U.S. Stocks Fall

[Brian4Liberty]

It looks like we broke under the 50 day and 100 day moving averages, taking out a couple of support levels.

And not surprisingly, the paid pundits on CNBC spent a lot of the day saying that the problem is rising labor costs. Yeah, that's the root cause of all of this. Fed policy, quantitative easing, easy money, money printing and debt could never create price inflation (except on incidentals like food and housing).

Luckily, there is an easy solution for those pesky labor costs. The US Chamber of Commerce will join with Obama for a clever "compromise". So convenient...

NEW YORK (Reuters) - U.S. stocks fell more than 1 percent on Thursday, with the S&P 500 on track for its worst daily decline since April and first monthly drop since January, as concerns mounted over the strength of overseas economies and ongoing tensions with Russia.

The benchmark index moved solidly under its 50-day moving average, a level it has not closed below since April 15. The moving average is viewed as a sign of short-term momentum, and selling accelerated after the level was breached.

All 10 macro S&P 500 sectors were down on the day, with energy (.SPNY) among those leading declines with a drop of 1.8 percent.

The CBOE Volatility index (.VIX) jumped 23.3 percent to 16.43, its highest level since April, though well under its historical average of 20.

"Technically, the market has looked very weak," said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston. "The number of stocks in up trends has been falling so technically the market has reported what investors are feeling," which is worried about the Fed and also "international events."

Argentina defaulted for the second time in 12 years. Investors had hoped for a midnight deal with holdout creditors, but the plan fell through. Even a short default will raise companies' borrowing costs, add to pressure on the peso, drain dwindling foreign reserves and fuel one of the world's highest inflation rates.

U.S. labor costs recorded their biggest gain in more than 5-1/2 years in the second quarter and a gauge of trends in the jobs market fell to an eight-year low last week.
...
More:
http://finance.yahoo.com/news/stock-futures-fall-argentina-default-112821651.html

 

[jllundqu]

Just some summer profit-taking methinks

 

[Jordan]

Labor costs will probably be a concern as unemployment drops and employers have to bid for workers/poach from competitors. But really, trying to discern why the markets moved up or down in one day of trading is pretty silly.

 

[ctiger2]

If Martin Armstrong is right the DOW will double before it crashes. Looking at his economic confidence models suggests maybe doubling of DOW from 17K to 34K from now until spring 2016 with the bottom coming mid 2017. Then it's OVER. 2016-20 isn't going to be all that fun for most.

 

[jurgs01]

If Martin Armstrong is right the DOW will double before it crashes. Looking at his economic confidence models suggests maybe doubling of DOW from 17K to 34K from now until spring 2016 with the bottom coming mid 2017. Then it's OVER. 2016-20 isn't going to be all that fun for most.

How could those valuations even remotely be justified? The Federal reserve would have to really gas the QE for that to happen.

 

[oyarde]

If Martin Armstrong is right the DOW will double before it crashes. Looking at his economic confidence models suggests maybe doubling of DOW from 17K to 34K from now until spring 2016 with the bottom coming mid 2017. Then it's OVER. 2016-20 isn't going to be all that fun for most.

More likely to see 14k than 34 k , just my guess ...

 

[fatjohn]

I smell a small crach coming, the DAX has really broken trough very visible resistance this week and is down another 1.6% today.
I think by the US close the dow will have touched 16000 and rebounded a bit. Could see it developping in an ugly friday and a panic weekend). Fun times ahead. Hope gold holds strong.

 

[ILUVRP]

More likely to see 14k than 34 k , just my guess ...

i agree , i think it could go down to 12500 , big moves like the 8k to 17k like to correct 50% of the move 17-8 = 9 divided by 2 = 4.5 , 8k + 4.5 = 12,500 .

i own TZA for the last 3 months , a 3x rus 2000 short , thats all i have , been looking at ANV gold stock but their debt is very high.

 

[thoughtomator]

I smell a small crach coming, the DAX has really broken trough very visible resistance this week and is down another 1.6% today.
I think by the US close the dow will have touched 16000 and rebounded a bit. Could see it developping in an ugly friday and a panic weekend). Fun times ahead. Hope gold holds strong.

The problem is that scenario very likely could happen, and it's also just as likely the Fed will flood the system with trillions more to prop up the market.

 

[TheCount]

The problem is that scenario very likely could happen, and it's also just as likely the Fed will flood the system with trillions more to prop up the market.

If neither of those things happen, will your expectations change?

 

[Brian4Liberty]

i agree , i think it could go down to 12500 , big moves like the 8k to 17k like to correct 50% of the move 17-8 = 9 divided by 2 = 4.5 , 8k + 4.5 = 12,500 .

i own TZA for the last 3 months , a 3x rus 2000 short , thats all i have , been looking at ANV gold stock but their debt is very high.

IMHO, ANV played itself out.

 

[oyarde]

If neither of those things happen, will your expectations change?

Well , I trust nobody , so I just keep planting trees , beans , potatoes ,panning gold dust , and loading rifles , LOL

 

[ILUVRP]

Well , I trust nobody , so I just keep planting trees , beans , potatoes ,panning gold dust , and loading rifles , LOL

sounds like a good life , i also reload .

 

[Madison320]

The only question for me is how many times will the Fed resume QE before the dollar crashes.

 

[thoughtomator]

If neither of those things happen, will your expectations change?

If it appears (in a few months or so) that neither thing has happened, I will be looking to determine what back channel the Fed managed to use to avoid detection.

Market equilibrium is far below where we are now - this we can be certain of, as raising market valuations is an explicit intent of QE - so if we don't return to equilibrium, then that there is an artificial (non-market) force in that case is a given, the only question being what is the force.

 

[ILUVRP]

the s & p 500 pe ratio now about 19x , the avg is around 15x , so to me it can fall 25 percent .

 

[Zippyjuan]

http://americasmarkets.usatoday.com/2014/08/08/tallying-up-stock-pain-if-p-es-retreat-to-average/

Article from today.

Tallying up stock pain if P-E's retreat to average

The Federal Reserve recently said that pockets of the stock market have “substantially stretched” valuations. The broad S&P 500 is also trading above its historical price-to-earnings multiple. If the P-E shrank to its long-term average, how far would stocks fall?

The answer: more than 8% from current levels. If you add that potential drop to the recent slide of more than 3%, you end up with a full-fledged correction of 10% or more.

Here’s how the math adds up:

The trailing four-quarter P-E ratio for the benchmark Standard & Poor’s 500-stock index is currently 16.8. If you multiply 16.8 x $114.44 (the S&P 500’s trailing four-quarter earnings-per-share, according to Thomson Reuters), you get the index’s current value of roughly 1915-1925. That’s down roughly 3.5% from its July 24 all-time closing high.

But a market multiple of 16.8 is much higher than normal. The long-term average P-E for the S&P 500 is 15.35, according to Bespoke Investment Group, citing data going back to 1929.

So where would the S&P 500 be trading if the market’s P-E contracted to the long-term average? Roughly 1750. (Earnings of $114.44 multiplied by a P-E of 15.35 = 1757 on the S&P 500.) If the P-E shrank to its long-term norm, the index would need to fall 8.3% from current levels.


Of course, with corporate earnings coming in strong and economic data in the U.S. on the upswing, a major contraction in P-E multiples isn’t a sure thing. But investors should be aware that the S&P 500’s P-E has already started to shrink amid rising geopolitical risks. Back in May, the index was trading at 17.3 times earnings — or 2 full percentage points above its historical average, according to Bespoke.

The good news is that the average P-E since 2004 is 16.95, Bespoke data show, which means the market’s current valuation of 16.8 times earnings is in line with more recent history.

 

[ILUVRP]

this is as of august 9

https://www.google.com/url?sa=t&rct...UmYtaJYAa6lVDeU3Q&sig2=gwasjKh3AP1QfremrjfRXg

 

[Zippyjuan]

Tomorrow is August 9th. But yeah, the article was looking at the "trailing four-quarter P-E ratio" which was the average for the last quarter, not a spot measure of today's figure.

Investopedia explains 'Trailing Price-To-Earnings - Trailing P/E'

This is the most commonly used P/E measure because it is based on actual earnings and, therefore, is the most accurate. However, stock prices are constantly moving while earnings remain fixed. As a result, forward P/E can sometimes be more relevant to investors when evaluating a company.