[Do Or Die]

1. A similar drop like past 10 days (more than 10% decline in a healthy bull market) is a very unusual event. This has occurred so seldom since great depression that you can count the instances on fingers. Technically this indicates a very high probability for negative returns for next few years.

Date/Time	10 day change
8/4/2011	-10.54
3/21/2001	-11.58
10/27/1997	-11.29
10/15/1987	-10.76
10/27/1978	-10.15
9/3/1946	-10.74
5/14/1940	-13.58
9/8/1937	-10.43
5/11/1934	-10.1
7/21/1933	-15.79

2. Relative Strength of financials has peaked out considerably. Note that financials are usually the leading sector to turn down at a peak.


3. Fundamentally stocks are NOT undervalued- there is sufficient room for price stagnation for few years or a further decline of around 20%.

4. The NY Fed's Treasury model suggests a recession probability less than 1% (0.97%); and for July of next year the recession probability is even lower, at 0.80%. This data will soon be significantly updated with the recent fall in treasury yields. I have a hunch that this model in hyped being in public domain and has lost its edge. In any case, we may not see a typical recession but the chances of slow downtrend on weekly charts cannot be ruled out. (The model uses the spread between the yields on 10-year Treasury notes and 3-month Treasury bills to calculate the probability of a U.S. recession up to twelve months ahead)

5. This crash is unlike any similar past instances in the sense that it is triggered by global events and not just the US economy. The recent fall is most likely triggered by Europe’s dire crisis, with Italy and Spain joining to the list of troubled economies. ECB rate hikes expectations (until very recently anticipated for autumn 2011) have suddenly vanished, and the September 2012 Euribor contract prices them at slightly below those for 2011. The biggest consumer’s market, China, is slowing down. Japan currently is a distinct case study

6. The US Economy has just grown by 0.4% in the first half of 2011 and all major economic indicators continue to point slow economic activity. According to the National Association of Realtors home prices will likely drop another 10 % nationwide, and according to the Mortgage Bankers Association, 70% of all loan applications are refinancings. Rapidly rising prices have (and will) hit the confidence of consumers. ISM data suggests that new orders will be dropped off and firms appeared to have tightened down on inventories. Recent PMI number indicates that manufacturing is barely above the zero line.


7. Institutional Funds are flowing from relatively riskier assets to relatively safer assets (from stocks to treasuries and gold).


The market has made a strong opening today reacting to yesterday’s price action which looks like a climactic bar. I have marked yesterday’s lows and currently working to liquidate my investment portfolio (wrote most of this stuff yesterday evening).

[Tams]

the event that led to this "unusual" event is also very unusual...
I doubt the past historical market behavior is a good guide for this unusual current event.

[Do Or Die]

Originally Posted by Tams »

..
ie. the past historical market behavior is not likely to be a guide for this unusual current event.

wow... thanks for the pointer... so when are you going to sell me that magic forecasting mirror

PS: think calmly sometimes later can you make a more useless statement ever

[Do Or Die]

I think I read somewhere on this page...

You can edit your post, but you can't hide your (posting) personality. LOL

[Tams]

Originally Posted by Do Or Die »

wow... thanks for the pointer... so when are you going to sell me that magic forecasting mirror

PS: think calmly sometimes later can you make a more useless statement ever

you are reacting to this at an emotional level... you are displaying your maturity level in dealing with a discussion topic.

[Tams]

Originally Posted by Do Or Die »

I think I read somewhere on this page...

You are reacting to this at a personal level... you are displaying your maturity level in dealing with emotional matters.

[Do Or Die]

Well, didn't mean to sound insolent or anything. I'll come back to discussion after market close.

[SIUYA]

funny discussion guys - good little piece of analysis doordie.....
going with Tams on this I guess this has been brewing for a bit and has just taken the market some time to wake up. Every crisis is different, yet every crisis has similarities.
The Asian financial crisis in 1997 was much the same - 6 months of fundamentally bad news and then one day the equity market craps its self - and that was a far bigger move. Looking back it now a blip.

Point is for every fundamental bit of info out there that is bullish, there are plenty of bearish ones too, but its what the market does that is important (unless you have billions to slowly move in and out). You can always point out both sides and make a case - thats what brokers do all day. (a few weeks ago on the same day we saw two reports - one commodities to crash 50-70%, the other was about the super cycle in commodities - all looking at the same info)
Whats is interesting for us in Australia is that our market has been one of the worst performing this year - we are already down from the highs around 20% after yesterday and yet we supposedly have one of the best performing economies around - go figure
Is this a bargain hunting opportunity, or a sign to exit? who knows.