Crash Monday Charts

Here are a couple of charts of SPY vs EWZ (Brazil) and Gold or bonds.

It’s pretty easy to see how a ‘risk off’ trade works… The first one is a 10 day hourly, the second is a 6 month daily. Volume spikes. When volume starts to trail off and the Red DMI- line is crossing the Blue DMI+ (after crossing the black ADX) then you can think about a ‘counter trend rally trade’ (off the 10 day chart).

SPY 8 Aug 2011 10d hr

SPY 8 Aug 2011 10d hr

SPY 8 Aug 2011

SPY 8 Aug 2011 with Volume

Live versions:

LIVE SPY 10 day hourly

LIVE SPY 10 day hourly

LIVE SPY 6 Month Daily with volume

LIVE SPY 6 Month Daily with volume

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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74 Responses to Crash Monday Charts

  1. George says:

    This selloff is obviously not related to the S&P downgrade. Cash is still flowing into treasuries. This is a pretty classic economic fear selloff. The market is discounting another dip into recession, in my opinion.

  2. I know absolutely nothing about economics, . . .

    but I suspect the stock market is ultimately related to reality (what is) and the US government has foolishly believed its own propaganda (fairy tales) for the past four decades.

    Oliver K. Manuel

  3. George says:

    Look at the reforms Bush proposed for Social Security in 2004 and spoke about in the 2005 State of the Union Address. The administration also proposed legislation several times to regulate the GSEs. Look at the Congressional testimony surrounding those items from Democrats.

    You are 100% correct that they were breathing their own exhaust. And as far as I am concerned, the Democrats get to 100% own this and they can’t foist the blame off on the Tea Party. It is like one blogger noted recently, it is like Wile E. Coyote runs off a cliff and just hangs there in mid air. Then Roadrunner points out to him that he is hanging in mid air, and THEN he falls. The Democrats would blame Roadrunner for the coyote’s fall where in this case the Tea Party is playing the role of Roadrunner.

  4. sandy mcclintock says:

    Am I right in thinking that a really big debt problem relates to the states Public Service Pension Funds. Without federal bail-outs, retired public service are going to be in trouble? The other part of the budget that must surely be a problem is military spending?

  5. George says:

    There are all sorts of state programs that are being funded with federal dollars that are in trouble. We have simply made so many promises to so many people of so much money that the system could not tolerate a downturn. Then in perfect Cloward-Piven manner, the government went way out on a limb with a huge “stimulus” program that it wasted by intentionally spending it on stuff that had nothing to do with stimulating the economy. So now the problem is compounded. We are much deeper in debt, have much larger deficits and now the economy is taking again and we now have no cushion to break this fall. We have spent our wad. We have nothing left to save us from this downturn.

    In sort: Obama and his crop of idiots have ensured the destruction of our economy. The problem is they miscalculated and the demise is going to happen pretty close to an important election where they stand to get tossed out of office on their ear. I think they had anticipated all of this would have happened six months ago.

  6. Dave says:

    Here it is in real-time glory:

    http://www.usdebtclock.org/

    So predictable that POTUS would blame S&P instead of acknowledging the real issue, then again I don’t think it fits in with his sense of reality. If he could just tax the “evil-rich” 95% all of his problems would be solved and people would treat him like the god-king he thinks he is.

  7. Scarlet Pumpernickel says:

    There is going to be sucker rallies, but now the bubble is popped, I think 3000-4000 is the next stop.

    http://online.wsj.com/video/dow-4000-still-in-the-cards/F50D3822-069F-404D-BBE2-2BC3FCD9F976.html

    The the DOW should have gone there last time to retrace back fully, but then Obama propped it up with a few trillion, now it’s even worse since we have more borrowings which need to be unwound.

    http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=djia&insttype=&freq=2&show=&time=20 You can see that the time the borrowings started in the 1990s and how it’s been running since.

    This drop is nothing, you can see the short term double top on the chart now. And it hasn’t even started falling yet. Most stocks are still close to 52 week highs!!!

  8. George says:

    So is there anything that shorts student loan SLABS? That has been said by some to be the next bubble to burst. Basically what has happened is academia is a huge Democrat political supporter. The #1 campaign donor for the Obama campaign was the employees of UC, for example.

    In order to justify the ridiculous salary increases at these institutions, we have ridiculous tuition increases. If financing student loans were in the private sector, at some point no private lender would allow students to get so far out on a limb. Government to the rescue! So government takes over the student loan industry. Basically does to students what Fannie Mae and Freddie Mac did to mortgages. They guarantee loans that people can afford to pay back. At some point interest rates rise and they can’t afford to repay the loans and the industry collapses.

    Basically a student loan is a college mortgage. Government is in the process of screwing that market up, too. So there are “Asset Backed Securities” (ABS) that are backed by student loans (SLABS). If you can find a way to short these when interest rates begin to rise, you might make a tidy sum.

  9. George says:

    “They guarantee loans that people can afford to pay back.”

    Meant “can’t pay back”

  10. George says:

    Oh, one thing you might ask. University of California employees donated $1,642,735 to the Obama campaign. That was half again more than the donations from the employees at Goldman Sachs. Where does that money from UC come from? A large part of it comes from tax money paid by California taxpayers. So here we have an example of our tax money again being sucked into political campaigns. So, gee, how can UC blow past Goldman Sachs in political contributions? Well, they can charge greatly inflated tuitions because government finances it on easy terms for the rest of your life. Interesting how that circular flow of back scratching goes, isn’t it?

  11. Scarlet Pumpernickel says:

    http://www.youtube.com/watch?v=VpZtX32sKVE Massive Scam College system in USA.

  12. Scarlet Pumpernickel says:

    DOW 3000-4000 is the TARGET?

  13. boballab says:

    @Sandy

    The problems for the states with huge pension liabilities is just starting. Ok, here is one problem with some pension plans: They are into the US Bond Market.

    Why is it a problem? A lot of pensions and funds can only buy AAA rated bonds as rated by the three credit agencies by law. Now think about that. they can only buy AAA rated bonds and US Bonds are no longer AAA rated. While not a huge amount of bonds compared to China or event he Fed but enough to start a ripple. If they have to get out of the market, someone else has to pick up the slack and the way China is talking it ain’t going to be them. The Fed is making noises about a QEIII and it will probably be them. That has it’s own set of potential problems.

    Now for the Pensions that were forced out they have to put that money somewhere, but where?

    Here is another complicating factor is that the US Bond Market is completely different from any other countries. In a lot of ways the rest of the world has to keep the US Bond Market afloat. You see it all goes back to the 1940’s and the Bretton Woods system and the Nixon Shock.

    To keep it brief, after WWII basically the only economy that was still standing was the US. So to get the world back on it’s feet the major countries of the world got together and hammered out an agreement.. This agreement basically reset most of the major currencies in the world and pegged them tot he US dollar. At that time the US had a Hard Currency ie that it was backed up by real gold (also known as the gold standard). That also meant that the Treasury couldn’t fire up the printing press and go to town whenever it struck the whim and in turn make the USD worthless.

    The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world’s major industrial states in the mid 20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.

    Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.

    Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.

    The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments.

    Now this arrangement had a problem: gold

    Gold was still being traded freely but the worlds reserve currency (USD) was pegged to it. Thus as the world prospered the US had to run deficits or the system would collapse. However if the US did run those type of deficits eventually the USD would lose value and the system would collapse:
    In 1960 Robert Triffin, Belgian American economist, noticed that holding dollars was more valuable than gold because constant U.S. balance of payments deficits helped to keep the system liquid and fuel economic growth. What would later come to be known as Triffin’s Dilemma was predicted when Triffin noted that if the U.S. failed to keep running deficits the system would lose its liquidity, not be able to keep up with the world’s economic growth, and, thus, bring the system to a halt. But incurring such payment deficits also meant that, over time, the deficits would erode confidence in the dollar as the reserve currency created instability.[11]
    http://en.wikipedia.org/wiki/Bretton_Woods_system

    The US tried a few things that failed and eventually Nixon ordered that USD’s couldn’t be directly converted for Gold. This is whats known as the Nixon Shock.
    http://en.wikipedia.org/wiki/Nixon_Shock

    The upshot was that the Nixon Shock officially ended the Bretton Woods system, however by that time it was too late. The USD was not only the reserve currency but the center for the world economic system that had grown for the last 25 years and the worlds “banker” was the US government.

    That is why things with the US Bond Market are not doing what would normally happen when a country gest downgraded ie people keep bonds. So the talking heads yapping about how Wall Street and the world is “ignoring” the downgraded and that didn’t cause the drop in the Dow, because they are still buying US bonds is a load of BS. Seriously who are the going to buy? Europe? China who has a AA rating? Japan and that economic mess? Some middle eastern country?

    They can not afford to have it go down and take all of them with it. This is literally a case of the old joke about how much you owe the bank and who owns whom:

    If you owe the bank 10,000 the bank owns you. If you owe the bank 10 Bn you own the bank because in reality the bank can’t afford to foreclose on you.

  14. George says:

    There is a fairly simple solution to the public pension problem. Simply have public employees kick in half their pension contribution. That pretty much solves the problem for most governments. Same with health care, have the employees kick in half, just like many public sector workers, and the problem pretty much goes away.

  15. George says:

    “DOW 3000-4000 is the TARGET?”

    I don’t think it was that low. I saw a pretty good graph of the whole head and shoulders formation that worked out just before the crash, it looked to me like there was substantial support around 7000 or so … but yeah, it has a ways to go.

    Speaking of college education. My dad had a 10th grade education. He was a mechanic on the highest performance supersonic fighters we had at the time. He knew mechanics and electronics. He worked on the B-66, the F-89, and the F-101

    He was a damned good mechanic and worked on planes, boats, and automotive engines to include agricultural and industrial equipment after he got out of the military. He did ok. He only went back to get his High School diploma because he was an ambulance crew member of a volunteer fire department and he was going for his EMT certification and it was required. He didn’t have a college education, but he was by no means stupid.

  16. George says:

    Oh, and he eventually got his certification for helicopter trauma medic, again as a volunteer. He only gave that up because he said he got tired of scraping his friends up off the road. He lived in a rural area and most of the calls he responded to involved people he knew. I’m pretty proud of my Pop. He was not a dim bulb but he wasn’t college educated either aside from the courses he needed to take for his certifications.

  17. Scarlet Pumpernickel says:

    @George, well if you want to go back to real support before the big rises came, its 3000-4000.

    USA has this crazy norm of stocks trading on too high p:e it cannot last forever and it’s built on debt.

  18. H.R. says:

    @George
    I’ve seen that you have learned the lesson that education does not equal intelligence. Intelligent people will always be educated, be it formally or informally, but educated people can never acquire intelligence if they don’t have intelligence from the get-go.

    Thanks for the stories about your dad. I have similar stories to share. Maybe E.M. will throw out an “educated idiots” thread where we can kick this around, eh?

    I wonder what the “book value” of the companies in market is right now? You know; where you add up all the assets such as cash, equipment, and property. That would be interesting to contrast with the market values of those companies.

  19. Scarlet Pumpernickel says:

    The most stupid people I know are accountants and people in finance. They laugh off the things you say, but when they come true they seem to have a forgetful memory. I wonder what they actually teach these people at university, since they seem to have not much actual understanding of stocks and markets.

    With markets there are basically two rules

    (a) Never believe a single thing the government says
    (b) Never believe what the media says

    In fact, doing opposite is probably the best option most of the time :P

  20. Corruption of solar science and smear tactics are at the base of the global climate scam.

    The decision was apparently made during Kissinger’s secret visit to China to in 1971 to use “Anthropologic Global Climate Change” as the common enemy to:

    a.) Unite Nations;
    b.) End the Cold War, the Space Race; and
    c.) The threat of Mutual Nuclear Annihilation.

    The Bilderberg Model of a “homogeneous Sun in hydrostatic equilibrium” – adopted at the Bilderberg in April of 1967 – became official government propaganda after the 1971 meeting.

    References:

    1. “The Bilderberg Sun, Climategate & Economic Crisis”

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.pdf or

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc

    2. “The Bilderberg Model of the Photosphere and Low Chromosphere”
    http://adsabs.harvard.edu/full/1968SoPh….3….5G

    3. “Neutron repulsion” “Neutron repulsion”, The APEIRON Journal, preprint, in press, 19 pages (2011) :
    http://arxiv.org/pdf/1102.1499v1

    With kind regards,
    Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

  21. Richard Ilfeld says:

    Just for grins – what would it take for the country to fix things, numerically?

    Essentially , public debt = GDP.
    Assume growth = inflation at start.

    1. Entitlements must be fully funded by payroll taxes collected — change benefits, age, means test, whatever. No net drain.
    2. Balanced current account budget, including interest on debt.
    Spend only what you take in. Want to spend more = more taxes.
    3. 5% of GDP current charge for debt retirement — not as bad as it sounds if the economy is growing and the debt is not – or if we choose to extract some resources such as energy and sell them internationally to reverse debt flows.

    Repeat and rinse for about 20 years.

    Arguably, the difference between families, who do this by the millions, and governments, who seldom do, is a head of household to enforce the rules.

    Since, from an historical perspective , “benign authoritarianism” is an oxymoron (and yes, I think Thomas Firedman is a fool and China is headed for thier own crash) we need a ‘culture” to enforce this. We had one from 1813 to 1840, and, arguably, through the Coolidge administration.

  22. George says:

    Sweden handled things in an interesting way. They cut their taxes and cut their welfare spending. Their economy perked right up and their current deficit is about 6% of GDP after running a surplus in 2008. They eliminated their “wealth tax” on people earning over $190,000/year, Obama wants to do exactly the opposite.

    Maybe Obama should have a look at what Sweden has done with their social welfare model (scaled it way back) and model changes after theirs. Here is an old article from last year but very illustrative:

    http://www.ibtimes.com/articles/76470/20101027/sweden-gdp-economy-banks-riksbank-social-welfare.htm

  23. PhilJourdan says:

    For a poor slob like me, being proven correct when so many dismiss you as just a partisan hack is refreshing, A gotcha moment. It is a shame it took so long for so many to realize just how stupid Obama is, but at least I am vindicated.

    Not that Obama has wrecked the credit rating and the economy on his own. But as these are “his” policies, only a fool can still blame bush for Obama’s $4 trillion in debt in just 2.5 years.

  24. George says:

    If you look at the size of the stimulus plan, it was about the same size as all tax revenues collected in a year by the government. Instead of spending it on a bunch of signs, shrimp on treadmills, and expanding government, Obama could have given the entire country a tax holiday for a year.

    Now imagine no individual, business, or corporation pays taxes for a year. No capital gains tax, no income tax on wages, dividends, nothing. Now imagine how that would have jumpstarted our economy. I believe that doing such a thing would have so boosted the economy that the following couple of years would have seen that money paid back.

  25. Regretfully it appears that economic and social collapse of the West may have been planned since 1971.

    Selfishness, self-centeredness – that is the root of the problem.

  26. George says:

    Yeah, Cloward and Piven would be proud.

  27. Judy F. says:

    Personally, I think that a committee of 3 women who have kept their family budgets under control, should be appointed to each department in the government and go over the budget line by line. I can hear it now:” I’m sorry, but you can’t afford that trip,Mr. President” ; “You want to buy back people’s old cars for how much???” ; “There will be no freebies just because you are in Congress, you will pay just like everybody else” ; ” Shrimp on a treadmill, are you nuts???” etc….

    Or, put the government on a cash only allowance. There are several local businesses in the area who got tired of bad checks and deadbeats, so now they operate only with cash, or have certain clients on a cash only basis. I can see the guy in charge of roads: ” Let’s see, I have 5 million dollars, so let’s take 1 bridge, 3 miles of interstate, a dump truck and wages for 5 guys. Now, how much do I have left…” ( Comment from the budget ladies from above: ” You know that one of those 5 guys just leans on a shovel all day, so we will only let you have 4 guys.”)

    Works for me.

  28. boballab says:

    @Judy F

    Can you imagine what those ladies would do to Michele Obama’s Food and Clothing budget?

    “Organic? ORganic? Do I look like I’m made out of money? You will eat the canned veggies from Wal-mart and appreciate those Hot Dogs.”

  29. E.M.Smith says:

    So I get off work (were reading blogs is discouraged…) and find 34 responses… Well, you folks have been busy!

    I look at the charts… Straight down,then rocket up. What?

    I have no idea what is going on…

    IMHO, it’s all computer driven trading based on formulas. It isn’t people make those decisions…

    At any rate, today LOOKS like a ‘rebound day’ but with just enough ‘weirdness’ to make me think it’s a “Quant Thing” and I’m not buying…

    I could be a fool for not embracing the “Mother of all buying opportunities” but something just doesn’t smell right…

    At any rate, it’s now bed time so further comments on all of your interesting comments will need to wait…

    For now, it just looks strange to me, so I’m “thinking in cash”…

  30. Scarlet Pumpernickel says:

    http://www.youtube.com/watch?v=xcjJIotD_sk&feature=player_embedded#at=11 X7 flare should crash the market now :)

    1993 time pivotal DJIA 3300 is my target

  31. Dave says:

    @Boballab

    Thanks for your explanation of Bretton Woods. I’ve been exposed to many different concepts and society impacting events by this blog. I spend most of my day reading about security patches and all the other systems I have to manage, so I rarely have time to delve into history as often as I would like. This blog gives me more paths that I will ever be able to follow. The threads on the left and fascism were some of the best.

    @George

    My Dad also faced adversity but was fortunate enough to attend a major university when it was still worth something. He broke his back in 1949 at age 18 while working at a glass factory. They told him he would never walk again and be lucky to make it to 40. Within a year he was walking with the aid of crutches and attending college where he eventually graduated with a EE degree. He went on to work at Boeing for 43 years and during that time acquired a MBA which Boeing paid for (imagine that!) He never sued anyone or got rich because of his mishap. He dealt with it and moved on. An inspiration to me every day, but he appears to be part of a diminishing breed of US Citizen although I’m happy to say he turned 80 this year.

    I think that is our biggest problem. When our schools are teaching distrust, dislike, and ambivalence for the country that has showered them with such opportunities, well we see what the end result is. We have not only devalued our currency but we have devalued the quality of our citizenry. Stand on the street of any major US city and see if you sense by the people walking by if most of them are adding benefit to or creating a burden for this great nation.

  32. Scarlet Pumpernickel says:

  33. Scarlet Pumpernickel says:

    This is like 1933, drop, sucker rally, drop, sucker rally, drop

    3200 is the target for the DOW most likely

    http://www.reuters.com/article/2011/08/10/us-markets-stocks-idUSTRE7771O020110810

    Looks like we are going down tonight again

  34. boballab says:

    At 10:13 the Dow is down 384 and had been below 400. Will be interesting to see what happens be the afternoon.

  35. Pascvaks says:

    When you take the external enemy from the equation, people only have themselves to blame and pick a fight with. Politics and economics are all about human psychology. Why do you think idiot Chancelors and Dictators start wars with their neighbors? As the market spirls to the bottom of the ocean, be on the lookout for people with small minds in high places to get us into a bunch of stupid little wars. What? … Really? … Dagh gone it, it’s later than I thought!

  36. George says:

    Looks like we are going to need a Wednesday crash chart thread.

  37. Today’s erratic economy is like an addict in early stages of recovery.

  38. boballab says:

    WAG time:

    At 12:25 Pm EST the Dow is now down 356 after swimming around the 400pt mark. So my WAG for the close is: down 448.

    Also on the Gold front it topped 1800 today:

    Gold at record $1,800 as French fears sink stocks

    http://www.reuters.com/article/2011/08/10/us-markets-precious-idUSTRE7781Q420110810

  39. George says:

    Now this sort of thing has always baffled me. According to several news stories I read, various business pundits are trying to tell people that the reason for today’s sell off of US equities is threats of downgrades for European sovereign debt. Now think about that for a minute. That makes ABSOLUTELY no sense.

    Why would I sell US equity investments if European bond markets were going to fall? In fact, it would seem just the opposite. If I live in Europe and my nation’s debt is downgraded and my bond investments are likely to fall in value, why would I want to sell my US equities?

    I believe this is yet another case of some pundit, when he appears on some program or another to explain why the US market is down, simply looks around the world for some piece of bad news they can hang the blame on. Basically they have to justify their position as some sort of oracle so they come up with something to cover the fact that they have no freaking clue why the market went down.

    The markets sold off early in the session today and have stayed rather steady since. Ya think folks who bought before yesterday’s late runup might have just been taking some profit? Most of this movement is due to computerized trading, in my opinion, and to tag the cause as some rumor of downgrade in foreign sovereign debt is simply grasping at straws, in my opinion.

  40. Jason Calley says:

    @ Richard Ilfeld

    “5% of GDP current charge for debt retirement — not as bad as it sounds if the economy is growing and the debt is not – or if we choose to extract some resources such as energy and sell them internationally to reverse debt flows.”

    While I like your other two suggestions, I would respectfully disagree on the 5% thing. I think you would be right IFF our national debts had been created in a fair and honest fashion — but I do not think that is correct. Many, if not most, of the Federal programs spending all that borrowed money are not (in my opinion) legally within the authorization of the Constitution. In addition, it has been over 75 years (when citizens were no longer permitted to redeem dollars for gold and silver) since the US has conformed to Constitutional requirements for legal tender. Why should we pay bad loans after being forced to use an illegal monetary system?

    Imagine someone dishonestly claimed to have power of attorney to do business on your behalf, and they took out multiple bank loans in your name. YOU are not responsible, and while the bank may not want to be out the money they loaned, they failed in their duty to do proper diligence on the credentials of the person to whom they gave the loan. How would YOU be responsible for someone else’s fraud?

    We should default on the debt, or at least negotiate a partial payment. We The People should not be responsible for bad loans taken without Constitutional authority. This is part of the legal doctrine of odious debt; the people of a nation are not responsible for loans taken in their name unless the loans were actually used for the benefit of the citizens. The people of Cambodia were not responsible for loans taken by Pol Pot.

    Nations have defaulted before. West Germany defaulted in (I think) 1960 or so, but they came out stronger.

  41. Jason Calley says:

    @ Judy F. “Personally, I think that a committee of 3 women who have kept their family budgets under control, should be appointed to each department in the government and go over the budget line by line. ”

    That would be a huge improvement!

    I am too lazy to look up the details right now, but I am reminded of a story in Herodotus’s History. Somewhen about 2,500 years ago, one of the city states in western Greece had been ruled by a series of very bad politician and oligarchs and finally was completely destitute. The people appealed to one of the neighboring cities (one which was prosperous and peaceful) to send someone to rule over them and restore their city. Instead, the neighbor sent a team of researchers who walked all over and stopped at every farm in the area, making notes of which farms were clean, productive and well ran. After checking all the farms, the researchers gave to the poor city a list of all the good farmers and said “Here is a list of men from whom you can choose you new leaders. Anyone who can run a farm and make it clean, productive and smoothly operating , is exactly the type of person you need to run your government.”

  42. George says:

    Many, if not most, of the Federal programs spending all that borrowed money are not (in my opinion) legally within the authorization of the Constitution.

    I will agree with that. 99 weeks of federal unemployment benefits, for example. Where in the Constitution does the federal government have the authority to pay people for not working? States? Sure, but not the federal government. What this does is enables a state (e.g. California) to make poor choices that result in business flight and increased unemployment while, in effect, taxing the other 49 states to prevent those unemployed workers from rioting against their state’s policies. If a state wants to mollify their unemployed, fine, but do it by taxing your own citizens. Let your own citizens see the cost or share the benefit of the state government’s decisions.

  43. boballab says:

    Time to check the WAG I made earlier.

    WAG of -448 and when it was 3:45pm EST the Dow was hanging around there, but then someone pulled the rug out and by 3:55 it was down over 550. It ended -520.29. I expected to see the market do what it did: An afternoon rally followed by a drop. I just didn’t expect the drop to start around 2:30pm, I thought it would be between 3 and 3:30pm. I also didn’t expect the floor to drop almost 100 pts in 5 mins at the end either.

  44. Scarlet Pumpernickel says:

    Down 519 again.

    Italy hasn’t even gone under yet. France jitters. Wait till Italy goes under.

    By the way, lots of bubbles in USA for eg the college scam (it goes up no matter what the whole economy is doing!)

  45. Interesting Connections says:

    This comment at Belmont Club is interesting:

    24. WWS

    Before today, I was confident that Gold would hit $2000 by the end of the year. Now, I think it may be there by the end of the month. And as to what this means in the big picture – the final collapse of the post WW2 international financial system is not some theoretical event that may happen some day. It is happening NOW.

    I hope it is not that bad.

  46. boballab says:

    Gold would have to get a lot higher and the USD go the route of the Zimbabwe Dollar before that happens.

    To put the price of Gold into perspective, while $1,800 is the record absolute price it isn’t the record price once you correct for inflation. Back around 1980/81 Gold hit a price around $1,200 and if you correct for inflation to today’s dollars that would be around $2,150 to $2,200 (I don’t remember the exact number off hand) per ounce.

  47. P.G. Sharrow says:

    We do live in interesting times. :-) pg

  48. H.R. says:

    OK boballab. Let’s see your call for today.

    No cookie for yesterday. You were too far off ;o)

    I mentioned before that my folks (just mom now) have a portfolio of about 20 dividend-paying stocks that were purchased in the 1920’s before the crash. (That is buy and hold and hold and hold and hold…) So far, I don’t see any chance of those companies going under so their price may drop back to 1929 levels, but I believe they’ll still continue to pay the nice dividends.

    I’m screwed in my 401K basket of choices. But then again, so are most other 401Kers. If our portfolios remain down during the 2012 elections (they will), we’ll all be remembering the “Obama Crash” at the voting booth.

  49. The key question is this: Do world governments now manipulate economics like they they were caught doing in climate “science”? The latter is being discussed as the UN’s IPCC issues new reports and struggles to restore public confidence. See:

    http://judithcurry.com/2011/08/11/representative-concentration-pathways/

    Why is government science used to deceive? The answer may be revealed later today in a five-video summary of events I personally witnessed over the past 50 years, 1961-2011.

    Prior to and during World War II, psychology was used by governments to organize citizens against a common enemy – Jews, Natzis, etc.

    The victor was decided by the branch of science that produced an “event” that literally vaporized Hiroshima on August 6, 1945 – scaring politicians worldwide.

    [By coincidence, the scientist that became my research mentor, a faculty member at the Imperial University of Tokyo in 1945, went to Hiroshima to find out the nature of the frightening nuclear “event.”]

    After WWII, psychology continued as an important tool to influence “value systems, belief systems, emotions, motives, reasoning, or behavior” [http://en.wikipedia.org/wiki/Psychological_operations].

    Our government openly formed the Psychological Strategy Board on April 4, 1951. Henry Kissinger worked there before becoming Secretary of State and National Security Advisor to Richard Nixon in the 1970s.

    Nationalism re-emerged as the Cold War, dividing the globe between communist East and capitalist West. Nuclear weapons became more destructive and difficult to transport to the other side of the globe.

    Did Kennedy announce the “Apollo” program on 20 April 1961 to show that the USA could transport a heavy, bulky H-bomb around the globe to Moscow?

    I don’t know. Ten years later Kissinger convinced Chinese leaders to join a worldwide effort to avoid the threat of mutual nuclear annihilation by ending the “space race” and uniting nations against a new common enemy – “anthropologic global climate change.”

    On January 5, 1972, President Nixon announced,

    “I have decided today that the United States should proceed at once with the development of an entirely new type of space transportation system . . ,” [Claud Lafleur, “No More Dreams, Mr. President”].
    http://claudelafleur.qc.ca/Nomoredreams.html

  50. boballab says:

    @H.R.

    today will be like Tuesday,, so I go with a WAG of finishing up at 325 on the Dow,

    However if you got stock that goes back to the 1920’s you might want to research them. You see, depending on what company it is and how much stock, those stocks could have split multiple times and would generate way more profit then you would ever make in dividends.

    Modern examples are Microsoft and Walmart. IF you had 10,000 shares of them from the day they went public (and then held them until today), after all the splits the Microsoft stock would get you close to 1 mil gross and the Walmart in the hundreds of thousands.

    There is a bunch of little old ladies running around Bentonville Arkansas that made fortunes that way. They worked for Sam Walton in his original store, bought a bunch of stock when it went public, bought more as part of the bene’s and when they retired sold it for hundreds of thousands of dollars.

  51. H.R. says:

    @boballab

    One day down, another up, another down, another up; Friday… takes a break?

    Depends on your viewpoint and timeframe. If you consider stocks as part ownership of a company, then you are participating in the profits of the company via your part ownership. Investing in a company and investing in the market are definitely two different things. One is share profits for as long as the company and the other is gambling that you can buy low and sell high every time you buy into a stock and sell out of one. Sometimes it works and sometimes it doesn’t. Everyone knows how to make a small fortune on Wall Street.

    Calculate the return on an investment that costs $0 and returns $1,000/year; (carry the 3… divide by the cosine of… plus 13 for wndage… minus the unladen velocity of a swallow…) well, it’s not a bad return.

    My personal concern in the market is for growth so my 401k is a whole ‘nother story. (When those old stocks are passed along to me and my siblings, I’ll make a sell/hold decision then. Times change, eh?)

  52. Jason Calley says:

    @ Oliver K. Manuel “Did Kennedy announce the “Apollo” program on 20 April 1961 to show that the USA could transport a heavy, bulky H-bomb around the globe to Moscow?”

    I doubt that we have any certain way of knowing; perhaps that was indeed his motive, but consider this: The B52, Navaho, and Atlas development had likely already convinced the USSR that the US could drop a bomb on them. perhaps Kennedy wanted the Apollo program for some people closer to home.

    Eisenhower had already warned of the “military-industrial” complex (though in truth he had initially named it the “congressional-military-industrial” complex.) Kennedy was under enormous pressure to open up a lucrative war with Cuba. The only way to prevent one more war — one which might escalate into full nuclear usage — was to offer a giant plum to the same industries and investors who normally make huge profits off of modern warfare. Hence the Apollo Program. All the high tech electronic, materials manufacture, rocket builders and aeronautical engineers get their money and the US gets a big publicity boost at the same time.

    I think his plan almost worked, but unfortunately the payoff left out a few key groups, primarily the ones who profit from controlling the finances and resources of subjugated countries and stooge governments. Which brings us to Dallas…

    Just my opinion, of course.

    By the way, speaking of the Navaho — http://en.wikipedia.org/wiki/SM-64_Navahohttp://www.schifferbooks.com/newschiffer/book_template.php?isbn=0764300482 — Imagine a 1950’s technology, supersonic, cruise missile with a nuclear warhead and a range of over 5,000 miles. Liquid fueled first stage booster rocket with the missile itself being essentially an unmanned supersonic ramjet. Truly stunning and audacious. The only reason why I ever heard of it is that some years back I ran across one of the boosters standing in front of a VFW post and had a heck of a time finding out what it was. I have heard (though I cannot confirm) that at the time of its cancellation, the Navaho was the most expensive weapon system ever developed, more expensive (in constant dollars) than the Manhattan project. Someone correct me if they have better info on that.

  53. George says:

    “Did Kennedy announce the “Apollo” program on 20 April 1961 to show that the USA could transport a heavy, bulky H-bomb around the globe to Moscow?”

    No, that was the purpose of the satellite program. If a nation can place a satellite in a controlled orbit, then they can hit a target on any place on earth (with varying degrees of accuracy) using a ballistic missile.

    As the path is ballistic (like a bullet), all you need to do to hit a specific point on the ground is have the missile arrive at a specific point in space. Hit that target in space, and you hit that target on the ground. If you can deliver a payload to orbit, you can hit any point in space you desire and so then hit any point on Earth that you desire.

    That is why it is such a big deal that Iran is placing satellites in orbit. Iran would be capable of delivering a warhead to any place on Earth of at least the same weight as the satellite. So once Iran gets a regular reliable satellite launch technology, they get an regular reliable ICBM capability and can hit any target on the planet.

  54. George says:

    And if you combine Iran’s satellite program with their nuclear weapons program, you begin to see the threat. But there is a bigger threat. We relied on MAD (mutual assured destruction) as a deterrent with the Soviet Union. If you have a culture of martyrs, what deterrent do you use? In that case it can be argued that there is no deterrent because even if you kill them all, they still win in their minds.

    So now if you place that thought in the context of Israel, if they develop an atomic weapon ( they probably already have and have tested it in North Korea) and if they develop a means to deliver it, are they then under a “moral” obligation according to their theology to use it? If they have the means to destroy Israel, to they feel obligated to do it even if it means their own annihilation? From the perspective of a culture that holds martyrdom in such high regard, that is a major question and a pretty scary thought.

  55. boballab says:

    @HR

    Friday will all depend on what/if news is released/breaks. Any bad news will the market is open and it will drop like a rock, good news it will go up.

    The problem a lot of people make is thinking that just because a lot of trades are automated the “human factor” is out of it. Remember who programmed the computers and what they are reacting to: Human interaction with the market.

    The last 4 days are a perfect example: They get some bad news, the market Tanked. Over night they realize they went overboard and rallied the next day. Day after that one “rumor” of bad news and it tanked again. Another over night and another realization of over reaction.

    Outside of that, gut feeling is the market is going to be flying a holding pattern for the next year, looking for something to rally on for one of the EU countries to go tits up.

  56. H.R. says:

    @boballab

    I think you have it about right. But as discussed upthread, where will the “new normal” wind up; 3,000? 10.500? 7,000? $14,000? Let’s all quit and go home?

    Good point you make: that ‘panic’ is programmed into computer trading. :o)

  57. Jason Calley@6:53 pm
    George@7:42 pm

    I do not know why events unfolded as they did in 1971-72 either, but my best guess of the strange events that I witnessed are summarized in “The Bilderberg Sun, Climategate & Economic Crisis”

    Click to access 20110722_Climategate_Roots.pdf

    I submitted an earlier version of the manuscript to Nature on 28 Aug. Today the editor, Dr. Phillip Campbell, informed me that he decided against its publication.

    That would have been, in my opinion, the quickest way to end the story of anthropologic global warming and start restoring confidence in government science..

    Oliver

  58. boballab says:

    @ H. R.

    Again just a gut feeling the holding pattern will be around 10,000 to 10,500 if the stagflation continues. That is the key thing: If thte Stagflation continues.

    The Bernack has officially throw in the towel by saying interest rates are going to stay basically where they are for the next two years. So the Fed has basically taken the position that the economy as you see it today is what they think it will be two years from now.

    Then you got Congress kicking the can down the road on the debt, while borrowing another 2+ trillion, while chest thumping about how much “they cut”.

    On top of that you got 2 wars and a “kinetic military action” (with possibly a second since the “One” has called for Assad to step down just like he did with Qaddafi) that still needs to be paid for at the same time the “Super Duper Congressional Committee” will meet and put on some more Kabuki theater.

    Looking at the make up of it, the most those who want spending cuts are likely to get is a dead lock and congress doing a vigorous dance around the $500 Bn in automatic cuts to defense. Worst case, there is two GOP members that are wobbly as they come: Fred “Incandescent Light Bulb Ban” Upton and Senator John “I’m retiring anyway, you can’t hurt me Tea Party” Kyle. So by you could have the House just before Christmas juggling voting yea on corporate/income tax hikes or trying the dance routine on the defense cuts.

  59. Scarlet Pumpernickel says:

    It’s really easy now, you buy on the down day, sell on the up day, each down day is greater then the updays (downtrend), have to be careful not to get trapped with two or more down days as you’ll never get your money back then…

  60. I just finished this summary of my career:

    A. Scientific Genesis Videos:

    1. Science vs. Propaganda
(1961)

    2. Origin of the Solar System (1975)


    3. The Iron Sun (1983)


    4. Neutron Repulsion
(2001)

    5. Global Warming Scam (2011)

    B. Text Summary in Dropbox:

    The Bilderberg Sun, Climategate and Economic Crisis

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc

    Click to access 20110722_Climategate_Roots.pdf

    Today all is well,
    Oliver K. Manuel

  61. E.M.Smith says:

    @George:

    The selloff was “in the cards” as soon as the rise rolled flat. Any “story” would do when the time came.

    “Why? Don’t ask why. Down that path lies insanity and ruin. -EMSmith”

    Exploring why:…

    At some point all the folks who are going to play have traded all their cash for “stock certificates”. At that point, the “momentum” trails off and things “go flat”. That’s the signal for the “Big Boys” to start dumping their holdings. Eventually when the’ve sold it all (and all the Retail Brokers have called all their clients to say “Look how much it’s gone up! Don’t want to miss it!!”… Comes the day when not much volume is left to happen. A nice quite “go nowhere nothing happens on light volume” day… That’s the signal for the “Big Boys” to start shorting aggressively. It’s called a “Bear Raid”. They can’t make you buy, but they can scare you into selling lower… when they ‘cover their shorts’…

    So you see the Big Down Day, usually followed by a day or so of ‘relaxation’ then another wallop… Just like starting a stampede. On “bang” to get ’em nervous, another two or three to start them running…

    Can’t do it too often, though, or they stop playing… Every few years is about it.

    @Oliver K. Manuel:

    Economics at it’s core is very simple: Who, makes What, for Whom.

    You can layer a lot of added stuff around it, but that’s the nub of it. Are all the Millennials going to work to make vacation resorts and nursing homes for the elderly? Or are they going to say “Austerity and pension reform” and head to the beach themselves? Who. What. Whom.

    Stock markets are more complex, but once you realize it’s mostly a game of “Liars Poker” it gets easier. Accept that the price is set by Goldman Sachs and the other Floor Broker market makers and with the purpose of generating volume (from which they get commissions …in either direction…) and that they are in an ideal place to “game” the clients. It makes even more sense.

    Real Value will rise, on average, about 3% / year. That’s IT. Draw a straight line that rises left to right by 3% against the SPY. Everything ELSE is not real growth… Now you can maybe add 2% to the line for the fact that the S&P500 is a managed list (losers get kicked off, winners added). But still, we move that much in one DAY. All THAT motion is an emotional index. What do people FEEL that day.

    Feelings can be driven by news, earnings reports, or even the POTUS Potusificating and doing it in public too…

    Most of the indicators I use are just a standardized way of measuring the emotional state of the average market participant and gauging what the Market Makers are likely to do with that knowing.

    @George:

    Have I ever told you I really REALLY like the Roadrunner? ;-)

    @Sandy McClintock:

    Yup, though the actual status varies a LOT by State. For California, for example, the Cal-PERS (California Public Employees Retirement System) is fairly well fully funded and VERY heavy into markets and investments. Not tied to the debt much at all. BUT, take someone in, oh, New Jersey and it’s a whole different deal. Some individual cities and counties are “toast” too.

    All depends on how they funded their pensions. Pay-Go or Pray-Later?

    @Dave:

    Progressives and ASoLibs believe in the power of government to fix anything and believe that as Rich Folks have all the money they ought to pay for everything. What they don’t understand is that resources are very limited and demand for consumption infinite. This result in everyone being poor. BUT “propensity to invest” increases with wealth, so when everyone is poor, nobody invests, and the capital stock is consumed. Then we all start over from the rubble of the war that results.

    Rich people can’t consume it all, so they invest some to make even more. This creates wealth in excess and the society as a whole advances. But this offends folks afflicted with envy, so they want to steal it, thus leading back to ruin… They simply can not accept that “wealth disparity” is necessary and GOOD for the general population. Perhaps there is a ‘limit case’ when everyone is a Billionaire and investment is “sufficient” even if some 100 B’aires get turned into 90 B’aires so the 900,000 ‘aires can be ‘uplifted’… but I’ve never seen evidence for it…

    @Scarlet Pumpernickel:

    Generally speaking I find “targets” in stock prices pointless. Not nearly as usable as volume and volatility…

    Per SLABS:

    There’s more to that, too… As the “demographic pyramid” gets straight sided, the “baby boom” and the “boom echo” are gone. Fewer folks to feed into the college system. They had to reach overseas to pull in more. If some of THEM stay home, the giant system starts to unwind…

    Who. What. Whom.

    Overpaid public employees. Overvalued education that does not get you a job anymore. Dwindling age cohort. Not a good time to be headed into a professorship… IMHO.

    @George:

    My Dad didn’t graduate high school. Left with one or two months to go, lied about his age, and went off to join D-Day. Eventually built a couple of successful businesses and sold Real Estate… Taught me a lot about sales, human nature, and investing… Oh, and farming and metal working and car repair and home construction and well digging and self sufficiency and ….

    More in a minute… The thunder is happening and I don’t want a ‘lights blink’ to cost me this text… also going looking for beer / wine ;-)

  62. Scarlet Pumpernickel says:

    http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=djia&insttype=&freq=2&show=&time=20

    If you look at the last crash, it should have gone to 4000, then Obama put in his 2trillion.

    Now the 2nd crash should take out 4000 and maybe 3200 now???

  63. E.M.Smith says:

    @Boballab:

    Pretty much sums it up…

    I’d only note that there is now an added layer of Special Drawing Rights and that the IMF also holds precious metals and some other currencies. They are trying to diversify the “monetary base”, but can’t really, as the other currencies tend to explode faster than the dollar… until now…

    @Scarlet Pumpernickel:

    We’ve BEEN having a bank run… just a very slow one… as most folks don’t actually have any money in the bank to take out… We’re mostly just a bucket of debt…

    BAC was forced via shotgun into a wedding it didn’t want and now is about to die of food poisoning as the bride doesn’t cook very well…

    Thanks to Uncle Ben and Pa Obama…

    Oh, and nice to see you’ve picked up the Chart Racing habit ;-)

    Yup, those “Government Investments” sure are, um, “interesting”…

    AND OMG! If the ultra-lib pMSNBC is dissing Obama he’s toast!

    What a wonderful and correct Rant!

    @Richard Ilfeld:

    You left out the Demographic Bomb…. Nice other than that.

    There is a rush of THE largest cohort of the population from their most productive years into their most consumption years (look at medical costs as EOL approaches…). Just WHO is going to provide that labor? Not the pretty pieces of paper, the actual GOODS and SERVICES. Who makes what for whom. We know the whom. Who’s the who and how big is the “what”… and do they even come close…

    @R. de Haan:

    Nice, very nice ;-)

    @Judy F.:

    Works for me too…

    @Dave:

    My Dad was working construction and had a disk get busted. Spent a year flat on his back. Eventually went into Real Estate sales… “Suck it up and move on” is a rare thing these days… but I like to think I’m of that ilk. At one time I was quite blind and 80-90 DB deaf. So after about 6 months of ‘recovery’ and some surgeries I went out and got a job… Now my vision is close to 20-20 (last time tested) and my hearing is about 30 DB down. Life goes on…

    @Pascvaks:

    Watch the Middle East… Somewhere on the axis from Libya to North Korea is going to go up (even more than it already is). The Muslim World is cranking out mouths to feed faster than they can possibly do so…

    @George:

    The point was not that the crash was “over” on Monday, rather that it was beginning… Today looked like it might be a bottom (or a ‘short cover’ a bit early to avoid the Friday Rush). Personally, I’d wait for next week before buying in…

    @Oliver K. Manuel:

    I’d not call The D.T.s “recovery”… they are still looking for a bigger bottle…

    @Boballab:

    On the “edging out of Gold” thread I’d said (IIRC, in comments) that we ought to see a $1800 and maybe even $2000 price as a spike. We’re now in the “parabolic blowoff top” phase, IMHO.

    It looks parabolic to me, at any rate.

    @George:

    My “solution” is SAD. Swift Assured Destruction.

    Since “mutual” is not going to work, you make it clear to them that THEY will be Swiftly and most Assuredly Destroyed as soon as they are on the verge of being a threat. THEN you must do it. (At least to the first damn fool who want’s to think it’s a bluff…)

    @Oliver K Manuel:

    OK, it’s all going to be your fault when I don’t get another posting done as I’m watching videos instead ;-)

  64. E.M.Smith says:

    Oh, and my guess for Friday is “wallowing down”… Slow Stochastic on the 10 day hourly chart is headed down… though there could be enough time for it to have a late day rally to about flat on the day.

  65. P.G. Sharrow says:

    @ E.M Smith
    Just remember, As long as you work for a living, you can’t make money. pg

  66. PhilJourdan says:

    @bollabab on 11 August 2011 at 8:10 pm
    Re: Software – You make an excellent point. What some fail to realize also, is that since man writes the software, he puts his own bias into it. And that bias, some would say experience, is based upon history. In the last 10 years, we have seen some unprecedented events in the market. What is an unprecedented event? In software terms, it is basically something never before seen, so the software has failed (I believe it has failed this week as well). That is not a slam or condemnation of the software, just an admission that computer trading is inherently falible because it suffers from the same things man does – lack of omniscience. The old adage that man makes mistakes and computers make them faster is just an acknowlegement of the human factors in computers.

  67. Pascvaks says:

    EM-
    Came across this at CNN this morning re: Ban on Short-Selling:

    http://money.cnn.com/2011/08/12/news/international/short_selling_ban/
    and wondered about the claim by the EU SEC that it “helped” calm the water down during market jitters. Would think any “temp” rule change that calms/slows the markets during such times would be beneficial –especially regarding the hi-speed institutional investers who benefit most when the market is going crazy, or through design can make a market go crazy. Would think so, but.. ?

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