October apocalypse?
October 1, 2009Jon Brooks 3 Comments »
One month ago we wondered: Would the stock market suffer a September swoon? If you answered yes to that question and acted on it, then you missed out on a nearly 4% gain in the S&P 500, a whopping 6% on the Nasdaq, and 2% in the Dow, which had its best quarter since 1998.
The bears can barely bear it. A month ago, the Reformed Broker asked “Did we fall off the bull today?” But he ended his September commentary with this “Bearslaughter” post:
Still, October is here, and it’s often no picnic. The market crashes of 1929, 1987, and 2008 all occurred in October. Over the week of October 6 last year, the Dow fell 1,874 points or 18%, its worst weekly decline in history. Meanwhile, the S&P 500 fell 20%.
Yet, Mr. Bull, a technical trader, is currently optmistic:
The opposite of Mr. Bull might be Doug Noland of the Prudent Bear Fund, often called a “perma-bear.” He remains so:
…anyone turning bullish in 1931 – two years after the financial Bubble burst – would have had to endure a nominal GDP drop of another 25% and even worse percentage declines in the stock market. It was many years after the bursting of the financial Bubble before bullishness had much relevance….
I’ll look to remove the bear from my lapel when a sounder Credit backdrop emerges at home and globally. It’s just not moving in that direction. I don’t see Trillions of federal government Credit as sustainable or constructive – and wouldn’t extrapolate recent system stabilization out to a sustainable economic recovery…I do see all the makings for a grinding, debilitating, secular bear market.
The Blue Penguin Report, written by a former Wall Street trader, poo-pooed a September slide but is less sanguine about October:
The Slope of Hope, technical analysis author Tim Knight’s site, sees an opportunity in a coming run-up before a plunge:
Seeking Alpha aggregates articles from market blogs, investment newsletters, and financial professionals. Just for fun, here are some of the more pessimistic–and thus entertaining–October posts:
What’s our real economic condition?
Have stocks jumped ahead of the economic recovery? And if so, are they setting up for a big correction? This week is crucial as some key data is set to be released such as the ADP employment report, GDP, Case/Schiller housing index, and consumer sentiment, which will either foster a technical breakout pushing the S&P (SPX) towards much higher year-end goals of 1150-1200 or convince investors to take major profits before its too late with a 20% retracement so fast it will make your head spin. Remember the old adage, stocks often stair-step up, but take the elevator down.
Are we poised for another great bull market?
Although there is no way for me or anyone else to prove it definitively one way or another, I highly doubt that what we are witnessing is the dawn of another rare secular bull market based on one variable: valuation. …At best, we are going through a cyclical bull market – otherwise known as a bear market rally.
I’m predicting another one of those unpleasant October ‘Black’ days (Black Monday, Black Tuesday, Black Anyday, take your pick), and I originally thought that dismal Christmas projections would be the cause. This is now beyond the idea phase and looks more like a certain reality.
If the market crashes, which I think is more likely than a break above the 50% level, will the dollar rally as well? That is what we saw in 2008.
1929 market crash vs. current model predictions
We’re standing out on a limb here with our call for a 50% crash in the stock market over the coming 2-5 months and although we could have held that forecast to ourselves, we’d rather walk the talk by putting ourselves and our money on the line here.
The market is currently being levitated on literal trash. Again today we see the Casino trying to suck in people; I got emails from two more associates over the weekend telling me that their “advisors” are telling them “you have too much cash allocated; now is the time to buy.”
Now is the time to buy, after a 50% move?! Where the hell were these so-called “advisors” at SPX 666!
Nobody – and I do mean nobody – is talking about what this sort of volume pattern means. Well, I will: this is the sort of pattern that precedes an all-on equity market collapse. It strongly implies that the only volume support that the market has is from “hot money” speculators. Lest you think this is sustainable let me point out that just a few weeks ago the very same so-called “commentators” said the same thing about China’s market….
I smell a repeat of 2001/2002, when the very same “analysts” said the bear market was over and everyone jumped back into the pool going into the end of 2001, only to get destroyed in the collapse that followed and took out the 2001 low.
My best estimate for the date of The Crash is between the next 10-Years US Treasury Notes auction, Wednesday, 7 October 1300 EDT and the close of the Market on Friday.
Wow. That last prediction isn’t just going out on a limb; it’s venturing out on a twig. Lest you panic and convert your entire portfolio into bottled water, ammunition, and toilet paper, we’ll leave you with this:
…, the path of least resistance for equities is still up. My inner trader tells me it’s too early to get outright bearish.
There you have it. Some dude’s inner trader says “buy.” Act accordingly.
October 2nd, 2009 at 7:21 am
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October 29th, 2009 at 12:46 pm
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April 14th, 2010 at 2:13 pm
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