Stock Markets Remain on Crash Alert: New Highs in Nasdaq are a Fake-Out NOT a Break Out
Last week, this website chronicled the increasing probability of an exceedingly rare event called a Stock Market Crash, based on the presence of certain pre-conditions. (http://markonomics101.com/2018/03/06/dow-jones-industrial-average-remains-in-crash-pattern/). Since then, the Nasdaq 100 and Nasdaq Composite have made new all time HIGHS, leading many to suggest the Bull Market in stocks was resuming. A position we respect, but vehemently DISAGREE with.
Crashes are very rare, so predicting one is no more probable than the winning the Powerball. In the last century or so, Stock Market Crashes have occurred in the United States TWICE! They do occur with some kind of frequency in other “markets” such as the Nikkei in Japan 1n 1990, an event that the country STILL has not fully recovered from.
Some of these preconditions were listed in a Blog called “Marko’s Take” in August 15, 2010: (https://markonomics101.com/2018/03/15/hindenburg-omen-all-over-the-financial-press/).
While it can’t be denied that the Nasdaq did make a new all time, it’s still in a BEARISH reversal pattern, known as an Ascending Wedge. But, what is very striking about the DJIA and NDX charts is that they both had PARABOLIC up trends for the better part of a year. The importance of that, can in NO WAY be understated. These PARABOLIC up trends, indicate the desperation to “join the party”, by the “Johnny-come-lately” investor crowd, that acts primarily on emotion. These “investors” define the condescending term “dumb money”.
Once the PARABOLIC final segment of the uptrend is broken, the “fat lady has sung”. Equivalently, the patient’s illness is terminal. Add to that the Chart of the Dow, which is extremely similar to that seen in 1987. Markonomics will shortly present a very thorough research piece which will be definitive the commonality of Stock Market Crashes.
Another factor that should be considered is the very, very steep decline in the cryptocurrency sector. In cryptocurrencies, we are already witnessing Crash-like price action, termed a “Waterfall Decline” (http://markonomics101.com/2018/03/08/cryptocurrencies-in-a-waterfall-decline/).
Markonomics101 will continue to update the status of the “Crash Alert”. If you want our assessment in real time, it will be as Breaking News by clicking here: (http://markonomics101.com/category/breaking-news/).