Why I feel this is about to all blow over

The news is out and the numbers are in. One variable causing fear and unrest in our markets is no longer a ranging value - at least for now.

I’m speaking of course of China, and the GDP numbers reported tonight are largely in line with expectations. Not great, but not bad either, but perhaps more important to us now is that tonight they are officially known. The worst case scenario factored in with everyone’s paranoia and end-of-days expectations has priced the market into a worst case scenario. The model can now be reset. And if that reset is true, the worst we’ve seen will be over.

I am by no means declaring victory and calling an immediate end to the turmoil. Markets can and will go up and down on their own terms, and sometimes there is no rationale. I just have a hunch that the oversold nature of our market will let out a huge sigh of relief in a very short order - barring no other world changing news event to stir in more unrest.

Here’s to a fresh new(s) day tomorrow.



From the FTSE point of view we are at a critical level - 38% retracement if it goes below this it looks like the market falls will continue and take this to the bear market definition of a 20% drop for the US markets.

I’d love this to be over but I think we have further to go.

I think Oil is a bigger psych factor in the US and Europe than China. If the west is falling back into recession or deflation then forget about China there are much bigger things to worry about if you are Fed or BoE.

When it blows over though it could turn pretty quickly. Then we have a pro business Trump presidency to look forward to!


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All the major indices (futures) are trading up near 1% as I type this.

Here is where the FTSE is: http://www.investing.com/indices/uk-100-futures

You are up 1%. Of course anything could change from now until the market opens officially - but for you that will be fairly soon.


Just for reference, here is where all the major indices are reported in real-time. Trading and reporting on the indices are available anytime there is a major market open on the planet somewhere, which is currently China and Japan right now.




Also note that the VIX is down over 3%, a sign that more certainty is being factored in to market thinking.




-38% is a bear by any definition.
World markets are linked more than ever.

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38% retracement of the bull run not of total index value. Yes 38% fall in an index would be a mega bear market.


A pop up Tuesday is high probability. But it is all market internals and has next to nothing to do with general longer term market trends.

Assume the prices on SP 500 are a random distribution Gaussian thing. They aren’t but they are not too far off. The last few days in the market are a bit more than 3 standard deviations down from a 30 week mean. Odds are this won’t last long, odds are astronomical against declines going straight down every day to -4 or -5 standard deviations,unless this is the end of the world. This is one way to look at the “oversold” idea.
There are others.

This has nothing to do with the outlook for Saul type companies. But may have something to do with the price you pay for the stocks.So it its not entirely OT.

Me, I have a couple off Saul type stocks that are buy and hold. Hopefully that will work out in the long run. Though as I get older the long run becomes ever more a shorter run…

Not great, but not bad either, but perhaps more important to us now is that tonight they are officially known.

What is officially known? The published numbers in no way indicate what’s going on in China. They are made up by government bureaucrats.

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Don’t forget: we are about to enter the thick of quarterly earnings reporting. It will be all about the guidance issued. I think it’s unlikely that we’ll hear much in the way of upbeat guidance.


Advocatus -
Try to keep up. The Chinese numbers being made up by bureaucrats started under Mao because that’s what they thought he wanted to see.

The practice continued post Mao, but the central government in Beijing began making “adjustments” to the provincial reports beginning with Deng Xiaoping because he felt it was more important to estimate what was really going on. This adjustment practice did not provide actual factuals but it came closer.

More recently, under Hu Jintao the reporting became much more accurate because China wanted to play more seriously in world markets and world trade.

And most recently under Xi Jinping the reporting has come in very close to the actuals because of his very serious efforts to end corruption in China and the jailing of a number of very important former government officials. He is taken seriously and the demands for more honesty and transparency are one of the reasons we’ve seen a decline in the incredible growth in the Chinese economy. It was, in fact, not credible.


Tonight, as I write this, the Nikkei 225 is up over 940 points. The Hang Seng is up just shy of 600. I believe we found our bottom. Helped by this is the ensuing short squeeze as short sellers around the world cover their open positions, fueling a buying frenzy. Europe opens next, we’ll see what she does. If that goes well, matching Japan, tomorrow we could see a near 1000 point rally.

I welcome the return of pricing based on actual fundamentals. Let the earnings season begin.


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kevinh68:I welcome the return of pricing based on actual fundamentals.

Seems that this is a rally built more on an admission by the European Central Bank to ease policy, seconded by a signal from Prime Minister Shinzo Abe’s aide on Thursday that “conditions for additional easing have fallen into place,” including an increase its asset-purchasing program.

Oh, and oil.