The original article has been edited here for length (…) and clarity ([ ])
As you can see below, the Dow has now broken below its 50-day moving average, its 100-day moving average and its 150-day moving average:
There is not much floor left. What used to be support beneath the market has become the ceiling. The market has inverted [and, as the chart below so clearly shows,] is now sitting right on its 200-day moving average…[and,] when stocks fall below their 200-day trend, the market is generally considered to have made a change in trend.
As Investopedia conveys: “The 200-day SMA…is commonly used in stock trading to determine the general market trend. As long as a stock’s price remains above the 200 SMA on the daily time frame, the stock is generally considered to be in an overall uptrend. It is possible there is also something of a self-fulfilling prophecy aspect to the 200 SMA; markets react strongly in relation to it partially just because so many traders and analysts attach so much importance to it.”
While I have not based any of my predictions on charts, the above chart reinforces what I’ve said would happen this year because many investors do put emphasis on charts…Breaking through the 200-day average on the way down with no clear support below is a frightening sign to many investors to which they may respond as frightened people often do – in a panic – so we are now perfectly poised to see where this market is going from this point forward.
It has become common now to read that the closest economic comparison to our own time is found in the Great Recession, and this retreat to Great Recession milestones in the U.S. stock market is happening just as the market enters what has typically been the weak half of the year for stocks (May – Oct.). That doesn’t give a lot of hope that things are going to return to any upward trend, especially when stocks keep dropping in the face of generally positive-sounding corporate reports.
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Wall Street hasn’t been this scary since the depths of the global financial panic in 2009 so is this the end of the bull market? Only 18% of money managers surveyed by Bank of America Merrill Lynch believe that stocks have peaked. That being said, the market is historically frothy after a near-record nine-year bull run and, if history teaches us anything, it’s that the key to success in investing is a willingness to go against the grain. Here are the warnings of five well-known strategists about impending market doom that shouldn’t go unheeded.
The decline in the equity markets since the end of January has many asking if the bull market is over – and the short answer is no – there is still room for the market to run. That being said, there are a number of concerns that could keep the markets on edge and, were they to materialize, the result could be a correction similar to those that occurred in 2011-12 (-19.4%) and 2016 (-14.2%).
There is an extreme amount of leverage in the markets and, while this leverage may increase for a while, at some point the insanity will end in one heck of a market correction-crash.
Right now most people seem to have been lulled into a false sense of security, and they truly believe that everything is going to be okay but every time before when the market has looked like this, a crash has always followed, and this time will be no exception.
The U.S. stock market has entered into the last stage, which I call the Super-Charged Tulip Mania. Not only are stock prices inflated well above anything we have ever seen before, but valuations are also reaching heights that are totally unsustainable. This next market crash will not resemble anything similar to what took place during the 2008-2009 U.S. banking and housing market collapse. When the markets cracked in 2008, EVERYTHING went down together. Instead this time around, as the markets tank the precious metals will surge to new highs.
Mark my words here: This third and final bubble (fourth if you count 1987) is now the biggest and most obvious bubble in this boom since 1983. It is as overvalued as at the top of 1929 and the fact that no one wants to hear about it is an ominous sign that it may well be peaking!
Treasury Secretary, ex-Goldman Sachs banker Steven Mnuchin, has threatened Congress with [a] stock crash if Congress doesn’t pass a tax reform Bill. His reason is that the stock market surge since the election was based on the hopes of a big tax cut. This reminds me of 2008.
If the markets crash in 2018 then, like previous crashes, they will prove to be a buying opportunity but, until the masses embrace this bull market, however, the most likely outcome is a correction and not crash.
Many people think that a huge crash is coming within the next 18 months. That being said, there are those who think that we will have a major ‘melt-up’ to 45,000 or 50,000 prior to a historical crash. Personally, I am uncertain which it will be and am waiting to discern what our Central Banks will do! Here’s why.
John Hussman believes the markets are so overvalued now that we can expect a 60% decline from here…[and in his original article he] presents a total of seven charts to make a compelling case.