• 48 mins Police Bust China’s Largest Bitcoin Hacking Scheme
  • 3 hours Venezuela Undergoes “One Of The Greatest Currency Devaluations Ever”
  • 19 hours Gold Is Up But Bears Still Have The Advantage
  • 20 hours Consumers Show ‘Extraordinary’ Shift In Sentiment
  • 21 hours Uber Falling Victim to Investors’ Short-Term Thinking
  • 22 hours Has Eastern European Economic Growth Hit A Ceiling?
  • 23 hours Wall Street Confident In Trade War Breakthrough
  • 1 day Emerging Market Woes Spark Surge In Bitcoin Trading Volume
  • 1 day Saudis Sovereign Wealth Fund Eyes Tesla Rival
  • 2 days Inflation Wipes Out Wage Growth
  • 3 days Turks Flock To Safe Haven Assets As Lira Plummets
  • 4 days Did North Korean Hackers Just Steal $13M From Global ATMs?
  • 4 days Asian Tech Stocks Rebound After A Tough Week
  • 4 days Switzerland Bans New Audi, Mercedes, Porsche Imports
  • 4 days Sealing Off The North Korea Smuggling Loophole
  • 4 days This Tech Giant Is Pushing For Blockchain Adoption
  • 4 days Venezuela’s Gold Reserves Are Reaching Critical Levels
  • 5 days Brexit Woes Weigh On The British Pound
  • 5 days Forget Turkey, This Is The Biggest Threat To European Finance
  • 5 days There’s No Hiding From Google
  1. Home
  2. Markets
  3. Other

Red Alert for 2nd Crash Downwave...

Originally published August 30th, 2015.

We are believed to be at an excellent juncture right now to short the broad stockmarket (or buy bear ETFs and Puts). As we know, we did just that before the dramatic plunge early last week, and are now "sitting pretty". Now is the time to add to positions, or if you haven't any and are looking for the right shorting opportunity, this is it.

To see just why now is an excellent time to enter short positions or build on existing short positions (inverse ETFs / Puts) we will now look at the latest 1-year chart for the S&P500 index. All those who bought in the large rectangular pattern drawn on the chart, labeled the "Mug Pen" are like sheep huddled in a corral waiting to be fleeced. Even after the sharp rally late last week they are nursing significant losses, and if they get the chance to "get out even" or nearly so, they are going to take it. What is likely to happen is that they will almost get the chance, but not quite, because the market will turn down again soon, or immediately, and they will have to make a run for it if they want to avoid a severe fleecing. This means that as soon as the market starts to drop away again, they will stampede to unload stocks while they still can at reasonable prices, exacerbating the rate of decline. This is a big reason that another severe downleg is expected.

S&P500 ndex 1-Year Chart

On the 3-month chart for the Dow Jones Industrials we can see recent action in detail, and how the market may right now be topping after the technical rebound last week, with a potential "Evening Doji Star" reversal forming on the chart, that will be confirmed by a drop tomorrow...

Dow Jones Industrials 3-Month Chart

The seriousness of the situation is made clear by the long-term 10-year chart for the S&P500 index on which we can see that a long overdue cyclical bearmarket has been signaled by last week's plunge, which involved a clear breakdown from a large bearish Rising Wedge. What we are seeing now is a final backtest of the "round number" resistance at 2000, formerly support that failed, before we enter a brutal self-feeding downtrend that is likely to be steep. This looks like the last opportunity to get out, or go short at good prices. Those who follow Wall St's advice to "buy selectively" will learn to their dismay that the market doesn't discriminate much when it comes to the damage it inflicts during a severe bearmarket phase - pretty much everything will be hit and hard.

S&P500 Index 10-Year Chart

For those who are experienced and comfortable with trading options, a wide range of suitable big stock Puts are detailed in two articles on the site, Big Stock Put Options for Market Crash - Round 2 and Big Stock Put Options for Market Crash - worthy additions.

 

Back to homepage

Leave a comment

Leave a comment