Why the stock market is crashing?
The financial markets have spoken their opinion about the Tuesdays election very clearly in simple easy terms: Massive sell offs. The Wall Street and the people who run this stock market have also spoken via a normal public relations channel called relentless sell offs. There should be no doubt in your mind what they mean here. They are not happy at the outcome of the Presidential election 2012.
Wall Street has been supporting Mitt Romney financially, and otherwise and investing in him. They knew as President, Mitt Romney will either remove Frank-Dodd act completely, or make it ineffective, and or have some major alterations. There were other hopes that Mitt Romney will create a better economy, which in turn would fix this economic mess, and a slow or poor recovery. If you listened carefully on the first debate, Mitt Romney spoke clearly about dismantling Frank-Dodd banking reform act which limits bank’s proprietary trading, and places other restrictions on the trading profits. The law has been a nightmare for the Wall Street last two years and they fought tooth and nail over it.
Such were the hopes and dreams of Wall Street and the emotional capital tied with the candidate. Their heavily invested and favorite candidate Mitt Romney was defeated in the electoral college by 8.20 PM Tuesday evening. All the hopes were also dashed to the ground in few hours of the historical evening of November 6 , 2012.
Next morning the SPX 500 dropped 30 points within 90 minutes. That is a huge sell off unseen all of this year and reminds me of April 2010 sell off and August 2011 sell off. Here is the Intra-day chart of SPX on 11-07-12 and 11-08-12. Please click to enlarge.
These sell offs are a specialty of Wall Street, whenever they get angry, something doesn’t suites the stomach, they start selling. They throw the baby with the bathwater through the window. The angst, anger, frustration, despair , upsetting moods, darkness never results in a bullish markets, at least you already know that.
I’ve been in these reactionary sell offs at least a dozen times in the past six years and I know one from the git go. I knew on the election night it would be a bad day. But I didn’t know how bad and how long. That no one knows. You just have to take one day at a time. It is like a sickness, an acute and severe sickness. Someday it would heal back become normal, but it takes time, but not until they bring you to your knees and plus some more. Weak hands will be crushed and positions decimated and squashed to a red throbbing pulp.
Well you see, it’s not a good idea to make these people so angry, not like this. Its not healthy. They have the power to hurt you and millions of people. They can squeeze all your retirement accounts to nothing, and leave you almost destitute and poor and almost dead and gone. It will hurt real bad, so bad you wont be able walk around on two feet. I know I’ve been there myself, I used to crawl to my computer on the floor and lay there holding it for few hours.
Now throw in the prospects of the Fiscal Cliff and that is like mixing gasoline with fire. It can really catch up. It already has. The market is crashing without doubt for these two reasons as John Boehner laid out the wrestling mattress in today’s speech.
The SPX is now penetrating the 200 day moving average. Will it bounce from here or go deeper that remains to be seen. Most of the stock charts are just as damaged below the 200 day moving average. Interestingly the $VIX is only in the teens at 18.49 as of this writing. That should tell you, there is really not that much fear in the market, because had that been the case of real concern this $VIX would have shot up to 20-30s or lot more and very fast. That is not the case here as yet. The people controlling this market aren’t really scared themselves at all. At least we assume or know, what they are doing ? Here is a chart of $VIX please click to enlarge:
If you don’t believe in $VIX than you are out of luck because fear will make you walk on all fours and it won’t help at all. For more technical analysis, volatility trading, and advanced options strategies, join our Premier membership it will help you daily in your technical analysis, and market direction.