Stocks Perfectly Poised to Plummet Past Point of No Return
Stocks Perfectly Poised to Plummet Past Point of No Return by David Haggith – The Great Recession
We are now well into the year when I said stocks would plunge in January and would prove to be a gaping “crack” in the economy by summer, and look at how seriously the market has fallen apart since it started to drop in the last week of January:
It was just three months ago that stock-market investors were being swept up by a euphoria pinned to the idea of economic expansion taking hold harmoniously across the globe—a dynamic that hadn’t occurred since the 1980s, and one that was expected to extend into 2018.
However, less than midway through the year and some market participants are already spotting cracks in the notion of so-called synchronized global growth, with some fearing that a whiff of stagflation is starting to permeate. Stagflation is typically described as persistently high inflation and high unemployment, combined with weak economic demand….
“The problem is that there have been macro forces that have been clouding the outlook, so it’s preventing the investor from taking the good earnings news and running with it,” Young told MarketWatch….
Economic growth in the U.S. has tapered a tad, with the first-quarter gross domestic product, the official scorecard for the economy, coming in at the slowest pace in a year owing to a big pullback in consumer spending. (MarketWatch)
Dow down relentlessly in spite of good news
Even though corporate earnings reports posted lots of good news last week and this, the market fell again and again along the relentless downward trend line I noted in last week’s article:
It’s not hard to see that each bounce up has become weaker than the bounce before. What happens when the collapsing ceiling and the floor meet? If the market breaks through that floor, typically the floor collapses. From there, it now has a long way to fall without any obvious support. In my view, its a fall that eventually leads back to the bottom of the Great Recession and maybe even further.
As you can see below, the Dow has now broken below its 50-day moving average, its 100-day moving average and its 150-day moving average:
There is not much floor left. What used to be support beneath the market has become the ceiling. The market has inverted, and is now sitting right on its 200-day moving average (often regarded as the ultimate floor):