I’ve been saying the stock market will take a turn for the worst sometime between mid-August and October. Numerous market metrics now show a market that looks ready to turn over. The bear may soon be back in charge.
The futility of trying to stop the stampeding herd and the Fed fallacy
When I pointed out last January that the market was more perilously overpriced than ever and imminently ready to crash, the stock market took one of its most spectacular dives in history just a month later. (See: “Stock Market More Overpriced and Perilous Than Anytime in History.”)
Before the market plunged, I showed that Fed juicing (quantitative easing) was at all-time highs and continuing. That, I noted, made my prediction highly unlikely by most accounts.
The Fed is back to easing — back to doing what it does to juice markets up. And the correspondence between what central banks do with their balance sheets and what the stock markets do is now almost 100%.
I illustrated that with the following graph:
Yet, make my prediction I did.
Giddy investors on some sites tried to scorch me under their burning belief that the market couldn’t possible fall because the Fed had its rigging all firmly in hand, even though I had noted I was well aware of that. I replied the market was going to fall anyway — likely soon and certainly hard.