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Thursday, 27 December 2012

Market Crash Imminent?

I'll start off blunt, there is a very high chance that we may see a 15-20% correction or more from current levels. There are many reasons for this but the way they all line up is just uncanny.

Dow Futures. Thomson Reuters
Almost identical pattern suggest a 15-20% correction, even the angled double top on the right shoulder is the same.

SPX today (green) vs SPX AUG 2011 (red). Bloomberg / Zerohedge

This chart shows how on and intraday basis the fiscal cliff has tracked the debt ceiling almost perfectly and lines up to the fact that we could see a 15% fall in next 8 trading days.

VIX Today (green) vs VIX Aug2011 (Red). Bloomberg/Zerohedge

The VIX, or Fear index is also tracking the previous VIX almost perfectly. And this also suggest the Stock Markets are going to fall. 

On the bright side, this correction could provide some great value around the world, especially in Europe, where the FTSE could down from nearly 6000 today to 5200 or lower, the DAX could once again Drop lower than the FTSE as it did in 2011.

Dow (RED) VIX (Blue). Thomson Reuters.
the relationship between these is clear and the VIX is pricing a much lower Dow.

All in all, the next 7-10 trading days could be extremely volatile but could provide real value.
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