Tuesday, January 11, 2011

Quick Market Update: Crash Alert In Effect

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In the wake of the January 4th solar eclipse, stock markets in the U.S. and Europe are topping out around psychologically important thousand marks in key indices equivalent to where the world reversed into the 2008 financial crisis that set off the crisis in confidence still impacting the global economy:

The U.S. NYSE index is topping around the 8000 mark:

The German DAX is topping around the 7000 mark:

The British FTSE is topping around the 6000 mark:

The French CAC is topping around the 4000 mark:

This comes as sentiment is ripe for a major top with investor optimism rivaling the manic levels which prevailed at the peak in 2007:

As can be seen above, according to the Elliott Wave Principle we are still in the midst of Primary Wave 2 up and when the next major turn down occurs this should be into Primary Wave 3 down, what I've dubbed the "Apocalypse Wave":

In this context, note that a Hindenburg Omen signal occurred in mid-December that portends the potential for a stock market crash in this time period:

Confirmed Hindenburg Omens are very rare. There have been only 28 confirmed Hindenburg Omen signals over the past 25 years. December 2010's is the 29th. This is amazing when you consider that during that time span, there were roughly 6,400 trading days. Of those 6,400 trading days where it was possible to generate a confirmed official Hindenburg Omen, only 197 (3.1 percent) generated one, clustering into 28 confirmed potential stock market crash signals.

If we define a crash as a 15% decline, of the previous 28 confirmed Hindenburg Omen signals, eight (28.5 percent ) were followed by financial system threatening, life-as-we-know-it threatening stock market crashes. Three (10.7 percent) more were followed by stock market selling panics (10% to 14.9% declines). Four more (14.3 percent) resulted in sharp declines (8% to 9.9% drops). Six (21.4 percent) were followed by meaningful declines (5% to 7.9%), five (17.8 percent) saw mild declines (2.0% to 4.9%), and two (7.1 percent) were failures, with subsequent declines of 2.0% or less. Put another way, there is a 28 percent probability that a stock market crash -- the big one -- will occur after we get a confirmed (more than one in a cluster) Hindenburg Omen. There is a 39.2 percent probability that at least a panic sell-off will occur. There is a 53.5 percent probability that a sharp decline greater than 8.0 % will occur, and there is a 74.9 percent probability that a stock market decline of at least 5 percent will occur. Only one out of roughly 14 times will this signal fail.

Meanwhile, we are now entering a Puetz crash window in the wake of the January 4th solar eclipse in association with the January 19th full moon:

Several years back, a cycle watcher named Steve Puetz attempted to see if eclipses and market crashes were somehow related. He studied eight of the greatest crashes in financial history, from the Holland Tulip Mania of 1637 to the Nikkei of 1990. He found that market crashes tend to occur near full moons, and that the greatest number of crashes start after the first full moon after a solar eclipse, when that full moon is also a lunar eclipse. Puetz found that all eight crashes occurred six days before to three days after a full moon that occurred within six weeks of a solar eclipse. The odds of that being a coincidence, Puetz calculated, are less than 1 in 127,000.

Puetz was not saying that so-called "Puetz windows" always lead to crashes, but that if a crash is going to occur, a Puetz window would be the likely time frame in which it would happen. Puetz windows tend to occur every year or two, while crashes are rare events. (SOURCE)

He....concludes that a full moon in general and a lunar (eclipse) full moon close to solar eclipses, in particular, seem to be the triggering device that allows for the rapid transformation of investor psychology from manic greed to paranoia (SOURCE).

Since I'm a broken record on most of these indicators and will ever be deemed a boy who cried wolf one too many times, I will simply post this updated information with the reassertion that there's the potential for the Elliott Wave Grand Supercycle crash and global war I've so long been warning this world about to no avail. The fate is what we make by not recognizing and counteracting the underlying insanity of unrepentant selfishness and sin ("sin" particularly in the sense of an attitude of dismissal or rebellion toward God). As long as people give in to their carnal, self-important nature, history will continue to unfold according to bipolar cycles between misled extremes of hope and despair. The truth is we are not on our own, so stop fretting either way!

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