Stock Market Analysis

Wednesday, January 27, 2016

Let The Stock Market Crash and Continue Rate Hikes...

"Let the stock market crash and continue to hike rates as previously planned!" said a renowned economist and Fed chairman candidate yesterday. In fact, there were also advises along those lines coming out of China to "let the stock market crash but continue...".

In fact, even though the FOMC announcement kept rates the same exactly as expected, the market still plunged as the Fed pledged with a 10-0 vote to continue raising rates in a "gradual" manner. This means that even though the stock market is looking really shaky now, the rate hammer is still hanging over everyone's heads. Well, this ties in exactly into the stock market crash scenario anyways so it didn't come as much surprise. Its usually interesting to see how the world starts to provide the reasons for a market crash whenever the time is due for a market crash. A few months ago when I first proposed a possible market crash going into Q4 2015 and 2016, many analysts tried to talk me down by quoting how economic data are strong and that the stock market do not revolve around imaginary lines blah blah blah. But when the time comes, the world always provides the reasons for my "imaginary lines".

So, why are renowned economist around the world telling policy makers to ignore the market crash, in fact, let the market crash, but establish policies for more stable economic growth in the future after the market crash?

This is because all of these people went through the same academic studies that I did... we all know that stock market cycles are inevitable and trying too hard to prevent it from happening only makes it come harder when it does and makes it even harder to recover from because of the unreasonable policies and steps taken in the pointless attempt to prevent it from happening. Yes, stock market cycles are a fact that eludes scientific understanding at the moment. How everything in nature are of cyclical nature still begs more scientific research. But for now, at least in finance we call it "retracement to the mean" meaning everything moves back to a more average level eventually and this returning to the mean occurring periodically creates this cyclical behavior that we observed.

Well one thing about today's drop that I didn't like was how strongly it happened on the back of that FOMC announcement without any real action taken by the Feds yet. Such a strong move on such a strong volume over nothing tells me tomorrow could actually be a positive day and that this dead cat bounce that I mentioned all week long isn't completely dead just yet.

Market Crash Timer: RED

For now, the market turns a short term neutral trend within an intermediate bear trend and primary neutral trend.


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