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davejh23 (< 20)

Crash Indicators



September 12, 2011 – Comments (4)

S&P cross of 50 and 200 day averages (death cross)...check.

S&P cross of 20 and 50 week averages...check...if we close out the week at or below current levels.

S&P cross of 5 and 13 month averages...check...if we close out September at or below current levels.

The death cross has given several false signals over the years, but look at the monthly chart with 5 & 13 month exponential moving averages...preceded the dot com bust and the '08 crash with no false signals in between. 

There's a lot of fear and uncertainty out there right now.  That could change quickly if some miracle resolution is reached in Europe and we start seeing some decent macro data points in the US, but I would say that caution is certainly warranted here.  Could QE3 save the day?  Maybe, but I think most investors would view QE3 as an act of desperation...the economy weakened substantially in the middle of QE2, why would QE3 be any different?...can a perpetual easing cycle result in anything other than disaster?  I know I'll be tempted to cash out, tax penalties and all, and get everything into real assets if it looks like that's where we're headed.

4 Comments – Post Your Own

#1) On September 12, 2011 at 4:27 PM, EnigmaDude (58.58) wrote:

Stocks zoom up at market close - un-check.

It's only Monday - who knows how we will close out the week?  un-check

It's only the 12th of September - who knows how we will close out the month?  un-check

Caution has been warranted all summer.  Nothing new here...

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#2) On September 12, 2011 at 5:46 PM, davejh23 (< 20) wrote:

"Stocks zoom up at market close - un-check."

Wrong.  The 50 day is still far below the 200 day average.  In fact, the spread between the two and the spread between current levels and the 200 day are greater than we saw during any of the false signals.

I agree that caution has been warranted all summer, but we still have analysts calling for S&P 1,400 by year's end, and Port dreaming that stocks will soar to fix his broken chart, etc...  There's still a lot of complacency out there, and that could mean bigger trouble than most currently expect.

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#3) On September 12, 2011 at 6:45 PM, turdburglar (43.20) wrote:

The one thing you can be sure if with technical patterns is that you won't be the first one to discover it.  Remember all those supercomputers that trade by the nanosecond? 

This stuff is just a lot of hogwash.  It would be more useful if it were printed on toilet paper.

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#4) On September 13, 2011 at 11:09 AM, rfaramir (28.63) wrote:

The Bernank has publicly committed to keeping interest rates near zero for the next year plus. That IS QE3 by another name.

Unfortunately, a good deal of that fictitious fiat will go into stocks, so I'm not saying that the S&P will crash or anything like that. But it will not be good for the economy, and it will be good for PMs.

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