http://www.thebullbear.com/profiles/blogs/stock-market-crash-possible
Is A
Stock Market Crash Possible Soon?
There are significant signals in the current market that a crash
or meltdown scenario could unfold sometime in the next 1-2 weeks.
Crashes are rare events and nearly impossible to predict, but many
elements that could combine to produce a financial market calamity
appear to be present at this time.
This video
reviews the current technical condition of the major world stock
markets. In it I examine each index in terms of the relationship
between price and the uptrends from March 2009 and
August/September 2010, the April 2010 top and March 2011 low, the
20, 50 and 200 Exponential Moving Averages and areas of
significant horizontal support/resistance.
Here's a direct link to the video:
Every major stock market in the world is either hovering just
above or directly upon or has already broken a critical area of
technical support. Ordinarily this might represent a major buying
opportunity. But the current market setup may be anything but
ordinary. In fact it may be quite extraordinary.
By moving dramatically ahead of the markets and leading price
lower, the market's underlying technicals tend to indicate that a
sharp break to the downside is imminent. Many indicators have led
the market lower and now price will likely play catch up to the
underlying technical condition of the market. Here is just one of
many examples:
target="_self">src="http://api.ning.com/files/1xQfgskAKKy1q7QQpzvsAryINiqK*mLOi6V0EF*I4TzeMiTCLa6SuA6WeLWHHtYvevIC5mIk*4DQTXbfut2kBjF8Enn5SVfh/Screenshot20110612at4.58.53PM.jpg?width=721"
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width: 500px; height: 415px;">
In spite of a very modest 7.5% decline over 6 weeks of trading
(1.25% per week), Percent of Stocks Above the 20, 50 and 200 EMA
have declined to precipitous lows usually associated with huge
selloffs. This is a prime example of the technicals leading the
market lower.
Here's a closer view of NYSE Percent of Stocks Above the 200 EMA:
href="http://api.ning.com:80/files/HXT6DGp5WSIg5UWOmtzOdLEKaVdPT8JJ09dmxKxeOsk3*OlNTj6KPpZR6adtAAEIuIeEyaASj-iPY0oxxMrQBsCi1lsxrW1A/NYA200R.png">
src="http://api.ning.com/files/HXT6DGp5WSIg5UWOmtzOdLEKaVdPT8JJ09dmxKxeOsk3*OlNTj6KPpZR6adtAAEIuIeEyaASj-iPY0oxxMrQBsCi1lsxrW1A/NYA200R.png?width=750"
style="border: 0px solid; width: 500px; height: 281px;">
Only 55% of NYSE stocks are trading above their 200 EMA after a
minor 7.5% correction. Even though market price has yet to take
out the March low, the indicator has plummeted below its March low
and is not far from its August 2010 low. It's moving averages have
crossed into bear market mode. So on a long term basis nearly half
of the stocks traded on the NYSE are trapped under long term
resistance in a market that is showing historically weak buying
pressure and significant and rising selling pressure.
Many analysts are calling this a signal of an oversold market. I
think they are wrong. An oversold condition requires some
capitulation selling and some fear and we have not seen that.
Remember, crashes and capitulations generally come from oversold
conditions. An oversold condition is also only a buy signal under
bull market conditions and there are many reasons to believe that
we are no longer in a bull phase.
There is very little fear in this market. VIX has barely budged:
target="_self">src="http://api.ning.com/files/jXAMZVLJgBheA9ioRikgaG*MLurKlQFlmNYDrAJ*ZEWNt*YLHOC5sy4cixVU2ixTf3kSRZ4zmeJzctWlxgUFgNszHbUJ8V*u/VIX.png?width=721"
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height: 281px;">
Near market bottoms when fear is strong, traders switch to the
use of ETFs instead of individual equities in order to insure that
there will be adequate liquidity to exit the market in a hurry if
things should turn ugly. This is represented in the SPY Liquidity
Premium indicator:
target="_self">src="http://api.ning.com/files/GzR6lP3OXzxWuBpwvhIa9IU4ZaD8ujB4FG6wl299-ig1eco7dVpvzNSHjMBhTvjNLFIV0VOET5q409qaHiF4cLYlm5lWAt4x/spyliq.jpg?width=742"
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width: 500px; height: 350px;">
In spite of everything we have discussed above, where is this
indicator in relationship to its March low or April 2010 low? Not
even close to showing the fear usually associated with a bottom.
This technical evidence tells me that the selling HAS NOT EVEN
STARTED YET. And it is likely to get started soon. There is MUCH
more technical evidence that supports what I am saying here which
has been published in a full report for
target="_blank">BullBear Traders members.
When you have a situation where price needs to play catch up to
the underlying technicals and market participants are not fearful
and are still buying the dip, you have the recipe for a selling
panic of some kind.
Today's weak bounce is probably just another selling opportunity.
Early action in Asia, US futures and the Dollar suggest that the
correction may be over already:
target="_self">src="http://api.ning.com/files/9OviI6CoFB7aQY8zev-yyXnECc1ybnyfV3zSYA32D7c79K*CqKJwN1csNUdIBlJChagZKFW0wW2-Wp0gSnM4b14HxXQn0hqC/es3.gif?width=721"
class="align-full" style="border: 0px solid; width: 500px;
height: 262px;">
This is wave C as I see it at this time. 2 of C was a large abc
flat and (ii) of 3 of C may have been a smaller version with c
falling short of a, making it a bearish running flat.
Volume on today's rally was POOR.
target="_self">src="http://api.ning.com/files/2ECLp1M1rr-KcwVxPwpkzKJ9uK06wEVfx2S03SXv0JzUJ6-YM5RogzKafiKPJoFZscaduBjelHiSWoDXT*tEFQFCFzH7U-L9/spx3.png?width=721"
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height: 281px;">
Volume was lower than the 50 MA of volume and lower than any of
the down days in the month of June.
Summation Index actually FELL today:
target="_self">src="http://api.ning.com/files/u3PNU1edhjrTR9MzI6xEbaGEEbtBxc7V3q6NqaRjVha5SJhtZmjdZ6q-mOSY*Cwrn6ve-WkNe*YAXZ58YDrUKq4ugbvN-kD9/si.png?width=721"
class="align-full" style="border: 0px solid; width: 500px;
height: 281px;">
McClellan Oscillator gave a negative reading (though higher than
the prior day) and the 50 EMA did not budge at all:
target="_self">src="http://api.ning.com/files/ogvhx-bR2wvk*D2Cz7ZN8fFY6hIsDbfHr2E7oK3ytU9VLGJUUjpRNXoCrZbGmZYATxkWY-TUYTMLOGdLgo0D59IkpUK6BlBS/mo.png?width=721"
class="align-full" style="border: 0px solid; width: 500px;
height: 281px;">
Breadth Thrust Indicator FELL today, a particularly ominous sign,
since if this were a real bottom of any kind there would be a
breadth thrust signal of some kind:
target="_self">src="http://api.ning.com/files/dQUZfO5-EhmaEUg5JG0sQwLqvOcPfMWDVF5U*tOqOUdhkCijuIEDIo0DnRCFmIil1wqW*LRAvo-SlsPICB7cSh1GKupXAsK3/bti.png?width=721"
class="align-full" style="border: 0px solid; width: 500px;
height: 281px;">
Many other indicators, such as Bullish Percent Index, did not
even register a blip. From what I can see the technical quality of
today's rally was very poor.
Also, Dollar rallied into the close and Euro and Aussie gave up
almost all their gains. This has continued in the Asian session
and Dollar is once again near 75.00. Looks like iii of C down may
have begun in Euro. I am short more EuroDollar.
target="_self">src="http://api.ning.com/files/amHlE62B*kK3HmPw-bsfHwIcNtBnZIqjHMgMsVTy8gJxxaIatRrNcCWQpigLoLEimEVQyMF6ZNPyWsD0tQi8nvvyrMW6riUK/euro3.gif?width=721"
class="align-full" style="border: 0px solid; width: 500px;
height: 262px;">
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