January 13, 2016
MAJOR ALERT: The warning signal preceding global stock market crashes in 1929, 2000 & 2008 was just triggered!
January 13 (King World News) – Jason Goepfert at SentimenTrader: Stocks have now suffered two 10% corrections in a short span. This is difficult to quantify, but according to our tests, this has only happened on three other unique dates, in 1929, 2000 and 2008. All of those preceded major bear markets.
On a shorter-term basis, a near-majority of our indicators are now oversold or showing extreme pessimism. We’re seeing the most heavily lopsided selling volume in five years according to the Up Volume Ratio.
Markets not responding to oversold conditions…The S&P 500 has now corrected 10% from near a 52-week high for the second time in a relatively short span. In the meantime, it had rallied at least 10%.
Action Mirrors 1929, 2000 & 2008 Stock Market Crashes!
Going back to 1928, this has only happened on four other dates, October 1929, May 23, 2000, October 11, 2000 and January 8, 2008. As shown in Figure 3, these were dates that should send a shiver down the spine of any bull (see stunning chart below).
Is this significant? We can’t read much into three unique occurrences, but they were consistent and the pattern is similar.
Shorter-term, the selling on Wednesday was overwhelming, with more than 90% volume flowing into declining stocks. Over the past 10 days, the Up Volume Ratio has dropped below 28% for the first time in five years.
Bottom line, this is one of the more difficult junctures in the 18 years we’ve been publishing. Stocks are objectively oversold but markets are not responding well to that. There are lingering long-term concerns but also many positives when looking at other oversold markets.
3 Possible Scenarios
This is a throw-your-hands up moment. There are basically three scenarios and we’d give the probabilities like this:
* Oversold bounce: 50%
* Flush lower then bounce: 30%
* Outright collapse of 5%-15%: 20%