I don't even know what to say that I haven't already said over the last couple of weeks. Like Dr. Brett said last night the "normal historical indicators of market bottoms are broken". I think Dylan Ratigan had it right tonight on 'Fast Money' when he said the market is crashing. Because of the modern market's circuit breakers we'll probably never see a one-day 20% drop like we had in 1987. But we've had a 5-day period that's just as bad, if not worse as any 5 days around the 1987 crash without having a single halt in trading. It's like a slow motion, controlled crash.
As you'll see in the charts below the indices have fallen between 25% and 35% since the SEC restricted short selling on financial stocks three weeks ago. So much for that plan.
Here's the VIX:
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down | Down | Down |
| Intermediate | Down | Down | Down |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Absolutely historic times in the markets. How long before the U.S. decides to just shut down the market for a day or two to give people a chance to "cool off"?
I am guessing they will not shut it off. The numbers you are seeing are still not true jumps like you would see on a 9/11 type of state emergency.
The most interesting aspect of this 'crash' is it's nature, as you pointed out - 'a slow motion, controlled crash'. Market multiples have expanded over the past decade through leverage expansion, not through increases in productivity of labour or capital. As the primary investors in this market deleverage it would certainly not be in their interest to let this market get out of their control ie. trading halts and market shut down. We are actually only back to approximate fair market values relative to long term low risk fixed income returns at this point - which is where we should have been without the excess leverage of the past decade or so - but it has been a great ride!!
Panama,
You nailed it. I'm hoping to do a post showing the huge gains and quick fall of some of the commodity plays that were the favorites of the levered folks over the last year or so. One might think those drops are over until you realize that many of those stocks still aren't back to where they were a year ago.
And don't even get me started on Apple (AAPL). :-)