technical analysis. Articles in The New York Times said he was known as “the market’s leading technical guru” — and more. An article in October that year said he had “emerged as both prophet and deity, an adviser whose advice reaches so many investors that he tends to pull the market the way he has predicted it will move.”

He has far less day-to-day influence now, after years spent developing a theory he calls “socionomics,” which holds “social moods” as the cause not only of market cycles but also of economic and political events. A grand cycle is ending, he says, and the time for reckoning is near.

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A version of this article appeared in print on July 4, 2010, on page BU4 of the New York edition.

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Goldman Sachs warns on global economic slowdown
Fresh fears over a global economic slowdown were raised on Saturday after Goldman Sachs' chief economist warned that data from China and the US revealed that any recovery was facing a "challenging period" and that evidence from America was "troubling".

By Jonathan Russell and Angela Monaghan
Published: 9:17PM BST 03 Jul 2010

As Britain enters a self-imposed period of austerity to deal with an historically large budget deficit, Jim O'Neill, one of the world's foremost economists, said that events beyond our shores could pose more of a problem than any domestic economic problems.

Writing in The Sunday Telegraph, Mr O'Neill, head of global economic research at Goldman, said: "What is clear is that a persistently struggling US, in addition to a major disappointment in China, would not be good news for the rest of us."


Goldman Sachs turns bullish on Chinese economyMr O'Neill, the man who first identified the BRIC economies of Brazil, Russia, India and China as the future for global economic growth and who has previously been bullish on the recovery, goes on to pinpoint growth in China as the main concern for the global economy.

He does say, though, that the present slowdown in China is to be welcomed as long as it is controlled.

"If we are wrong (about estimates for growth in China) especially significantly, then the world will be a very challenged place, particularly for those living on self-imposed domestic austerity," he said.

"What adds to the reality of this situation is that there appears to be growing evidence that China is slowing down."

The warnings come just days after Goldman downgraded its forecast for GDP growth in China this year from 11.4pc to 10.1pc.

China is currently carrying out a difficult rebalancing operation of slowing its high speed economic growth without killing the global economic recovery.

While China is still growing, the outlook in the US is "distinctly chilly", Mr O'Neill warns, and the country could be threatened by a period of deflation.

"Despite our global optimism of the past year, we have remained rather cautious about the US, expecting the past problems of housing excess and domestic savings weakness to plague domestic consumption for some time," he writes.

"What is more troubling recently is that the housing market indicators have turned especially weak again."

The other danger highlighted by Mr O'Neill is the concern that too many G20 economies undertaking austerity measures at the same time could reverse the global economy recovery.

His view mirrors concerns voiced by President Barack Obama at the recent G20 meeting when he wrote to other world leaders expressing worries about the speed of budget cuts.

"All G20 members tightening fiscal policy at the same time as the UK's tough stance would make it hard to deliver on improving growth for all, or possibly any," Mr O'Neill explains.

The gloomy outlook comes just days before the Bank of England's Monetary Policy Committee meets to decide whether to raise interest rates. The expectation is that members will vote to leave interest rates on hold at 0.5pc on Thursday amid the mounting concerns of a double-dip global recession.

They are also expected to maintain its quantitative easing target at £200bn of asset purchases.

Unlike the US, the MPC has been grappling over recent months with the twin pressures of above-target inflation and the risk that the fragile recovery under way in the UK could be derailed.

Mervyn King, the Bank's Governor, has already indicated that loose monetary policy will be required to offset the impact that the severe fiscal tightening announced in the Budget is likely to have on growth.

The British Chambers of Commerce (BCC) urged the MPC to maintain its ultra- loose monetary policy stance.

"While the recent tough Budget was an important step towards stabilising our public finances and protecting our credit rating, its scale and severity inevitably increases the danger of an economic setback," said David Kern, chief economist at the BCC.

"Negative developments in the eurozone and signs of a slowdown in the US only add to the obstacles facing the UK economy."

However, one member of the committee, Andrew Sentence, voted for a 0.25 percentage-point rise in interest rates at the June meeting, citing "resilient" inflation.

Mr Kern said: "We were disappointed and concerned that one MPC member voted for an interest rate increase at its last meeting. Raising interest rates too soon would be a major mistake.

"It would heighten threats of a major setback, which are particularly acute at this early stage of the recovery."

Economists do not expect the MPC to increase rates in the immediate future.

"We expect the MPC will keep rates on hold until year end and hike only slowly in 2011, but they may have to act more aggressively if above-target inflation destabilises inflation expectations," said Michael Saunders, economist at Citigroup.

Also on Thursday, data from the Office for National Statistics are expected to show manufacturing output and the broader industrial production measure both grew by 0.3pc in May, after falling 0.4pc in April.

There are fears, however, that recovery in the manufacturing sector could lose steam if depressed demand among Britain's key trading partners in the US and Europe hits exports.

The latest trade data on Friday will give a snapshot of export levels in May. The trade in goods deficit is expected to narrow to £7bn, from £7.3bn in April

 

OK, so you'll take a pass at 10:1.

How about a green close on Tuesday? Even money that Tuesday shows a green close on SPX.

 

I am extremely bearish but I am leaning towards some upside, all this talk about indexes dropping further I agree with, however I see some relief rallies on the way.


NDX down 10 days in a row!!!

I bought QLD and USD last week getting ready for a bounce of at least 2% on the NDX.

 

The Dow Jones Industrial Average is repeating a pattern that appeared just before markets fell during the Great Depression, Daryl Grumppy, CEO at Grumppytraders.com, told CNBC Monday.

“Those who don’t remember history are doomed to repeat it…there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,” Grumppy said.

The Dow retreated 457.33 points, or 4.5 percent last week, to close at 9,686 Friday. Grumppy said a Dow fall below 9,800 confirmed the head and shoulders pattern.

The Shanghai Composite is seeing a very rapid collapse, falling below 2,500, which suggests the major fall in the Dow, he added.

In the European markets, Grumppy says Frankfurt's Dax is witnessing a different pattern to London's FTSE.

Grumppy uses the broad trading band as measurement- giving the Dax a downsize target of 1,500. The same head and shoulders pattern seen in the Dow can also being seen in the FTSE, he added.
© 2010 CNBC.com

 

bond_trad3r is rapidly becoming the one user who's threads should be moved instantly to chit chat on creation.

Just like his pal stock_trad3r.

 

Uh oh, futures are slightly negative. You suppose they're gonna be taken to the woodshed tonight?

 

Futures will follow Asia and Europe, tonight and tomorrow morning. If they both tank then Yes we will have a negative open. I don't expect circuit breaker action though until we take out SPX 980 and truly start free falling. There was strong support at SPX 1050 and it took a while to break through. There is even stronger support at 980. Once we do take out 980, it will get U-G-L-Y.