Is a Crash Impending?

"President Hoover's Response to the Stock Market Crash of October 29, 1929" via The Presidential Timeline of the Twentieth Century.

[Dear Readers, You may have noticed that often I post here, in its entirety, an article that I've read elsewhere. This I do for several reasons. One, I use this blog as a repository for information I want to keep handy for myself and two, because what I'm posting is, in my opinion, too important to simply provide a link for you with the suggestion to, "Read this," (as you often don't.) This article satisfies both of those conditions. While its details may be a little beyond the grasp of the average Joe (who may not have been a stock trader as I was,) its language should be plain enough to convey the point. -- The stock market is being manipulated. This is not a recovery. - c]

Disclaimer: covertress holds no market positions.

Is a Crash Impending?

By Karl Denninger, Seeking Alpha

You have to wonder when you see statistics like this (through 9:30 Friday morning):

Remove SPY, ETFC and LEHMQ (none of which trade on the NYSE) from the list and you get 606 million shares.

How many shares have traded in total with one hour in?

1.491 billion.

Forty percent of the volume is comprised of four used dogfood stocks, just as we've seen for the last couple of weeks - all people passing shares back and forth among each other, many of it being "computer HFT games." [<-- Read this. ;)]

The other used dog-food stocks (LEHMQ and ETFC) are really no better; they just don't trade on the NYSE. Lehman is particularly ridiculous as that's a formally-bankrupt company!

Fannie (FNM) and Freddie (FRE) are two of the most outrageous abuses I've seen in a long time, second only to AIG (AIG). All three of these should be delisted as their equity value is quite literally bupkis.

This just goes to illustrate - the market is currently being levitated on literal trash. Again today we see the Casino trying to suck in people; I got emails from two more associates over the weekend telling me that their "advisors" are telling them "you have too much cash allocated; now is the time to buy."

Now is the time to buy, after a 50% move?! Where the hell were these so-called "advisors" at SPX 666?!

Nobody - and I do mean nobody - is talking about what this sort of volume pattern means. Well, I will: this is the sort of pattern that precedes an all-on equity market collapse. It strongly implies that the only volume support that the market has is from "hot money" speculators. Lest you think this is sustainable let me point out that just a few weeks ago the very same so-called "commentators" said the same thing about China's market. Here's what happened:

The white box down below is the target on the break downward out of that flag last night - the top of the box is the critical "must hold" level from the first retrace off the bottom and the bottom of the box being the the start of the entire move. If they're lucky the market holds around the 250-275 level, but I wouldn't bet on it.

That's nasty - The Shanghai market has already lost roughly 25% from its recent peak, and it took just three weeks to lose what required roughly three months to put on.

How do you like those odds, folks? Pay close attention to the lessons from the East, lest you get to learn them the hard way right here.

A 25% loss from the recent highs on the SPX places the S&P 500 around 775.

I smell a repeat of 2001/2002, when the very same "analysts" said the bear market was over and everyone jumped back into the pool going into the end of 2001, only to get destroyed in the collapse that followed and took out the 2001 low.

Heh, I might be wrong on this, but those who "believed" in the Shanghai market are missing 1/4 of their money - so far. -- ###

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Listen carefully for parallels to today's economy.

1929 Wall Street Stock Market Crash

This particular video about Wall Street crash of 1929 is from episode 5 of the PBS series entitled "Cosmopolis."

It's worth watching for the historic eye candy alone.

Archival shoots took place at various historical and cultural institutions in New York and include the best footage I've seen of The Crash at the New York Stock Exchange.

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In the general course of human nature, a power over a man's subsistence amounts to a power over his will. -- Alexander Hamilton

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Gone fishing. - c