Chinese market up Thu night 4.8%

[beauanderos]

Updated title and notes - China ends down slightly and Europe not liking it at start of Wed.

http://www.bloomberg.com/markets/stocks/world-indexes/europe-africa-middle-east

[beauanderos]

I subscribe to the Bill Bonner Letter... received 8/26

CRASH ALERT
BY BILL BONNER, CHAIRMAN
BONNER & PARTNERS
bill bonner TIVOLI, New York – We hadn’t even had our morning coffee on Friday when we got an alarming message from Stephen Jones, who does stock market research for us.

Stephen – a former equity analyst at Value Line – has been working on a proprietary indicator. The aim is to give us a better understanding of the expected returns on stocks, given today’s rich valuations.

We’ve already reported on his long-term forecast: He expects the U.S. stock market to fall, on average, by 10% a year for the next decade.

So, if the Dow is somewhere close to 6,030 points in August of 2025 (the result of a compound loss of 10% a year over that period) Stephen will be proven right.

But what about now? What can we expect in the short term?

We don’t know. But on Friday, Stephen sent us a “Crash Alert” – his first ever.

A “Large and Dramatic Downturn”
Writes Stephen:

Short-term market timing is typically best used for entering and exiting positions or making modest adjustments to the size of the equity position in a portfolio. There are very few times when one should consider making more dramatic moves.

Now is one of those times. Not that there is any guarantee that a market downturn is will occur; however, the evidence suggests that a very large and dramatic downturn is imminent for the equity markets.

By “large,” we mean a decline in excess of 50%. By “dramatic,” we mean a period of less than three years. Examples include the 21-month decline from January 1973 to September 1974… the 25-month tumble from August 2000 to March 2009… and the 17-month fall from October 2007 to March 2009.

“Imminent” is the most difficult part of this forecast; however… the decline appears likely to start within the next three months.

Back-tested to 1952, Stephen’s indicator has been at this level only 7% of the time. And after that happened, investors took big losses.
Cronies on the Run
We take no pleasure in a stock market rout. Not personally anyway. We make our living by offering economic commentary and financial advice. This will be bad for business.

Still, we can enjoy it vicariously. And okay… maybe a little dark smile crosses our lips. The kind the Germans have a word for – Schadenfreude (which literally translates as “harm-joy”).

The cronies are on the run. Mr. Market, Main Street, and the real economy are finally striking back.

The trillions of dollars of stock buybacks at or near record-high prices are beginning to look like what they were all along: looting of corporate treasuries by the insiders.

All that blather about central banks stimulating a recovery via monetary interventions is beginning to sound like the B.S. it always was.

Plus, at the Diary we have a deep and abiding amor fati. We like it when what should happen actually does. It settles our nerves. Pope Francis is at the Vatican. Janet Yellen sits in the comfiest chair at the Fed. And stocks are falling. All is right with the universe.

But Friday’s market break has made everybody jittery… running scared… sweating. MSN Money on Friday afternoon, after the Dow registered a 531-point drop:

The Dow Jones industrial average fell more than 500 points, into correction territory for the first time since 2011 as all blue chips declined. In the last five years, the index has only had four instances with closing losses of more than 400 points.

The Nasdaq Composite lost more than 3%, also closing in correction territory and joining the other major averages in negative territory for the year.

Apple lost about 6%, into bear market territory, and the iShares Nasdaq Biotechnology ETF (IBB) plunged 2.5%.

‘Right now there is a feeling of fear in the marketplace and all news is interpreted negatively and it's interpreted indiscriminately,’ said Tom Digenan, head of U.S. equities at UBS Global Asset Management.
Should You “Buy the Dip”?
Not so!

As expected, Wall Street came out on the weekend explaining why you should “buy the dip.”

“Stock sell-off looks overblown to three Wall Street strategists,” assured a headline on Bloomberg on Sunday.

“Biggest U.S. Stocks Look Like Global Havens to Bank of America,” said another.

MSN Money explains why there is nothing to worry about…

Is there more selling to come? No one knows, but corrections are natural in a bull market, a pause in the market's march higher, and this one is long overdue. They usually come about once every 18 months. The last one was four years ago.

Get it?

A pause in the market’s march higher.

Financial adviser Suze Orman – about the smartest financial expert on the planet (next to Janet Yellen, of course) – was quick to go to the heart of the matter.

Via Twitter, Orman reminds us that the fix is in:

I am taking this year off, but it is hard to sit silently and watch these markets. Fed Chair Yellen, help us out.

Oh, Saint Janet! Patron saint of bubbles. Touch us. Heal us. Give us more cheap credit. Give us more EZ money.

Have faith, dear reader. Have faith. Saint Janet will not forsake us.

Regards,
Signature
Bill

[rsk1963]

Updated title and notes - China ends down slightly and Europe not liking it at start of Wed.

in the last two days china has thrown 23 billion at this problem and now cut their interest rates and still cant stymie the bleeding, and a week or so ago the devalued their currency by 2%.

[Mossy]

Third hand rumor, Chicom troops to NorK border to turn back refugees.

[68Camaro]

Appears that someone is today selling euros for dollars then reinvesting them in the US market. That pushes PMs down and equities up. Must be a lot of it. Wonder who that could be?

[68Camaro]

As noted elsewhere, the stark V-shape of the major US indices today indicates the PPT came to the battle with a better recipe today than yesterday. They started with a planned futures bump again, and as the bump died off slowly over the length of the day, they started injecting fresh capital throughout the end of the day without stopping, to yield the third highest point gain in history (not that point gains mean much). Percentage wise - <4%, so solid, but not a shocker.

So, what will happen in China tonight?

[68Camaro]

China back up 5.3% - market breather time. Wound licking time. The PPTs have succeeded in slowing things down for the moment. The NGOs that lost money will assess where they are, and we'll soon find out if this put any institutions into trouble.

The eventual reaction to this - regardless of what happens day to day - has to be QE4 on a large scale - perhaps coordinated. Or else currency wars, which I think TPTB are smart enough to know is suicide (but maybe they aren't that smart).

[beauanderos]

Appreciate your take on things, Rich How'd you get so smart?

[InfleXion]

I've seen a lot of chatter debating whether the global slowdown is because of China or because of the Fed's stance on the rate hike.

My take is, the answer is yes. What's the difference? It's all interconnected, and regardless of the public fingerpointing they will have to work together to keep the lid on this thing, which is precisely what happened when the Shanghai Composite first started showing cracks at the seams - coordinated buying by the US, China, and Japan. Although I still think China did this on purpose, because they created an obvious bubble in short order. My gut says it's all just part of the plan, since they can't prevent the inevitable, but they can make it happen before it becomes inevitable so as to control when and to an extent how the coming paradigm shift from west to east plays out instead of waiting for free markets to force their hand, which would afford them less maneuverability when backed against the wall.

[68Camaro]

Appreciate your take on things, Rich How'd you get so smart?

Even a blind squirrel gets an acorn every once in awhile?

[68Camaro]

The DOW today was such an overt PPT double-recovery - no real market does this, but the MSM coverage is just garbage, OMG. Atlas Shrugged in modern times. The people are drinking the kool-aide.

Day 3 of PPT central tomorrow. The PPT is back in control of the US market for now until there is another major glitch in a market. If China reacts badly again, we'll see.

[68Camaro]

China didn't react "badly" because their PPT stepped in after a market decline. Up 4.8%, sure, but on life support. Without life support would the patient survive?

[68Camaro]

And the US open... matches the S&P futures I posted in the OP. Down. Interesting - they didn't defend the open this morning with a big PPT futures push. Is the PPT simply executing a test to see if it will hold on its own?

[beauanderos]

And the US open... matches the S&P futures I posted in the OP. Down. Interesting - they didn't defend the open this morning with a big PPT futures push. Is the PPT simply executing a test to see if it will hold on its own?

Just as the futures selling occurs in naked selling silver contracts, in order to flush out the stops... I think that the PPT is like Dad taking baby on his first swimming attempt. Baby has the inflatable water wings (whatever they call them) thingees, and Dad gently shoves and releases him into the pool. If Baby begins to paddle merrily and stays afloat, Dad will leave him to his own course, but warily keep a watchful eye. If Baby starts to sink, spluttering and choking... Dad will then rush in to keep him afloat, or better yet yank him from the water (mandatory exchange trading halt).

[68Camaro]

Looks like the baby keeps sinking every time they nudge it up...

[68Camaro]

Man that was a choppy day in the US markets. They definitely don't have it under control yet.