As the carnage continues with stocks now ignoring anything the Fed throws at them — and the Fed has pretty well thrown everything it has used in the past and is now moving into bailout mode — where is the US stock market crash likely to to stop falling? So far, it’s been limit-down all the way.
Before posing “The Fed is Dead” later today, I wanted to rush this out because I can get it published quickly:
The above graph shows two reasonable targets that I would suggest.
My best case scenario for the US Stock Market Crash
I am completely convinced it won’t end better than this, and I think it is only likely to be a resting platform unless the Fed leaps into strategies I’ve been talking about in Patron Posts that are currently illegal.
This level is based on the zone where the bull stopped running for two years and churned sideways as a place it hung out when the Fed stopped QE. That was back when I said the market would crash because of the end of QE, and it didn’t quite do exactly but, but the bull was broken. The market stalled for two years, so not really a bull in my books — at best a bull in a coma).
With the Dow ignoring the Fed’s kitchen-sink solutions again today and ending down more than an unlucky 1300 (at 1,3338, having touched again on 2,000 down intraday), it looks like we’ll enter the market’s old hang out in the rectangular safety zone sometime this week.
When the US stock market crashes down into the safety zone, the entire Trump Rally going back to its first inkling since the day after he was elected will have been destroyed — so fundamentally “strong” was the economy that supported it all. (Be careful what you believe from the lips of politicians. I don’t care who they are or even if I voted for them, as I have been known to loudly criticize ones I voted, for, too — like George Bush II. I’ll own my foolishness, but I won’t repeat it.)
A likely worse-case scenario for the US Stock Market Crash
Maybe stocks will take a rest there and bounce around inside that two-year safety zone for awhile. Maybe. Until the continuously growing downdraft of the general economy sucks the market all the way into the belly of the Great Recession again.
The next level down from the rest stop is based on where the market’s long-term trend would be if you project the line to the present day (the trend it dove down to in the belly of the Great Recession).
That deeper trend, as you can see, is exactly where the market would be if you wiped out all the Fed’s excess fiat fuel that inflated the dot-com bubble before it burst and then filled up the housing bubble before it burst and now has formed the Everything Balloon — far beyond a mere bubble. It’s where I see the stock market as settling out with the one caveat that the Fed will continue doing everyone it can dream of to bubble us back up somehow.
My easily possible worst-case scenario for a market crash
First, let me say there is no true worst-case scenario short of the US stock market crashing into the pits of hell because no one knows where everything that is happening right now will end. But I’m dealing with where this could easily go based on what we already know about the coronacrisis.
by David Haggith