Wall Street Panics: A Stock Crash Is Just Beginning

There was panic on Wall Street Friday, August 21^st, the Industrials diving 530.94 points, the S&P500 getting crushed for 65 points, and the NDX losing a huge 188 points. Let’s examine the magnitude of what just happened. After the Industrials lost a whopping 358 points a day earlier, it was the first back to back 300 point plus down days for the Industrials since November 2008. The Industrials lost over 1,000 points this past week, the decline occurring precisely from our August 14^th phi mate turn date. The top for the Industrials arrived on May 19^th, 2015, another of our phi mate turn dates. This past week’s 1,000 point decline was the worst since August 2011. The Industrials are now down 10 percent since their May 19^th high, having lost 1,892 points. This crushing decline is occurring with two Hindenburg Omens on the clock, an indicator that warns of a higher than normal probability of a stock market crash within 4 months of when this signal occurs. All the gains since October 2014 have been wiped out.

The Wilshire 5000, which represents almost the entire stock market, has lost $1.77 trillion since the June 22nd, 2015 top at $22.537 trillion. The chart for the Wilshire 5000 shown below shows a Jaws of Death pattern from 1990 that has completed. Investors must be on high alert that Grand Supercycle degree wave {IV} down has started.

Think about this: In just a few weeks, one-third of the $5.0 trillion total of all QE programs from the Fed has been wiped out! A third of all that monetary printing out of thin air, $5.0 trillion, that the Fed gave to Wall Street in exchange for interest bearing securities held by Wall Street, some of those securities not so good, in QE 1, 2 and 3 has now disappeared from a stock market collapse. Instead of placing that $5.0 trillion in the real economy through a tax rebate to Main Street (in conjunction with the U.S. Treasury, which I discussed in my book, The Coming Economic Ice Age, available at amazon.com ), the Fed chose to give it to Wall Street to drive up the stock market artificially. The chickens have come home to roost, and the Wilshire 5000 chart says this fallacious Fed policy has failed. All it accomplished was a temporary levitation of the stock market and a huge rise in the cost of living on Main Street.

If the Fed raises interest rates in September, we are going to see the mother of all crashes. The world economy is sliding hard and fast. Geopolitical tensions are high. The domestic economy is far weaker than official stats reflect. Housing, contrary to what the stats showed, is in the tank. It would be a colossal mistake, similar to what they did at the beginning of the Great Depression of the 1930s. I wouldn’t be surprised by a QE 4 program getting rolled out in October, the Fed’s solution to everything. That would generate an excitement counter-trend rally, but would soon fade. The QE programs simply did not work, so a QE 4 won’t either.  

The S&P500 closed decisively below key support, below the 2,044 level. The Crash we have been warning about is underway. The worst part of the Crash is not here yet. The NDX fell below key support at 4,400, and dove through its 200 day moving average.

As we feared and have been cautioning  in executive summaries to our subscribers, we pointed out that the stock market looked “heavy,” meaning there is a pattern of lower highs and lower lows that can be a precursor to a powerful sell-off where expected upside target levels for corrective rallies are not met, and declines within the primary trend down take off sooner than an orderly wave mapping would normally expect. The charts we showed in Daily newsletters to subscribers before the plunge revealed an interesting price pattern parallel to that which was seen just prior to the stock market crash of 2008. That comparison is proving prescient.

We are now on HIGH ALERT!!!!! Grand Supercycle degree wave {IV}’s decline has started with a STOCK MARKET CRASH. This first of many coming crashes is just getting warmed up here in August 2015, and could continue into October 2015.We need to pay close attention and be prepared , as we believe a far greater decline is coming.                              

The Industrials reached and are now plunging from the upper boundary of the Jaws of Death pattern, the top for Grand Supercycle degree wave {III} up. Grand Supercycle degree wave {IV} down, which could last 5 to 7 years, is now underway.

The Industrials have plunged from a “Death Cross” on August 11th, 2015, dropping almost 1,000 points in two weeks, where its 50 Day Moving Average declined below its 200 Day Moving Average. This event often leads to a huge decline in stock prices.

            Let’s look at what happened the previous three times we saw this:

• The previous Death Cross occurred on August 24th, 2011 with the Industrials at 11,321. What followed was a sharp decline to 10,404 on October 4th, 2011.

• Before that a Death Cross occurred on July 7th, 2010 with the Industrials at 10,018. Stocks remains essentially flat afterwards, falling only to 9,936 on August 27th, 2010 before starting a new rally.

• The Death Cross previous to that was on January 3rd, 2008 with the Industrials at 13,056. What followed was a massive stock market decline to 6,469 on March 6th, 2009. This Death Cross proved to be an ominous warning of things to come.     

After completing a Rising Bearish Wedge from October 2014, the Industrials saw their worst one-day drop since August 2011 on August 21st, 2015, and have lost over 1,000 points in the week ending August 21st, 2015, the worst one week drop since August 2011. The back to back losses greater than 300 points each day on August 20th and 21st, 2015 were the first time that has happened since November 2008, during the Great Recession. The Industrials dropped 1,000 points from our August 14th, 2015 phi mate turn date in just five days.

Above we see that the S&P 500 declined decisively below point {d} above, below 2,044, confirming the top is in. The S&P 500 topped 1 point below its all-time high on Monday, July 20th, and fell impulsively since then. That high on July 20th is a truncated top for wave {e} and concludes the Rising Bearish Wedge from October 2014, and concluded wave c-up of e-up, and at the highest scale, completed a Bull Market Grand Supercycle degree Wave {III}.

Also, let’s note that the S&P 500 is very close to generating its own Death Cross, as the 50 Day Moving average is diving into the 200 Day Moving average.

The NDX reached the upper Blue boundary line and topped precisely there, and has since fallen hard. This qualifies as a completed rally. The break below 4,400 on August 20th, 2015 is very Bearish, breaking down below the bottom trend-channel. The 200 day moving average failed to support prices on August 21st.       

To summarize, We believe stocks have started the next Great Bear market and are headed substantially lower. The decline will be stairstep, but inside this Bear market, which could last 7 years, there will be several stock market crashes. We believe there is a high probability that the first of many stock market crashes is underway and could occupy several weeks.

********

When did Noah build the ark? Before it rained. We believe it is now time to make sure our arks are built and can float. We can help you at www.technicalindicatorindex.com with our daily and weekend market updates, or conservative portfolio model, and Platinum educational Trading program.  

If you want to track the technical picture for our economy, the stock market and Gold, we can offer you a free 30 day trial subscription to our market forecasting service at www.technicalindicatorindex.com  Simply click on the Free Trial button at the upper right of our website home page. We cover stock markets, economic events, and Gold daily and have Buy / Sell signals we track for stocks, Gold and precious metals. We also offer a Platinum Trading service. Email us at [email protected] for information on that program.

Do not be satisfied hearing what the market did; learn how to predict what the market is going to do. Join us at www.technicalindicatorindex.com as we study the language of the markets. Markets tell where they are headed. Technical Analysis is the science where we learn and apply the language of the markets. We are currently offering a FREE 30 Day Trial Subscription. Simply go to www.technicalindicatorindex.com and click on the Free Trial button at the upper right of the home page. If you would like to follow us as we analyze precious metals, mining stocks, and major stock market indices around the globe, We prepare daily and expanded weekend reports, and also offer mid-day market updates 2 to 3 times a week for our subscribers. We cover a host of indicators and patterns, and present charts for most major markets in our International and U.S. Market reports. 

Dr. McHugh’s book, “The Coming Economic Ice Age, Five Steps to Survive and Prosper,” is available at amazon.com at http://tinyurl.com/lypv47v

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com.  The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only.  Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice.  Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision.  Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment.  Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2015, Main Line Investors, Inc. All Rights Reserved.