The Stock Market

double rainbow chart pattern forming

Shanghai Composite down another 7.5% today. I don't think there will be a huge knock-on effect in Europe and the US immediately, though.

European exchanges are all rising. Could see Chinese exchanges falling again tomorrow and for the rest of the week. As someone pointed out on Twitter, there was no good reason for them to grow 150% - 180% over the course of the last eighteen months so no reason for them not to fall back over the next few weeks. It's unlikely to be hugely catastrophic for the economy as a whole but the bubble seems to have been caused in large part by the Chinese government encouraging small investors to plough cash into the markets. You're going to get a lot of individuals who have borrowed money to invest completely wiped out.

I'm more concerned about the end of ultra low rates than I am about China. I think China is just sparking panic because people are already on edge for other reasons and any catalyst could have set the markets off. I'm guessing there will be a lot of ping ponging between panic and relief in the coming months.

lol

the market looks so rigged at times like these

Good piece from Feb.

http://www.theguardian.com/business/2015/feb/20/crispin-odey-debt-deflation-downturn-predictions

that is good

The Wonderful Wizard of Oz was written in 1900.

China falling through the floor again it looks like

http://www.businessinsider.com/buybacks-disappearing-could-mean-recession-2016-3

zzz these broken clocks predicting recessions that never come... bring it on bitches

I counter with "the market can stay irrational longer than you can stay solvent"

i wish we had Bob Shiller-style GDP futures markets so i could bet on there not being a recession

TBF I'm not really sure why a stock market crash due solely to the end of buybacks would cause a recession in the larger economy, but the thesis about the stock market is somewhat compelling.

lol flopson 2016 'bring it on bitches'

flopson 2018 'ok could u pls stop bringing it on now'

why is the volume up so much since December, and is that something that should be of concern?

Dow, 1-year:
http://i.imgur.com/kqajDse.png

Dow, 3-year:
http://i.imgur.com/y837IkX.png

you have to go back to the meltdown of 08/09 to find volumes this high (except for a blip in mid-2011)
http://i.imgur.com/kDN80Sn.png

maybe this is a question better posed to the algorithms that run the markets now

definitely a concern

something's brewing

and it ain't starbux

it's fun to look at that 10-year chart as a reminder that the current heights of the stock market are entirely due to donald trump

http://www.scholastic.com/parents/sites/default/files/field_asset_image/girl-blowing-bubbles.jpg

was there something that happened in early Dec 16, though, that i'm forgetting? seems odd that volumes would triple, overnight, and stay that way.

if only it'd just be a burst

there's a theory that when the stock market is strong and keeps "overperforming" there is war on the horizon

i carry more than a passing interest in this since basically my only assets are my retirement savings, which are tied up in the government version of a 401K. i can choose (once per day, before noon, to go into effect the following business day) to allocate my savings in large cap stocks, small cap, international, or bonds. although it's generally recommended (for younger people who can accept more financial risk, esp.) to just stick it all in the large/small caps and don't touch it, i do try to at least pay attention to impending disasters so that i can shift my money to bonds and avoid huge losses. but that can blow up in your face, too. a week before trump's inauguration i shifted everything to bonds, assuming that there was a high probability of trump doing something incredibly stupid that would destabilize the global financial markets. i forgot that traders love trump because they know he'll deregulate, if anything, and so my retirement savings stayed flat while everyone else's jumped up 10% over a month. now i'm back in the game, so to speak, by allocating most of my savings to the large/small caps, but i'm concerned that there will be a crazy day out of nowhere and i'll lose a 1/3 of my savings in one fell swoop. but then again, i can't just stay out of the market for the next 4-8 years.

IT'S SO COOL THAT THE GOVERNMENT DECIDED TO TIE ALL OF OUR RETIREMENT SAVINGS ACCOUNTS TO THE STOCK MARKET

if only we could tie our Social Security accounts to the market as well, am i right!?!?!!

http://www.barrons.com/articles/war-is-hellbut-not-for-the-stock-market-1492702379

Consider how the Dow Jones Industrial Average has performed both before and after the U.S. military became engaged in past foreign hostilities. We focused on seven discrete events since the early 1980s:

• The U.S. invasion of Grenada (1983)

• The U.S. invasion of Panama (1989)

• The first Gulf War (1991)

• The U.S. bombing of Kosovo (1999)

• The U.S. war on Afghanistan (2001)

• The second Gulf War (2003)

• The U.S. bombing of Libya (2011)

...

On average over the month prior to the beginning of these seven events, the Dow fell 0.6%, or 1.4 percentage points lower than the average of all months since 1983 (see chart). But this underperformance was quickly reversed: In the month after the U.S. military entered a conflict, the Dow soared an average 4.0%—3.2 percentage points greater than the average of all months since 1983.

i assume that's something specific to the DJIA and the way it's defined/calculated. there isn't the same jump in other indices.

i do try to at least pay attention to impending disasters so that i can shift my money to bonds and avoid huge losses. but that can blow up in your face, too

don't do this. don't do this. don't do this. buy 30% bonds and 70% in a broad equities tracker. check your account once a year. increase 30 and reduce 70 as you approach retirement.

also that seems to say that the stock market over performs after the war start but under performs beforehand so i don't think an overperforming stock market suggests imminent war

it says it underperforms during

and no, not imminent, it's just a theory

On average over the month prior to the beginning of these seven events, the Dow fell 0.6%, or 1.4 percentage points lower than the average of all months since 1983

don't do this. don't do this. don't do this. buy 30% bonds and 70% in a broad equities tracker. check your account once a year. increase 30 and reduce 70 as you approach retirement.

This.

xp

keep reading

"But this underperformance was quickly reversed: In the month after the U.S. military entered a conflict, the Dow soared an average 4.0%—3.2 percentage points greater than the average of all months since 1983."

right - exactly what i said. before the conflict the stock market went down. after entering the conflict it went back up.

that's at the very start

then it goes down

More than half the DJIA's weighting is [10 stocks](http://indexarb.com/indexComponentWtsDJ.html). There isn't a notable volume increase in more representative like SP or NASDAQ; indeed volumes been declining. I think we're just seeing two short covering rallies in Nov and Apr, and when that supports gone and we have our government shutdown we'll see support breaking on those larger indices.

they changed the way they calculated volume - https://stockcharts.com/articles/dont_ignore_this_chart/2016/12/whats-the-deal-with-that-intraday-volume-on-the-dow-indu.html

Can't fool all of the people all of the time

I started to wonder today if the ridiculous bull market we have right now is purely the result of all that money pumped into the system after the financial crisis finally starting to exit other asset classes (e.g. real estate) and flow into equities.

A large part of the enthusiasm atm is based on the newly passed tax bill. The anticipation is that the profits currently parked by big multi-national corporations in their foreign subsidiaries will quickly be repatriated to the USA at the much lower tax rates, which could be rolled back if the democrats take Congress and the White House. The thinking is that the vast majority of that money will be used for stock buy-backs or for mergers and acquisitions, since there's little appetite for investing it in new equipment, new factories, or (exploding laughter) higher wages.

Market was growing before the tax bill. Not saying it makes no impact (I don't have the analysis skills to make that determination) but it seems like there are other factors.

Market was growing before the tax bill.

Markets are all about pricing the future. But, yes, the tax bill isn't the only factor in play. It's just a very big factor. If the market started to believe the Fed was going to boost interest rates at an accelerated pace, that could slow it down a fair bit. Right now, exuberance is the order of the day. Even having an unstable semi-literate running the executive won't change that calculation... for now. Expectations about the future are inherently unstable.

It's been growing at an insane rate since trump was elected, but maybe it's all on the assumption of tax breaks and business giveaways

A big infrastructure bill loaded with lots of goodies would just whet their greed even further. That's another business giveaway the market is hoping will land in their lap. In fact, overheating the economy seems to be the Republicans' main strategy for avoiding big losses next November.

http://www.macrotrends.net/1358/dow-jones-industrial-average-last-10-years

^^ worth a peek for context

mid 2015-2016 on that graph is basically ¯\_(ツ)_/¯

haha i was thinking wonder woman / weezer / wwf wrestling

Watch the bond market (which dwarfs equities). July 2016 was the "top" (lowest yield). There's an important test of the "lows" (high yields) of December 2016 and March 2017 in the next couple weeks.

Also, the yield curve is growing ever flatter: expectations for slowing growth.

Reuters: Chinese agency Dagong cuts U.S. sovereign ratings to BBB+ from A-

The growing reliance on the debt-driven mode of economic development will continue to erode the solvency of the U.S. federal government, the Beijing-based ratings agency said.

“Deficiencies in the current U.S. political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,” Dagong said.

“Massive tax cuts directly reduce the federal government’s sources of debt repayment, therefore further weakens the base of government’s debt repayment.”