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Market Crash on horizon-where there is Smoke there is Fire...

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May 08, 2014 – Comments (4) | RELATED TICKERS: SQQQ , SDOW , DOG

There has been smoke coming out of the high flying tech sector and the Russell small cap stocks. That smoke is a sign that stocks have overheated and are now being burned by the bear market return.

I have been in the market since 1998, so I have witnessed first hand the signs leading to a bear market return, first in 2000, then the double dip caused by 9/11, then the return of the bear market in 2008. Although it first showed the bear market was returning in 2007.

Past signs:

In 2000 the signs that a market top was reached was when you saw penny tech stocks with anyname.net attached to it soar from a few cents to Dollarland in just a few days and anyname.net IPOs that would soar to Hundreds of dollars in just the first day of trading.

In 2007-2008 the signs were everywhere that the market top was reached in the mortgage sector.

People were able to buy homes with no money down, no credit check, no document check, hell, you didn't even need a job to qualify for a mortgage. Why? Because your going to turn around in a month and sell the house you just bought for $50k more than the purchase price before even making your first payment. Even dead people started buying houses because there was no document check.

Present signs:

In 2014 we know a market top was reached because we had penny cannabis stocks that soared from a few pennies to $40+ like the case of vape, and other high fliers like cana and cann, but there were many more that soared 1,000%-10,000% withing weeks if not days. Many of these stocks were just shell companies, but that is what happens in an overheated market all you need is the right name for your company to turn from $100k to $100m.  

But the Bear Market took notice and returned with a vengeance to that cannabis sector and burned it down just as fast as it rose. The bear market always burns down the most vunerable sectors first and that is exactly what it did to the cannabis sector, it crushed vape, cann, cana and all the other weed stocks. Now the bear market is turning its fire onto the high flying tech and small cap stocks with PE's or forward PE's that are 5 to 20 times higher than the current market average PE.

One thing to remember is that when a bear market fire is started its really hard to extinguish it before it burns down everything in its path. That's why after it lays waste to the current group of stocks I think it will head to the heavy debt loaded stocks and keep working its way to every sector until a full blown BEAR MARKET ATTACK is burning down the entire market and the media then finally starts calling it a recession. When that happens we only have a few more weeks of pain left before its all over.

That is exactly what occurred in 2008 and during that time there was no such thing as a safe place to hide in the equity market when the full blown BEAR MARKET ATTACK was upon us, unless you considered a double digit decline safe compared to -100% decline that so many stocks suffered in 2008.

Read this article on why a crash is coming:

 http://www.moneynews.com/MKTNews/wall-street-crash-market-strength/2014/04/24/id/567582/?promo_code=a3auptln&utm_source=taboola&utm_medium=referral

 

4 Comments – Post Your Own

#1) On May 09, 2014 at 2:47 AM, awallejr (38.93) wrote:

Except those past crashes resulted from recessions.  Unless you see a recession on the horizon there is no reason for a crash or a strong correction.

I don't see any reason for a crash. I am tired of hearing the Marc Farbers saying the market will crash because something bad is going to happen. That is a truly stupid thesis. Let me repeat, a truly STUPID thesis.

The current market is HEALTHY.  It is ringing out the excess (bio/tech) and moving the money elsewhere but still in the market.

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#2) On May 09, 2014 at 2:51 AM, awallejr (38.93) wrote:

P.S.  I would never listen to Gary Shilling. This guy has been wrong for YEARS. Let me repeat for YEARS.  You listened to him the last 5 years and you LOST money.  You listened to me these last five years and you would have made money. 

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#3) On May 09, 2014 at 3:27 PM, EnigmaDude (60.92) wrote:

LOL. You use cannabis penny stocks as proof that a market crash is looming? What we are seeing is a return to "safe" stocks like utilities, energy, telecoms, and other sectors that have taken a beating the past few years while high flying smallcaps have been outperforming. I do think we are experiencing a shift in market sentiment, but mostly away from volatile, speculative stocks and towards more blue chip, dividend paying ones.

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#4) On July 29, 2014 at 2:10 PM, anash91 (97.26) wrote:

Of course the market will crash in the future.

 

Don't try to predict it or you will go broke.

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