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Old 02-28-2007, 03:01 PM
stevo stevo is offline
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Arrow Has a market meltdown begun?

Has a market meltdown begun?
History says no. Despite all the recent bad news from Alan Greenspan, China and the housing market, stocks should continue to bounce back.

By Jon Markman
Investors have been trading stocks at Wall and Broad streets in New York for a very long time -- more than 200 years. There's been trading through wars, depressions, recessions, booms, busts, floods and riots.

And human reaction to changes in buying and selling pressure has never changed much. That is why it's useful to study history as a guide to future market behavior. History shows how investors in the past have reacted to events we're witnessing in the present. The market is as much an emotional feedback loop as it is a weighing of the economic prospects for companies and countries.

So what does history tell us about what to expect in the aftermath of a 416-point plunge in the Dow Jones industrials ($INDU) on Tuesday, one of the 20 largest one-day percentage declines on record?

Well, let's see what caused the collapse first.

It was kicked off by a Tuesday sell-off of stocks in China, but that was hardly the only cause. Former Federal Reserve Chairman Alan Greenspan actually started it all when he said a recession could hit the U.S. later this year. Then on Tuesday morning in the U.S., the Commerce Department reported that durable goods orders fell 8% in January, which was a much worse-than-expected number. And although reports on housing starts and consumer confidence showed strength in the economy on Tuesday, there is still a lingering feeling that the residential real estate market is on shaky ground.

Yet wait a minute. Didn't current Fed Chairman Ben Bernanke tell Congress last week that everything is hunky-dory in the economy? And didn't he essentially tell Congress the same thing today, helping to spark a small rebound?

Yeah, he did. And there's the rub. We have a market that was up a lot since summer without a major decline -- ripe for serious profit-taking -- and a few little catalysts to get the ball rolling downhill. But at the end of the day, when you look soberly around the world, things are just not bad enough to merit the start of a long-term decline.

OK, so this is where history comes in.

There have actually been 14 occasions in the past when the market has fallen 3% on a single day in February since the 1880s, according to research by Logical Information Machines in Chicago. In all but two of those occasions -- 1898 and 1933 -- the Dow Jones industrials were higher a month later. In the most recent two instances, which occurred in 1938 and 1946, the Dow was 8.2% and 7.1% higher a month later.

So most of the time, big declines do tend to bring in buyers who were waiting for lower prices to begin or add to their investment positions.

Lots of losers
Another way to look at the Tuesday decline is through the prism of the New York Stock Exchange advance-decline line. This is a ratio of all the NYSE stocks that finished up in a single day to the number of stocks that finished down.

Tuesday was off the charts in this category, the worst reading in 10 years. To make the concept more concrete, consider that only two of the 500 stocks in the S&P 500 ($INX) were up: retailer RadioShack (RSH, news, msgs) and natural gas utility Questar (STR, news, msgs).

Analysts at Birinyi Associates looked at similar advance-decline line plunges in the past 10 years to see how the market reacted the next day. The answer: The S&P 500 has risen three-quarters of the time for an average gain of 1.2%. But Birinyi observes that the advances do not tend to start right away. On average, the market starts the next day with a sell-off as margin calls go out and people sell stocks to raise money, and the rally begins around 12:10 PM ET.

Birinyi analysts further noted that in the two cases where the advance-decline debacle occurred as a result of Asian market fears, the S&P 500 ultimately rose 5.1% and 1.2% the next day.

Just a correction
So what happens next? According to technical indicators that compare stock indexes to their average values of the recent past, the bull market will not be considered to have been broken until the S&P 500 falls below the 1,342-to-1,328 area and remains there for at least two days. For now, we can only say that we're observing a market correction within an uptrend. It's the first big drop since the summer, but for now that's all it is.

Can it go farther? Yes, of course. I'm on alert for signs that Tuesday signaled the start of a major bearish break. But when you consider that down volume exceeded up volume on the New York Stock Exchange by around 70-to-1, you just have to figure that a lot of people panicked and sold into the decline.

Generally that kind of down volume leaves a vacuum into which buyers will rush -- particularly when it happens at the end of a month, as mutual-fund and hedge-fund managers dress up their portfolios for clients to see in their statements.

Video on MSN Money: So what happened?
Video: Anatomy of a sell-off

Here's a look at what sent the Dow tumbling 416 points Tuesday, with CNBC's Melissa Lee.

So my guess is that the plunge was more like a natural blow-off in an uptrend than the start of a much bigger decline. In the next couple of days I would expect a snapback to higher levels, perhaps back to where we started this week.

Fine print
Two weeks ago I warned readers of my stock-picking newsletter of a possible market disturbance in the last week of February. I didn't want to panic people by giving an exact date because, frankly, I wasn't sure that it would occur. But the warning stemmed from my study of the work of economist Martin Armstrong (currently in prison on a civil contempt charge), who developed a theory on market cycles in the 1970s called the Economic Confidence Model, or ECM, when head of an organization called Princeton Economics International.

The ECM is fascinating and complicated but the bottom line is that Armstrong believed it provided dates in the future that would represent turning points for markets around the globe.

There's no point in debating now whether his theory on eccentric cycles of 8.6 years was any good. The point I need to make is that his work was very popular in Asia, and also had many fans among big "macro" hedge funds here in the United States.

The last "ECM date," as these cycle turning points are called, was Jan. 1, 2005. And, in fact, that date did witness a huge decline that came out of the blue after a buoyant December.

The most recent ECM date was Feb. 27, 2007. Yeah, Tuesday.

There used to be a lot of Web sites that studied Armstrong's work, but the only one left that I am aware of is Contrahour.com. You can see its reproduction of one of Armstrong's most famous papers, listing all the dates, on this page.

At the time of publication, Jon Markman did not own or control any shares of companies mentioned in this column.


Is this a market meltdown? - MSN Money
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Old 02-28-2007, 03:35 PM
drunkguy drunkguy is offline
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i luckily moved to practically all cash about a week ago


quite happy being out of the market right now. Had a nice run up for a little bit and now will sit on the sidelines while the dust settles
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Old 02-28-2007, 03:41 PM
zychik zychik is offline
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Market will tank until end of Sept. Stay short or in cash. JMHO.
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Old 02-28-2007, 06:30 PM
Buck Swope Buck Swope is offline
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Luca Brasi needs to pay Alan Greenspan a visit

Guy has singled handedly caused absolutely chaos in market movement about a dozen or so times now through his biased ranting
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Old 02-28-2007, 06:38 PM
ChuckyTheGoat ChuckyTheGoat is offline
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I see that New Home builds were down 17% in January. Housing bubble about to burst?

I have no faith in Americans. We can screw up anything, and the average education level of Americans has to be bottoming out.
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Old 02-28-2007, 07:00 PM
count zero count zero is offline
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Once, we were among the smartest nations on earth.

But dumbness works better for politicians and for big bidniss. Dumb people will vote for and buy whoever and whatever the TV tells them to. Presto -- instead of promoting education, we get college for everybody (it's more democratic when everyone can go to college, even if it drags down the whole concept of higher education to the point where college becomes 13th grade); we get ads that mock smart people for trying to find the cheapest phone plan (they're "different" than you and me -- you don't want to be different, do you?); we get American Idol, where you apparently have to be physically attractive to be a good singer, instead of...well, almost anything would be "smarter" than AI. In fact, the only smart people you're allowed to see in the media now are the bad guys in the moron movies that Hollywood puts out. The good guy is always a likeable, lucky dumbfuck.

So now, after a few generations of this, it's all over for being smart. America hates and fears intelligence. Reason: most Americans a) retain a vestigial sense that intellect is an immensely powerful quality, and b) know they don't have it.
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Old 02-28-2007, 08:37 PM
Mjulian Mjulian is offline
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Hey Count, is there anything you LIKE? Please, do share. That is, anything besides:



or:



or:

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Old 02-28-2007, 08:55 PM
count zero count zero is offline
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Pretty funny. Took me a while to get it. I assume the top picture is a THC molecule. Shinier than I thought it would be.

Anyway, three things seems like a lot to me. How many things do you like, Mr Big Shot?
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Old 02-28-2007, 09:44 PM
Reggieboi Reggieboi is offline
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Default I hope not...

I was sick of losing on online gambling and sick of my Credit Card debt, but then I found this easy online job. A couple hours a day and I'm making Money that is liquid un-like the money in your sports account. Don't you want an online account that only goes up? I thought I could make it in Gambling, but the swings are too much. Get yourself involved in something safe. Get the thousands of dollars you want, but cant seem to hold onto gambling.


This Job Has Saved My Life and I hope it Can Help You Too


No live links please

Last edited by stevo : 02-28-2007 at 10:00 PM.
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Old 02-28-2007, 09:45 PM
Mjulian Mjulian is offline
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At least four.
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Old 02-28-2007, 10:02 PM
stevo stevo is offline
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I've been in cash a year. Early yes but prudent

Looking for cheap G.E. if we get a nice correction.
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Old 03-01-2007, 10:38 AM
zychik zychik is offline
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Default YESSS$$$$!!!!!

Short sellers are
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Old 03-01-2007, 12:48 PM
Garbage Time Garbage Time is offline
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Over time, the market always goes up. If your projected retirement is more than ten years away and you won't need to draw down for other reasons, you should be 100% in stocks, period.
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Old 03-01-2007, 09:05 PM
Buck Swope Buck Swope is offline
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Quote:
Originally Posted by stevo View Post
Looking for cheap G.E. if we get a nice correction.
sharp post
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Old 03-01-2007, 10:22 PM
grapefruit grapefruit is offline
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Markets always go in cycles...

Over the past 130 years "stocks and commodities have alternated leadership in regular cycles averaging 18 years" - Barry Bannister, Legg Mason Wood Walker Inc. (Baltimore based financial services)

Stocks and commodities are negatively correlated, when commodities go up, stocks go down, and vice versa...this makes perfect sense...for example...kellogg's company..when the price of wheat, sugar, corn, and paper went up, their stock sunk 50%... or when the price of oil goes up, profit margins decrease for companies almost across the board (except oil companies of course)...

There's a strong case that commodity prices will be bullish for the foreseeable future simply due to supply/demand conditions for the majority of commodities:

-low commodity prices over the past few decades and opportunities for better returns outside of commodities have deterred new exploration and mining for many resources including silver, aluminum, copper, and other metals....and also poor investment into infrastructure necessary for their development such as refineries and roads in remote areas, which has resulted in low reserves of most metals and an inability to quickly increase production if necessary...the current situation is dangerous supply/demand balance for most resources

-China's insatiable appetite for everything from metals, oil, and concrete, to food will continue to drive demand higher for every single resource...they are responsible for something like 30% of the growth in demand for goods in the world (the recent tightening of monetary policy a minor delay, simply to prevent overheating of the economy), which grew between 9-13% each year over the last few years depending on who you listen to, and showing no signs of slowing down

-OIL...this is whole other topic to go into entirely...but based on the fact that PEAK OIL has already hit or will soon hit, basically oil production is at its peak right now, and will only decline...

Oil supplies - 83.5 million bpd and declining
Oil demand - 82.4 million bpd and rising (china is projected to increase demand by 2.5-5 million bpd by 2010)
*IEA 2004

with no viable alternative energy sources in sight that could curb our dependence on oil significantly...and no new refineries have been built in the US for over 20 years (as you can see with the recent distribution troubles), infrastructure for oil is also in poor shape

Rising oil prices will put a big hurt on the stock market and the economy

plus...likely upcoming conflicts with Iran?..and Iraq is not a safeguard...production has LOWERED since the takeover of the oilfields due to attacks on piplelines....etc, etc...much more can be said about oil

-any rise in interest rates or economic shock will result in massive defaults on those 5%-down mortgages out there...already we are seeing record rates of defaults and the real-estate market is now starting to go down a bit...this is a huge bubble that is just ready to pop...this will multiply the effects of any economic slowdown

-the likely increase in commodity prices will cause inflation and higher interest rates

-unemployment...how many millions manufacturing jobs have been lost and are continue to be lost to globalization?...this trend will not end with so much cheap labour everywhere in the world, and with no new jobs to replace them because the education system hasn't been producing nearly enough people in fields necessary for the new technology-based economy that first-world countries must adapt to

-the US has over 8 trillion in debt, and the debt is growing at 1 trillion every 21 months...with no signs of being corrected with big drains in military spending (even democrats can't stop the costs of war)...all of this money must be paid back with interest

I don't see many positives out there, especially for the US economy...Canada is a little brighter with more resources and oil, and more restrictions on mortgages...

Overall...I think stocks are about as high as they're going to be, and not only that I am pretty sure we're in for a major recession...it's a ticking time bomb, the only question is when the big drop will happen, we're already in the midst of the decline...

Best thing to do is get out of real-estate (esp. US), short the stock markets (Bill Gates is pulling out), short the US-dollar (Dick Cheney has already put all his money into Euros), and get into commodities (the indexes have already tripled since 1998)...gold, silver, oil, aluminum, nickel, tin, copper, soybeans, natural gas, corn, sugar, coffee are all good investments, or simply buying the indexes is easier and more diverse

A good book about commodities investing and a more in-depth look at the reasons why they will be bullish is HOT COMMODITIES by JIM ROGERS

Maybe look at ways of reducing your dependence on oil or investments into alternative energy sources...things to think about at least
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Old 01-21-2008, 01:44 PM
lebowski_ lebowski_ is offline
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The stock market was in meltdown today as nearly 60billion was wiped off London shares as fears of a US recession sparked a global sell-off.

Britain's benchmark FTSE-100 slumped 5.5 percent

France's CAC-40 Index tumbled 6.8 percent

Germany's blue-chip DAX 30 plunged 7.2 percent

India's benchmark stock index tumbled 7.4 percent

Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent
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Old 01-21-2008, 02:02 PM
Domer Domer is offline
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Can't wait until tomorrow.

Jesus christ
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Old 01-21-2008, 03:17 PM
drunkguy drunkguy is offline
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ugly
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Old 01-21-2008, 07:15 PM
stevo stevo is offline
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I want some good stuff cheap. Keep going.
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