Black Monday...
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We are now in the “full on” market crash phase predicted and earlier prepared for on clivemaund.com many weeks in advance – it comes as no surprise to us whatsoever. The purpose of this update is to consider what is likely to happen over the next few days and especially tomorrow, Monday.
When a market tips into a crash on a Friday, what typically happens is that the thousands or even millions of investors who believed the mainstream media and didn’t see it coming spend the weekend “stewing” over their investments – and many of them decide to bail out come Monday. Thus we may see a massive down day tomorrow, possibly the worst of the crash phase, and it would not be that surprising to see the Dow Jones Industrials drop by 800 – 1000 points in one day, perhaps even more. Remember that the Dow Jones Industrials “only” dropped 3% on Friday, which is no big deal by the standards of past crashes. What we need to see before this is over is a headline grabbing day where the market collapse is THE big story, and is not relegated to 2nd place by three fellows tackling a terrorist on a French train, as was the case with BBC World News on Friday – Saturday. It will take something like a 800 – 1000 points down day to achieve this which will probably be the worst crash day, and while we might see one or two more down days immediately afterwards, we would soon be at a high volume selling climax marking exhaustion of the panic phase. Thereafter an erratic rally would probably ensue that would be followed by a more measured decline as the market settles into a bear market downtrend.
A 2-year chart for the Dow Jones Industrials enables us to see to advantage what is going on. The market plunged on Friday by over 530 points to the black dot above the black arrow, and is obviously in full blown panic mode. The magnitude of the preceding bull market and the magnitude of the top area with a huge choppy trading range forming over many months implies that there is heavier downside to go before the crash phase has exhausted itself. A scenario that looks likely is that the market plunges even harder tomorrow, perhaps as mentioned above by as much as 800 – 100 points tomorrow, before the decline slows on very heavy volume and choppy volatile trading near the support level shown, where it seems likely that a selling climax will occur, followed by a sharp snapback rally. We will be looking to ditch our bear ETFs and Puts in this area. Here we should note that if there is a premature attempt at a rally tomorrow, it would be expected to be followed by renewed decline.
Observe how the crash was presaged by a deterioration in the Dow Jones Transports and the Junk Bond market, among other things, for quite some time before it occurred. These are shown at the top and bottom of the chart.
What should now happen is that Asia becomes a “sea of red” tonight as the crash rolls around the world in a self-perpetuating “Mexican wave” for a few days, and losses in Asia feed further losses in first Europe and then Canada and the US and Latin American markets later and then back to Asia.
Related Research
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Courtesy of http://www.clivemaund.com
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Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.
Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.
The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.
Visit Clive at his website: CliveMaund.com
