The Door Slams Shut?

71
Tue, Mar 1, 2016 - 11:25am

Since August of 2015, we've been following the decline in U.S. equities and marking the similarities to the previous market collapses of 2001 and 2008. We'd suggested last autumn that there was one, final indicator that we needed to see before issuing a final warning. Well, here you go.

Before proceeding, I urge you to review the link below. For proper context, it is extremely important that you do so:

And, again, this update comes with the same caveat/disclaimer that we've included in each of these posts since August:

<All of this comes with an important caveat. Though there was certainly some Central Bank market manipulation in 2001 and 2008, it was NOTHING compared to what we see today. Will cycles and history be too much for the CBs to overcome? Instead, will their almost daily interventions be able to stem the tide? We're about to find out.>

Next, a copy-and-paste recap of the S&P action since August and the eerie similarities to 2001 and 2008:

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December 2000: Range was 9.72%. Final loss was 4.97%

January 2008: Range was 13.72%. Final loss was 6.38%

August 2015: Range was 11.64%. Final loss was 6.67%

Pretty startling similarities, wouldn't you say?

We then projected an October-November rally based upon the Green Candles of Hope in 2001 and 2008. These previous Green Candle bounces produced the following gains:

Late December 2000 - January 2001: S&P rally from 1254 low to 1383 high. Total gain of 10.3%

March 2008 - May 2008: S&P rally from 1257 low to 1440 high. Total gain of 14.6%

Late September 2015 - November 2015: S&P rally from 1872 low to 2099 high. Total gain of 12.1%.

As you can see, the market action in late 2015 was eerily similar to what foreshadowed the massive bear markets of 2001 and 2008. So, do the similarities continue? See for yourself.

After the Green Candle of Hope is early 2001, the market's bubble finally burst as the month of February 2001 saw a total S&P range of 11.7% with a final monthly loss of 9.2%.

After the Green Candle of Hope in the spring of 2008, the market's bubble finally burst as the month of June 2008 saw a total S&P range of 9.4% with a final monthly loss of 8.6%.

After the Green Candles of Hope in late 2015, did the market's bubble finally burst? The total S&P range in January was 11.1% and the total monthly loss was 4.8%. However, without the startling announcement of negative interest rates by the BoJ on Friday...spiking the USDJPY and taking the S&P futures with it...the total loss for January would have been 7.1%.

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We first published the chart below on 12/1/15. Please take a good look:

The following text accompanied the chart that day:

"In both 2001 and 2008, the door was slammed shut and the S&P collapse began in earnest when the 6-month moving average bearishly broke through and moved below the 24-month moving average. On the chart below, you can see that this occurred immediately following the previous "green candle" periods. And, once this happened, all heck broke loose."

So, has the door slammed shut? Is all heck about to break loose? Well, according to the criteria laid out above...yes.

Below is your latest, updated S&P monthly chart. If you look closely, the 6-month and 24-month moving averages have, indeed, bearishly crossed:

So, where does "the market" head from here and what should we expect next? Well, if history is any guide AND, given all of the similarities to 2001 and 2008, perhaps you should consider the following:

  • The 6-mo crossed the 24-mo in early February of 2001. The S&P 500 began that month at 1365.67. March of 2001 saw an intra-month low of 1081.19. That's a drop of 21%. With the bear market now well underway, the decline continued into October of 2002, ultimately reaching a low of 768.63. This marked a total drop from the MA cross point of 43.7%.
  • The 6-mo again crossed the 24-mo in May of 2008. The S&P 500 began that month at 1385.97. July of 2008 saw an intra-month low of 1200.44. That's a drop of 13.4%. With the bear market now well underway, the decline continued into March of 2009, ultimately reaching a low of 666.79. This marked a total drop from the MA cross point of 51.9%.

If history repeats itself yet again...as it has with the recent action of last August, last October-November and again this past January...then we should now expect:

  • A decline in the S&P over the next 60 days. This decline will very likely be in the 15-20% range, projecting a low near 1650 or so. From there, if the pattern continues, the S&P will continue lower, eventually falling to near 1100. Which, you'll notice, was our original forecast back in August of last year.

Again, though, all of this comes with the caveat/disclaimer listed at the top of this post. Perhaps you should re-read it now. However, past history sometimes IS an indicator of future results. Therefore, we'll conclude today's update with the same warning we issued a month ago:

At the end of the day, what you do with this information is entirely up to you. If you own stocks, ETFs and/or mutual funds in your regular accounts, IRAs and 401(k)s, it certainly appears that NOW is the time to be VERY cautious as history suggests that a major bear market in stocks is on our doorstep. Perhaps it would be prudent to take some time to review your current asset allocation and measure it against your risk tolerance and investment/retirement timeline. If another 50% drop in the "stock market" would decimate your accounts and ruin your retirement plans, it might be wise to consider taking some action before it's too late. Hope in central planning and central banks cannot keep global equity markets afloat indefinitely. Our study of chart candles and market history suggests that the next central bank "policy failure" may be right around the corner.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  71 Comments

gazzmann
Mar 1, 2016 - 11:27am
boomstick
Mar 1, 2016 - 11:29am

we're doomed

first?

Edit: GAZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ!

joeblack
Mar 1, 2016 - 11:31am

If you follow the metals

a subscription to Craig's website is the best $10 a month you can spend.

cashonly
Mar 1, 2016 - 11:32am

fourth!

Yes! a the coveted fourth position!

I'm climbing up in that ol' silver recliner right now!! (before Marchas swats me right off of it and takes his rightful spot!)

GoldenWizard
Mar 1, 2016 - 11:34am

Stock Market Drop

Lets face it, if Gold and Silver are to have any chance of breaking out to new all time highs the Stock Market must complete this drop, otherwise we PM holders are in for a rough ride.

Mar 1, 2016 - 11:36am

For aggressive traders

Where would ole Turd look to get short? See below:

Marchas45
Mar 1, 2016 - 11:37am

Dang It

As soon as I step away from my desk he posts a thread. O! Well at least I'm looking for deals. Keep Stacking

jchantel
Mar 1, 2016 - 11:43am

Getting interesting for sure!

This is going to be a year for the history books!

Marchas45
Mar 1, 2016 - 11:45am

Just Asking

So what effect will the collapse in the S&P have on the metals?? If any, if they can still manipulate the charts?

tyberious
Mar 1, 2016 - 11:53am

Perth Mint Silver Sales Top

Perth Mint Silver Sales Top One Million Ounces in February

by Louis Cammarosano

Perth Mint Silver Sales Topped One Million Ounces For the Six Month In A Row. February Perth Mint silver sales of 1,049,062 ounces were up 168% year over year. Silver Kangaroo bullion coin continues to drive massive silver sales. February Perth Mint gold sales of 37,063 ounces were up 15.9% year over year. Silver Sales […]

Read more of this post

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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