US stock markets tumbled again yesterday as the recent sell off gathers speed. Traders note that the markets are now very close to their 200-day moving averages and when those are passed there is every possibility of a major crash for the most overvalued equities in the world whose internal support has been hollowed out over the past year.
After the falls on Tuesday the Dow is under 200 points away from the 200-day moving average trigger line, and the Nasdaq is even closer to this tripwire with 90 points to go. Automated selling could turn into a market panic to get out at this point.
The long rally is exhausted. The QE3 money machine is coming to an end. Where are the buyers going to come from now? Besides the small caps have been selling down for ages. This is a hollow shell of a market just waiting for the big guys to join the rout.
It’s also a market exhibiting every sign of the madness of crowd buying, from the all-time high for margin debt to the leveraging of corporate balance sheets to buy back stocks on an epic scale. The most overvalued stock market in the world now faces a global recession and high dollar.
Subscribers to our highly regarded monthly newsletter have been aware of this for some time and will have crash proof portfolios if they have heeded our advice (subscribe here). How well are you positioned for a Black Monday 1987-style of a 2010-vintage Flash Crash?
We are close to the brink now with not a sign of anything on the horizon to alter this inevitable fate.
Have we gotten this sort of prediction right before? Well have a look back at our whacky prediction of a crash back in October 2008 (click here). How was that for timing and accuracy about the level of the fall?
Where to this time round? Dow at 6,000 anybody?