Tagged: Stock market plunge
December 29, 2018 at 2:47 pm #9535
This Is Exactly The Kind Of Behavior That You Would Expect During A Stock Market Implosion…
If a doctor tells you that his patient’s condition is swinging up and down wildly, is that a good sign or a bad sign? Of course the answer to that question is quite obvious. And if a doctor tells you that his patient’s condition is “stable”, is that a good sign or a bad sign? Just like in the medical world, instability is not something that is a desirable thing on Wall Street, and right now we are witnessing extreme volatility on an almost daily basis. On Thursday, the Dow was already down several hundred points when I went out to do some grocery shopping with my wife, and at the low point of the day it had fallen 611 points. But then a “miracle happened” and the Dow ended the day with an increase of 260 points. As I detailed yesterday, this is precisely the sort of behavior that you would expect during a chaotic bear market.
As Fox Business has noted, bear market rallies are typically “sharp, quick and usually short”. I figured that the momentum from Wednesday would carry over into the early portion of Thursday, so I was surprised when the Dow was down by so much as we neared the middle of the day. But then around 2 PM we witnessed an extraordinary market surge…
The Dow Jones Industrial Average posted a 865-point swing in less than two hours. The blue-chip index had been down in mid-afternoon more than 500 points to cut the previous session’s gains in half, before bargain hunters and short covering turned a big decline into a modest gain.
An 865 point swing in less than two hours is not “normal”.
In fact, it is about as far from “normal” as you can get.
Let’s talk about short covering for a moment. During huge market downturns, speculators often try to make a lot of money very rapidly by shorting stocks. But if momentum suddenly shifts, those short sellers can be caught with their pants down and the consequences can be quite dramatic. The following comes from Marketwatch…
Indeed, market veterans warn that massive, one-day rallies are often more characteristic of downturns, occurring as selloffs lead to significantly oversold technical conditions that leave markets ripe for short covering only to give way to renewed selling once the frenzy of forced buying is exhausted. Investors who short a stock are essentially betting that its price will fall by first borrowing the shares, but those traders can be forced to buy shares back if prices suddenly swing higher, which, in turn, can amplify price swings.
In addition, it appears that on Thursday there was more of the “forced pension rebalancing” that Zero Hedge has been talking about…
It certainly has the smell of a massive pension reallocation as the moment stocks started to surge, bonds were dumped…
No stock market crash in U.S. history has ever gone in a straight line. There are always huge ups and downs during every market crash, and this market crash is no exception.
Ultimately, there is no way that you can possibly interpret the behavior of the market in recent days as “healthy”…
Here’s the problem: as we discussed last night, since 1990, every comparable reversal – with a few exceptions – came during the 2008-2009 bear market. According to Bloomberg data, in eight previous bear markets the S&P 500 experienced rallies of greater than 2.5% more than 120 times as the benchmark plunged from peak to trough. From the collapse of Lehman to the financial crisis bottom in March 2009, the S&P 500 rallied more than 4 percent on 13 different occasions.
“This is not the kind of price action you see in normal bull markets,” said Robert Baird equity sales trader Michael Antonelli. “This is just a face ripping short cover rally. I am 100 percent not saying we are in a situation like 2008 now, but look at October 10, 2008 to October 13, 2008: the market rose nearly 12 percent in one day. October 27 to October 28, 2008, it rose 11 percent.”
Meanwhile, it appears that one of America’s most iconic retailers is about to go down in flames.
A Minute to Midnite Administration
A Minute To Midnite Show HostDecember 29, 2018 at 2:50 pm #9536
The Federal Reserve Is A Suicide Bomber With A Deeper Agenda
Central bankers are sociopathic in nature and sociopathic people tend to behave like robots. When one understands the motivations of central bankers, or at the very least what their goals are, their actions become rather predictable. The question is, what truly motivates these people?
I believe according to the evidence that the central banks are motivated by ideological zealotry with the core purpose of total global centralization of economic and political power into the hands of a select group of elitists. This agenda is really just a modern “reboot” of feudalism or totalitarianism. They sometimes refer to the plan in public as the “new world order,” or the “global economic reset.” I often refer to the encompassing ideology as “globalism” for the sake of expediency.
To attain this goal, central bankers must influence mass psychology using traumatic events. Fear opens doors to centralization of power. This is simply a fact of social behavior and history. The more afraid a population is, the more willing they will be to give up freedoms in exchange for safety and security. Therefore, the most effective weapon at the disposal of the globalists and their central banking counterparts is engineered economic crisis — a weapon that can, if allowed, destroy entire civilizations almost as fast as a nuclear war, while still keeping most of the expensive infrastructure intact.
Beyond that, economic crisis is also a weapon that can influence a population to embrace even greater enslavement while viewing their slave masters as saviors rather than villains.
Despite what many people assume, central bankers are not driven by a desire for profit. They print their own capital, they hardly need to make a profit. Central bankers are also not driven by a desire to keep the current system afloat. They have demonstrated time and time again their habit of deliberately sabotaging the system through the use of inflationary bubbles followed by fiscal tightening into weak economic conditions. The U.S. economy today is just as expendable as any other economy the banks have destroyed in the past. It is not special.
This fact is becoming extremely clear lately as the Federal Reserve initiates policy tightening measures into obvious economic weakness; an action which is crashing stock markets as well as destabilizing other sectors of the economy including housing markets, auto markets and credit markets.
As noted, this was highly predictable. In September of 2015 I published an article titled ‘The Real Reasons Why The Fed Will Hike Interest Rates‘, predicting that the strategy the banks would use to bring about the next crisis would be interest rate hikes in the midst of financial instability. This was the same strategy they used to initiate the Great Depression. And as mentioned earlier, sociopaths act like robots — they tend to use similar tactics over and over again because these tactics have worked in the past.
At the time, the vast majority of analysts were predicting that the central banks would move towards negative interest rates. But if the goal of the banking elites is total centralization of the global economy, then keeping the U.S. system alive for another decade or longer makes little sense. They had already created the perfect financial bubble using QE and near zero interest rates to encourage debt accumulation at historic levels. It’s a veritable economic atomic bomb, why not use it?
At the beginning of this year, I published an article titled ‘New Fed Chairman Will Trigger A Historic Stock Market Crash In 2018‘. In that article, I predicted that Jerome Powell would push forward with interest rate hikes and balance sheet cuts. This would put extreme pressure on highly indebted corporations and they would be forced to stop spending capital on stock buybacks, which have been propping up equities for several years.
I would point out that not only has Powell in fact done exactly what I predicted, but that he has done it consciously, knowing what the results would be. In 2012, Powell outlined the exact consequences of policy tightening in the Fed October minutes. These minutes were not made public until recently. They PROVE that the Fed is fully aware of what it is doing, not acting blindly.
In September of this year, in my article ‘The Everything Bubble: When Will It Finally Crash?‘, I predicted that stock markets would begin crashing in December of 2018, despite many skeptics arguing that a “Santa Claus rally” was guaranteed. From the article:
“The Fed’s tightening policies have resulted in a severe reaction by emerging markets which are already crashing and have diverged greatly from U.S. markets. American stocks will not escape the same fate.
The Fed’s neutral rate efforts suggest a turning point in late 2018 to early 2019. Balance sheet cuts are expected to increase at this time, which would also expedite a crash in existing market assets. The only question is how long can corporations sustain stock buybacks until their own debt burdens crush their efforts? With such companies highly leveraged, interest rates will determine the length of their resolve. I believe two more hikes will be their limit.
If the Fed continues on its current path the next stock crash would begin around December 2018 into the first quarter of 2019. After that, other sectors of the economy, already highly unstable, will break down through 2019 and 2020.”
Though stock buybacks had saved markets from the plunge in February, they are long gone in the final quarter as the cost of corporate debt expands. Stocks are now in near free fall in December. The crash of the “everything bubble” has begun. So far, intermittent bounces have been brief, lasting in some cases mere hours to a couple of days, then plunging into complete retraction. The trend line indicates far more pain to come.
I was able to calculate this outcome because I am willing as an analyst to accept certain realities. The most important being that at this stage the Fed DOES NOT CARE about propping up the U.S. economy, and ultimately, the Fed does not even care what happens to itself as an institution. The truth is that the Fed is working towards an ideological end game of global centralization; this means one economy, one currency and eventually one world government (a plan which has been openly admitted to by globalists in the past). It has no loyalty to the U.S. system, and it will destroy the U.S. system if it must to achieve this prize.
The concept of the “plunge protection team” has become widespread in recent years, and for good reason. It was the central banks in tandem with government agencies that have hidden honest economic data from the mainstream public as well as artificially inflated asset valuations to obscure the truth – that the US and much of the world has been suffering from systemic decline, a collapse that has been ongoing since at least 2008.
However, things change, and the plans of central banks evolve. It took a decade to create the ‘Everything Bubble’; an unprecedented bubble encompassing every facet of our economy including Treasury bonds and even the dollar. The true purpose of most financial bubbles is to engineer a crash. The “plunge protection team” is no longer a guaranteed element of US markets anymore. If they are intervening, it has only been as a steam valve to slow the current crash to more manageable levels. In other words, it’s a controlled demolition.
I don’t call them the “PPT” anymore – instead I think I’ll call them the PAC (Plunge Acceleration Commission). The PAC-men are devouring the economy piece by piece and digesting it as they go. They want a crash. In fact, they need one.
A Minute to Midnite Administration
A Minute To Midnite Show HostDecember 29, 2018 at 7:57 pm #9537
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