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The coming crash

 
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S2



Joined: 17 Oct 2005
Posts: 79
Location: Portland, OR

PostPosted: Fri Feb 10, 2006 11:19 am    Post subject: The coming crash Reply with quote

There are many, myself included, that feel we are ripe for a major market crash. If the recent weakness in the market is not enough of a signal for you look at the economy and the global situation. If you want additional insight to this check the Worden discussion forum at Stock and Market talk worden.com/training/default.aspx?g=topics&f=25

If you are familiar with Elliot Wave theory you know that after a 5 wave bull impulse there is a 3 wave bear correction. The 5th impulse wave eneded with the peak in 2000. Leg A, the first corrction wave bottomed in late 2002, since then we've been in the B wave (a mild bull), we are set and primed for the long ride down on the C wave; this will make the 2000 - 2002 slide look tame in comparison.

Keep you eyes open and your stops close.

S2


Last edited by S2 on Wed Feb 15, 2006 6:34 pm; edited 4 times in total
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Bluto



Joined: 26 Nov 2005
Posts: 146
Location: Va. Beach, VA

PostPosted: Fri Feb 10, 2006 3:00 pm    Post subject: Reply with quote

I think the term "crash" might be a bit dramatic. The market historically moves in 4-year cycles. We had major bear markets that bottomed out in '66, '70, '74, '78, '82, '87, '90, '94, '98' & 2002. The '82 - '87 cycle was a slightly variated 5 yr. cycle followed by a shorter 3 yr. cycle. The decline from peak to trough in these cycles was roughly 20%. The most common cause for the bear markets has consistently been tight money policies of the Federal Reserve and increasing interest rates as well as banking system liquidity flows. History shows a strong tendency for bear markets to bottom out in October. Coupled with some deep intra-cycle oversold conditions in October 2005 & April 2005, I'd say screw your wigs on tight and cover your longs as we head into the late summer period because October 2006 looks like the impending bottom on my radar. However, polish up on those bearish candles because fortunes can be had on either side of the mountain. I think I'll go on vacation in October anyway. Just my 2 cents worth. Wink

Last edited by Bluto on Fri Feb 10, 2006 3:30 pm; edited 1 time in total
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drunnels



Joined: 09 Feb 2006
Posts: 23

PostPosted: Fri Feb 10, 2006 3:21 pm    Post subject: Reply with quote

And in the short term -- gonna be a lot of oversold hammers at the bottom Bollinger Bands today.
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abbo



Joined: 12 Sep 2004
Posts: 148
Location: australia

PostPosted: Sat Feb 11, 2006 12:45 am    Post subject: Reply with quote

I dont do a lot of long term investing and do like to hear the market is heading lower. This is primarily because most often stocks will use the stairs to climb up but take the elevator (or window) to come down.
From an outsiders perspective, US interest rates are going up, the US deficit is BIG and George is comming to the end of his time. The next guy in power will need to make some serious economic decisions and we all know it is best to do this early in your presidency so that the voters are back in the good times and memories have faded by the time the next election is due
But then again, WHO REALLY KNOWS? Trade the signals but remember to look at the big picture (weekly, monthly charts and squeeze up the daily charts every now and then)! This will allow you to trade the daily signals and be more in sync with the nest time frame up
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Bookworm



Joined: 29 Dec 2005
Posts: 71
Location: Lubbock, TX

PostPosted: Sun Feb 12, 2006 1:04 pm    Post subject: Reply with quote

Cosmo,

I am sure there are others better able to answer about the yield curve particulars than I am, but here is the gist.

Like any good corporation, the USGubmnt finances its debt with bonds backed by the US Treasury. We sell bonds at different maturity periods. Most of the time the longer term bonds have a greater percentage payout at maturity, or, a larger yield. Shorter term bonds tend to have smaller yields. The yield is tied to the Fed interest rate and theoretically related to the predicted (!?) future rate of inflation.

An inverted yield curve happens anytime the interest rate payout on the shorter term bonds is larger than that of the longer term bonds. It anticipates a spike in inflation and encourages people to hold shorter term bonds. The concern is that foreign governments, who collectively hold well over a trillion dollars of USGubmnt bonds, will trade in their longer term bonds for shorter term bonds or trade them in for more stable long term bonds backed by other governments. This will end up making the US debt level more volatile and, supposedly, more difficult to handle.

I recently read one wag who said that inverted yield curves have predicted 15 of the last 8 recessions. That is, they are not always a good pre-recession indicator. However, longer term economists that I read (e.g., John Mauldin, Dennis Gartman) anticipate a pretty steep sell off during the third or fourth quarter. They do not, however, think a full blown recession is in the works, but more like a serious economic slowdown.

For the candle trader, if you focus on weekly and daily charts, this is largely irrelevant. Candle trading purists pay no attention to the news (unless it is a catastrophic even like 9/11) and trade the candles. At most, if candle traders do listen to this, it might help them anticipate whether the market is acting more bullish or bearish for the short run. This same conclusion, however, can be drawn from tracking the number of stocks forming bullish vs. bearish patterns. I haven't tracked them long enough to draw firm conclusions, but I sense this works best over the short term (weeks). Right now, we are in a choppy sideways market with no discernible momemtum.

Peace and all good,

Bookworm
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REN



Joined: 01 Sep 2005
Posts: 10
Location: Waco

PostPosted: Tue Feb 14, 2006 10:35 am    Post subject: Reply with quote

Bookworm,

I am not trying to be critical, but working with a Nobel Prize nominated economist, I just want to make sure that we are aware the John Mauldin is no where near an economist. He is more a journalist that is well-informed and connected, with many friends in the business and elucidates complicated theory into digestible pieces to the laymen, which is to be commended. His books and newsletter are a great source of information. Dennis Gartman, I believe is an accomplished futures trader and economist.

If you are interested in how macro-economics and equities markets relate, I would suggest former U of Michigan economist, John Hussman.[/url]
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REN



Joined: 01 Sep 2005
Posts: 10
Location: Waco

PostPosted: Tue Feb 14, 2006 10:35 am    Post subject: Reply with quote

Bookworm,

I am not trying to be critical, but working with a Nobel Prize nominated economist, I just want to make sure that we are aware the John Mauldin is no where near an economist. He is more a journalist that is well-informed and connected, with many friends in the business and elucidates complicated theory into digestible pieces to the laymen, which is to be commended. His books and newsletter are a great source of information. Dennis Gartman, I believe is an accomplished futures trader and economist.

If you are interested in how macro-economics and equities markets relate, I would suggest former U of Michigan economist, John Hussman.
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Bookworm



Joined: 29 Dec 2005
Posts: 71
Location: Lubbock, TX

PostPosted: Tue Feb 14, 2006 11:18 am    Post subject: Reply with quote

REN,

Thanks for the info. I defer to your gentle critique and appreciate it. Now, do you have anything to add to my knowledge of the importance of the yield curve? I know only a little and could sure stand to understand more. Is this something you can educate us about a little more?

I, for one, would appreciate it.

Thanks again.

Peace and all good,

Bookworm
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candlestick1
Site Admin


Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Wed Feb 15, 2006 6:29 pm    Post subject: No Crash Reply with quote

I do not see signs of a crash. First the the market is telling on us that the economy is relatively strong. 3% growth rate with no inflation and low interest rates is not the scenario for a market crash. It is the scenario for a slow growing economy. The American economy is running at it's highest employment percentage that it has for decades. We are not worrying about the masses of poor, devastating interest rates, or low sales, The economy is the steady and should be that way for the next couple of years at least
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