by John Galt
September 10, 2016 22:20 ET
Before I go into any great details as to why I think this horrid bull market is over, albeit horrid only because it is Federal Reserve purchased and promoted bull, I wish to review the markets at the end of trading this past Friday, September 9 (courtesy of the Wall Street Journal).
How bad was it really?
-NYSE down ratio of 13:1 on 4.3 billion shares
-Nasdaq down radio 6:1 on 2.18 billion shares meaning it could have been worse
-Dow Transports down 254 points or 3.15%
-KBW Banking index down 1.01%
-HGX Housing index down 4%
And some of the ugliness said the real story in charts.
The IBB was once the speculative sweetheart and it barfed a nice 3.26% hairball:
Meanwhile the Philadelphia Semiconductor Index (SOX) also barfed up another one down 3.66%:
One of the two bellwethers followed in these pages finally started a decisive move after the release of the iPhone 7 which turned into a disaster as far as the AAPL stock price:
Lastly, gold and gold stocks have sent that deflationary red flare up into the evening sky but it will be interesting to see if any central banksters know how to deal with it:
So do these charts indicate the end of the bull market in and of themselves?
I listen, watch, and read a lot of material. Some of which I relay here to my readers, most of which I assume my audience has enough ability to find and discern on their own.
One of the radio shows I try to listen to for sentiment indicators are two nice stock brokers from the Miami area who take calls from little old ladies and retirees who ask if they should buy or sell stocks, etc. As with previous declines, what do I hear on Friday? “Should I increase my holdings now” or “is this a good time to average up” and of course, my favorite, “shouldn’t the market continue to higher highs because of the election so shouldn’t I double down on my investments?” God bless those souls. They are the same hosts who insisted that Citigroup was a buy at 14, Wachovia at 10, and Washington Mutual would never go to zero. Yet the crash of 2008-2009 didn’t teach anyone a thing.
Need further proof?
On Saturday morning I went out for my bi-weekly haircut. Curiously, I was listening to the banter between a young lady who was cutting a gentleman’s hair and the subject of the stock market came up. What was the gist of this? To paraphrase, “This is the time, if you know what you are doing you can become a millionaire easily.” Another parent piped up and said, “Yeah, and my kid’s math teacher is teaching kids math by using the stock market but she’s using her portfolio as part of the lesson.”
That in and of itself is not alarming until one reflects on history. On the 1999-2000 dot.com disaster. On the 2006-2007 “hey, we had all best learn how to flip houses” insanity which is happening again as I type this. But I have overheard this manic talk from truck drivers, salesmen, an electronics technician, and worse, discussions at grocery stores while in line to check out.
The common theme?
They all believe that this is a can’t lose proposition because the Federal Government and Federal Reserve bailed everyone out last time so they will have to again.
Welcome back to the insanity.
I hereby declare the Federal Reserve Bull Market initiated in March of 2009 dead as of September 9, 2016. The next correction will be brutal, harsh, and quite destructive for the inexperienced.
20-27% is the downside risk in the immediate term. But there is a much darker possibility which many dismiss.
It would appear markets are in the midst of the end of an 18 year cyclical bear which has one more trip to the downside within it, and barring a major intervention by the central banksters or world war, a retest of the S&P cash price of 666 is not to insane a possibility. I think however that once the S&P 500 crosses the 1000 mark the Fed will intervene but only time, and this upcoming election will tell. If the Fed actually allows the cycle to naturally complete a real bull market, not the phony one we have just experienced will emerge in 2018 and probably take the markets to real all new historic highs. But beware of what happens should the Fed indeed stop the decline and start buying equities as that destabilization of what’s left of our capitalist system will only create a new perverse Japanization of our dying nation. Thus prepare for not only stock, but commodity, bond, and currency price distortions.
How would you like your bull cooked, medium rare perhaps?