U.S. stock market on verge of collapse?

[bailx]

Is this the beginning of the end for the bull market in U.S. stocks?

Global stocks, crude oil and US stocks fell sharply on Monday as investors reacted to the surprisingly sharp slowdown in U.S. jobs growth reported last Friday, which raised concerns about the strength of the world's largest economy.

Even before the jobs report was announced, the markets were reeling right after the markets closed on Thursday, when Egan Jones Rating Company downgraded the US government debt once again, from AA+ to AA, with a negative outlook, citing soaring deficits and the US government failure to come to any workable plan.

“Assuming the federal deficit for 2013 remains at $1.4T and GDP growth is 2.5%, the total debt will rise to $18.1T and GDP will rise to $16.1T, resulting in debt to GDP of 112%. In comparison, France's and Italy's debt to GDP are 81% and 117% respectively.”

This is an Obama recovery!

Short term the market is now oversold and due for a rebound off the S&P 500 50-day moving average, so this is important test.

[Knobby22]

[I]
This is an Obama recovery!

Obama can't raise taxes to the wealthy and can't attack defence spending.
The only thing he can do is further restrict Federal spending on infrastructure and human servises, this will obviously cause a contraction.

It looks like Romney will not be permitted to do anything about these issues either and may in fact get us all in a war with Iran next if he gets elected.

Romney added that he’d restore aircraft carriers to the eastern Mediterranean and Persian Gulf region. And he closed with this stark warning: “Either the ayatollahs will get the message, or they will learn some very painful lessons about the meaning of American resolve.”

All I can think is that too many US politicians are"owned" by powerful interests. Where is the Lincoln equivalent when you need him?

[Starcraftmazter]

SP500 isn't the greatest distance away from it's all time highs during the dotcom and housing US bubbles. Even if the rally continues, it's not going to last long.

[Uncle Festivus]

Not while ever the Fed pumps/prints $5Billion a day into various priming mechanisms AND interest rates stay low AND there are hints of more QE AND revenue increases AND expenses decrease AND everyone else in the world continues to buy their bonds AND......

Then again, reality might triumph, like $18TRILLION in federal debt?

But for some - Reality is merely an illusion, albeit a very persistent one. -Albert Einstein

It's all coming undone.........................

[CanOz]

You know you haven't left the last bear market far enough behind when all the bears come out at the first sniff of a needed correction......

CanOz

[notting]

You know you haven't left the last bear market far enough behind when all the bears come out

Not quite out of their caves just yet.
You'd think we'd have to fall through 1270 ish on the S&P with a bit of volume before the old grinding grizzly bear jaws are hot on our heals. Still a fair amount of hot air between that and where it is now.
The expectations for earnings in the US are not that high, Alcoa has already outdone itself.
If they start debating the US Debt reality to get themselves votes, then it will be a global slaughter house. It will be interesting to see if the Republicans are that unpatriotic.

[sammy84]

SP500 isn't the greatest distance away from it's all time highs during the dotcom and housing US bubbles. Even if the rally continues, it's not going to last long.

Interesting.....because US is near all time highs that means the rally can't continue. I guess the trend isn't your friend.

[Starcraftmazter]

Interesting.....because US is near all time highs that means the rally can't continue. I guess the trend isn't your friend.

Well the only way it got there last time is through very big bubbles - and still during much better economic times than right now.

So what sense does it make for it to surpass that point in the current situation? I'd bet any amount of money it won't.

[sammy84]

Well the only way it got there last time is through very big bubbles - and still during much better economic times than right now.

So what sense does it make for it to surpass that point in the current situation? I'd bet any amount of money it won't.

So I assume you have used all funds at your disposal for short positions?

I trade with the trend. Highs get taken out or sometimes price bounces of resistance. Position sizing will save me regardless.

[Starcraftmazter]

So I assume you have used all funds at your disposal for short positions?

I haven't taken any unusually large positions, I wouldn't like to call an exact top - but I do feel that this rally does not have long to go.

The US inventory cycle is either already over or almost over, people are waking up to the fact that the Euro mess is only just beginning, and China has produced nothing but bad data for weeks.

I can virtually guarantee that the world stock markets will be lower by years end - assuming no QE3/LTRO2.

[chrislp]

I haven't taken any unusually large positions, I wouldn't like to call an exact top - but I do feel that this rally does not have long to go.

The US inventory cycle is either already over or almost over, people are waking up to the fact that the Euro mess is only just beginning, and China has produced nothing but bad data for weeks.

I can virtually guarantee that the world stock markets will be lower by years end - assuming no QE3/LTRO2.

Why bother with that stuff?

I can guarantee you that you won't make money in this market if it's common knowledge.

Considering the price action in the US/European markets in the last 4 months what do you think has been priced in?

[Logique]

I haven't taken any unusually large positions, I wouldn't like to call an exact top - but I do feel that this rally does not have long to go...

Don't always agree with you Star, but siding with you here. I think the risk is to the downside now. Don't know whether it will be just corrective, or a return of the Bear.

[Starcraftmazter]

Considering the price action in the US/European markets in the last 4 months what do you think has been priced in?

I don't know. How do you price in the breakup of the Eurozone? Or a slow landing in China? I suppose by comparison the US will not be catastrophically worse off, but clearly the recession will continue.

[CanOz]

but clearly the recession will continue.

Recession?

Whats your definition of a recession?

Europe, i would agree....but the US...AT THE MOMENT...i don't think too many economists would argue that they are in a recession.

Australia? Until the next data release Australia is not in a recession....

China, depends on how you define it, anything less than 8% growth?

CanOz

[Starcraftmazter]

Recession?

Whats your definition of a recession?

High unemployment, no real wage growth, little or no opportunities for uni grads.

[Klogg]

High unemployment, no real wage growth, little or no opportunities for uni grads.

I always thought a recession was strictly defined by a decline in GDP for two quarters running, but after jumping on wikipedia I found this:

In a 1975 New York Times article, economic statistician Julius Shiskin suggested several rules of thumb for defining a recession, one of which was "two down consecutive quarters of GDP".[3] In time, the other rules of thumb were forgotten...

I guess you learn something new every day

[Starcraftmazter]

I always thought a recession was strictly defined by a decline in GDP for two quarters running, but after jumping on wikipedia I found this:

That is the way it is defined in Australia. Other countries define it differently. And I responded to CanOz's question of how I define it with my own definition as per his request.

[Uncle Festivus]

If we are talking about the definition of what a recession is to gauge the health of the system then you can have an apparent healthy system based on positive GDP but still have an underlying 'recession'.

This is based on the fact that they count Government spending & inventories as positives to the total - absent the governments continued propping up of the figures and US GDP has been negative for several years already. Now you combine this with the fact that they are now running deficits of $1.3TRILLION annually and it only needs simple maths skills to work out that at some stage the government will have to reduce spending dramatically which will show up as official reduced GDP and recession. It has to happen sometime in the future.....

The irony is that if there really is eventually an actual recovery that interest rates will have to rise and they will then have a massive interest bill as well.

They can only pass the buck into the future by printing money & continually rolling over T Bills to keep rates down for a limited time - eventually the system will break.

Time to update 'The Jaws Of Death'

[Smurf1976]

Australia? Until the next data release Australia is not in a recession...

Perhaps the country as a whole isn't, but SA and Tas certainly are and Vic would appear to be damn close.

Tas and possibly SA could be dismissed, but Vic is a rather significant state economically...

[CanOz]

Perhaps the country as a whole isn't, but SA and Tas certainly are and Vic would appear to be damn close.

Tas and possibly SA could be dismissed, but Vic is a rather significant state economically...

Tasmania is Australia's Newfoundland....

Except wait...no greens and now NFLD is Canada's mining boom center....

Now my home province is the Tassie

They measure recession as a national metric, end of story there.

CanOz