August 21, 2013

It's been a couple of weeks since my last post.  My apologies!  I have been trading and keeping up with the markets, however I have also been starting a business and getting a house ready to move in to.  So between everything going on finding time for the blog has been hard.

Recently, however, market news has come to light and I think we're on the precipice of witnessing a "once in a decade" event on the markets.  All year the market has been riding high on cheap an easy money pouring in via the Fed's bond-buying program, and the stock market has reached all time heights by riding this wave.  Recently some Fed executives have been whispering about the Fed tapering it's bond buying which, in turn, would taper off the some 86-billion-dollar per month bond buying the Fed has been feeding the market with, which in turn would lead to an overall market decline.  Today we were supposed to get some sort of hint from the FOMC meeting minutes as to what they may be planning.  That hint never came, and the markets seem paranoid at the prospects of even a possible tapering.

Add to this the fact that the markets have been declining the past couple of weeks, and add to it that there have been occurences of the so-called "Hindenburg Omen" this summer, and it all spells a downturn in the markets (at best) and a crash (at the worst) in the coming months.  Seeing as mutual funds must sell their losers by the end of October for tax purposes, I say if a crash does happen it happens between now and the end of October.

See more on the recent re-emergence of the Hindenburg Omen on Yahoo Finance and also on Business Insider.  Long story short, the Hindenburg Omen is a mixture of several different technical indicators that, if they all occur on the same day, it is a bad omen.  If they all occur on the same day, and we have at least two of those such days in the same 30 day time span, it spells possible disaster.  If we have several of these such days in a short time span, it spells an almost certain market crash.

There have been 5 Hindenburg Omen's triggered in the last 8 trading days.  The last two times they occurred with this level of concentration and frequency were before the crash of 2000 and before the crash of 2007.

What do I think?  I think a lot of this hinges on the Fed and how much paranoia Wall Street exudes surrounding the Fed.  Sure, things are certainly going to go down for the next month or two.  That's to be expected, what with fall approaching.  What will vary is by how much things go down and if we actually experience a crash.  If the fed begins tapering it's bond buying, I would say we're almost certainly looking at a crash.  If the Fed pledges to not taper till the beginning of 2014, I think we'll see a market decline/correction and possibly a crash.

As long as Wall Street continues to get it's "heroine" from the Fed, it'll keep flying high.  However, as with any substance dependency, once the "stuff" is cut off, there's a hard crash that follows...