Is this the Last Gasp? Did we just Peak?
In looking at the data, timing the market's crash seems to be less mysterious and more easily predicted.
1. Shortly after the recession starts
2. Following a major run-up. That is, the market doesn't move sideways and then suddenly down - it lurches up.
Are we in recession? If GDP was 0.6% in Q4 2007, we are probably very close to recession.
The recession is clearly not the trigger for the onset of the crash because the markets continu eto rise. But we never know exactly when we enter a recession, only in hindsight do we know. So, when the market crashes, it must be while the economy is very sluggish but the proof - the official numbers - are not yet out.
Do the GDP releases act as a trigger? certainly markets anticipate the releases with great interest.
The 1990 crash - started the 3rd week of July, just after the Q2 1990 numbers were released.
The 2001 crash - started the 3rd week of May, when April preliminary figures were released and setting the tone for Q2 2001
But that doesn't tell the full picture. Using government figures (http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&FirstYear=2006&LastYear=2007&Freq=Qtr)
Look at 1990:
1Q 1990 GDP 4.7%
2Q 1990 GDP 1%
3Q 1990 GDP 0%
Real GDP may be a quarterly figure but monthly updates are released. While the official numbers confirming recession would not be released for a few more months, some preliminary figures must have been released that spooked the markets.
I don't have the time machine to go back and read the articles of the day. But I suspect that in order for GDP to fall from 4.7%+ to 1%, June must have been pretty dismal. Spending doesn't just stop, it drifts down - so June must have been announced as a bad month. The preliminary June figures would have been released in mid-July, right when th emarket tanked.
Looking at 2001:
Q3 2000 -0.5%
Q4 2000 2.1%
Q1 2001 -0.5%
Q2 2001 1.2%
What happened from April, when the Q1 2001 GDP figures were released and May? that is, why the 1 month delay? Again, without newspapers, I can't say for certain. I suspect that the preliminary figures at the start of Q2 were causing confusion, but by May things were clearly worsening.
The Q1 GDP data releases April 30th - 3 weeks away. I am planning on that being a trigger for a market collapse. The markets aren't stupid: we just went from 4% growth to 0.6% growth. They know that the economy is anemic. They are just waiting for the official numbers.
It's no guarantee that we'll wake up April 30th to see a market diving for cover. The Fed could drop interest rates a further 0.5%, for example. But it is likely that this month or May will bring the hammer down.
1. Shortly after the recession starts
2. Following a major run-up. That is, the market doesn't move sideways and then suddenly down - it lurches up.
Are we in recession? If GDP was 0.6% in Q4 2007, we are probably very close to recession.
The recession is clearly not the trigger for the onset of the crash because the markets continu eto rise. But we never know exactly when we enter a recession, only in hindsight do we know. So, when the market crashes, it must be while the economy is very sluggish but the proof - the official numbers - are not yet out.
Do the GDP releases act as a trigger? certainly markets anticipate the releases with great interest.
The 1990 crash - started the 3rd week of July, just after the Q2 1990 numbers were released.
The 2001 crash - started the 3rd week of May, when April preliminary figures were released and setting the tone for Q2 2001
But that doesn't tell the full picture. Using government figures (http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&FirstYear=2006&LastYear=2007&Freq=Qtr)
Look at 1990:
1Q 1990 GDP 4.7%
2Q 1990 GDP 1%
3Q 1990 GDP 0%
Real GDP may be a quarterly figure but monthly updates are released. While the official numbers confirming recession would not be released for a few more months, some preliminary figures must have been released that spooked the markets.
I don't have the time machine to go back and read the articles of the day. But I suspect that in order for GDP to fall from 4.7%+ to 1%, June must have been pretty dismal. Spending doesn't just stop, it drifts down - so June must have been announced as a bad month. The preliminary June figures would have been released in mid-July, right when th emarket tanked.
Looking at 2001:
Q3 2000 -0.5%
Q4 2000 2.1%
Q1 2001 -0.5%
Q2 2001 1.2%
What happened from April, when the Q1 2001 GDP figures were released and May? that is, why the 1 month delay? Again, without newspapers, I can't say for certain. I suspect that the preliminary figures at the start of Q2 were causing confusion, but by May things were clearly worsening.
The Q1 GDP data releases April 30th - 3 weeks away. I am planning on that being a trigger for a market collapse. The markets aren't stupid: we just went from 4% growth to 0.6% growth. They know that the economy is anemic. They are just waiting for the official numbers.
It's no guarantee that we'll wake up April 30th to see a market diving for cover. The Fed could drop interest rates a further 0.5%, for example. But it is likely that this month or May will bring the hammer down.
posted by Andrew at
6:44 PM
1 Comments:
Markets are wavering at its best. I thinking last rally somewhat squeezed the shorts. I also think market would do the same until it gets some message from Feds late April, and that might spark another fake rally. May be after that, there might be a crash as you say.
Anyhow, ultra shorts are still beaten up. Its going to be interesting month ;)
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