Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Financial Meltdown 2008-style in 2016?

Stock-Markets / Financial Crisis 2016 Feb 14, 2016 - 04:43 PM GMT

By: Clif_Droke

Stock-Markets

As the global market crisis continues, the danger posed by this crisis to the U.S. economy continues to be underestimated by economists and central bankers.  A report recently showed that U.S. job openings surged in December and the number of American voluntarily quitting work hit a nine-year high.  According to the report, this data points to “labor market strength despite a slowdown in economic growth.”

Further commenting on the supposedly improving labor market, Reuters stated: “The signs of a robust jobs market could ease concerns about the health of the economy, which were underscored by other reports on Feb. 9 showing a drop in small business confidence in January to a two-year low and further declines in wholesale inventories.” 


It was also noted that economists at the Federal Reserve look at these numbers to determine their monetary policy.  What this translates to is that the Fed now has another incentive to continue pursuing their tightening policy.  This is exactly the opposite of what the market needs.  Indeed, the direction of Treasury yields (below) is screaming to the Fed that looser money is what it desperately wants.

Reuters quoted Joel Naroff, chief economist at Naroff Economic Advisors, as saying: “If the labor market is tightening, can the economy really be faltering?”  Allow me to answer his question with an emphatic “yes!” 

Most economists continually underestimate the degree to which the stock market acts as an extension of money supply.  That’s why the saying, “As goes the stock market, so goes the economy,” is so true.  The global bear market in equities has already led to trillions of dollars in losses, and this will sooner or later show up in the U.S. economic numbers.  Unfortunately, by the time it does it may be too late for the Fed to take effective action to forestall recession. 

One would think by now that Fed Chair Yellen would have learned a lesson.  Yet the overall tenor of her recent comments suggests that she is completely oblivious to the negative effects that higher interest rates are having on equities.  The fact that one FOMC voting member recently implied that the Fed would likely raise rates four times this year testifies to how oblivious the central bank is to the growing threat of a U.S. economic slowdown.

Taking the sum of the various comments from FOMC members, it would appear there is confusion within the Fed.  There is no clear consensus from voting members on what tact the bank should take in the coming year in regard to interest rate policy.  A market-sensitive central banker like Ben Bernanke would know what to do.  He would heed the market’s cry for liquidity, liquidity, and more liquidity.  

By contrast, Yellen appears to be frozen in the oncoming headlights of the global crisis.  This is not what the market wants to see.  In times of crisis the market wants above all to have confidence in its policy makers.  Until it receives a calming message from the Fed, the uncertainty will likely continue.  And as veteran market analyst James Dines used to say, “bear markets are characterized by the high state of uncertainty.”

Meanwhile stock analysts and economists are debating whether or not the global economic crisis is sufficiently big enough to cause another 2008-style crash.  The crisis hasn’t metastasized enough to allow for a definitive answer yet, but here is a technical point worth considering: The following graph shows the NYSE Composite Index (NYA) going back over the last 10 years.  I think it’s noteworthy that the NYA is testing the 9,000 level which can be viewed as a technical/psychological benchmark with origins in the 2007-2008 credit crisis. Note that when the NYA first broke below the 9,000 level in January 2008 (circled), it served notice that crisis conditions were fully underway.  It was eventually followed by a waterfall decline in the major averages.

The significance of the 9,000 level in the NYA was further underscored in early 2013 when the runaway phase of the QE-fueled bull market kicked off.  The NYA hesitated for a few weeks after initially breaking above the 9,000 level in 2013, but after re-establishing support above this level it was off to the races and the market barely looked back from there until finally hitting the wall in late 2014.

History doesn’t normally repeat by the letter, so if the NYA breaks under 9,000 this time it won’t necessarily be followed by a similar cascade-style crash.  However, a break under the 9,000 would definitely be of concern and would indicate abnormal weakness.  It could also invite panic selling, which knows no bounds if it occurs within the context of a major financial or economic crisis.  I normally don’t put great emphasis on chart levels, but in this case I believe we should closely monitor the 9,000 level in the NYA. The bulls will likely do everything in their power (limited though it may be right now) to protect the 9,000 level from being violated in the near term.

The market rarely moves in a straight line, though, and that’s one reason why navigating a bear market is very challenging.  Bear market rallies tend to occur after major support levels have been tested, and the primary function of those rallies is to keep investors from selling.  They also tend to mask the presence of the bear and keep investors in a state of confusion, hence the reason why extremes in pessimism normally don’t occur until after the bear has run its course. 

Mastering Moving Averages

The moving average is one of the most versatile of all trading tools and should be a part of every investor's arsenal. Far more than a simple trend line, it's also a dynamic momentum indicator as well as a means of identifying support and resistance across variable time frames. It can also be used in place of an overbought/oversold oscillator when used in relationship to the price of the stock or ETF you're trading in.

In my latest book, Mastering Moving Averages, I remove the mystique behind stock and ETF trading and reveal a simple and reliable system that allows retail traders to profit from both up and down moves in the market. The trading techniques discussed in the book have been carefully calibrated to match today's fast-moving and sometimes volatile market environment. If you're interested in moving average trading techniques, you'll want to read this book.

Order today and receive an autographed copy along with a copy of the book, The Best Strategies for Momentum Traders. Your order also includes a FREE 1-month trial subscription to the Momentum Strategies Report newsletter: http://www.clifdroke.com/books/masteringma.html

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules