After 8 years of reckless central bank policies and bubbling stock prices, today one of the greats in the business issued a stock market crash warning.
September 14 (King World News) – Art Cashin, Head of Floor Operations at UBS: Of Calendars And Cautions – This year has seen many longstanding seasonal patterns fail to perform. Sell in May and Go Away was a clear loss maker this year. The traditional market weakness in August and September has been stood on its head. Sharp-eyed Keene Little over at Option Investor thinks it may have to do with a different “pattern”, the one that comes in a year ending in a seven.
Here’s a bit of what Keene wrote:
While we should be looking over our shoulder for potential trouble, the market has been ignoring the troubling signs and that could continue longer than most think possible. Don’t fight the trend is clearly the message after just a 3-wave pullback in August. The pattern of the rally off the August 21st low is not clean but the choppy move higher fits as an ending pattern. So I would definitely not get complacent about the current rally. Don’t fight it but be careful joining it. I have a feeling the reversal from it could happen quickly and strongly.
If the market does hold up into October it would fit a pattern for years ending in 7, which is what we’re currently in. In the past, with August and September being typically weak months, it’s been common to see some ugliness into September. October has been known as the bear killer since a strong rally into the end of the year has typically started from a stronger pullback into October.
But in the more recent years ending in 7 (1987, 1997, 2007) we’ve seen market highs in October and strong declines follow. There was the stock market crash in October 1987 (down -34%), the mini-crash in October 1997 (-13%), which started in Asia, and the peak in October 2007, which led to the crash into the 2009 low. Instead of being bear killers, the past three Octobers in the year ending in 7 have been bull killers (even if for only just a scary pullback before heading higher again).
The way the price pattern is setting up I think this October (if not a couple weeks before it) will be another bull killer. The market is so badly distorted right now (excess credit) and the rally from last November has been built primarily on hope (for government tax and regulation changes). Sentiment is a fickle thing and when it changes it’s likely to induce panic quickly, which is the reason for watching over your shoulder while enjoying the ride higher.
***KWN has released the remarkable audio interview with whistleblower and London metals trader Andrew Maguire discussing a major short squeeze developing in the gold market, why the Goldman Sachs admission is such a big deal and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: An Extremely Important Look At The Big Picture CLICK HERE.
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