I thought I would provide a brief reminder & update. Consider this an economic heads-up.
In mid-October, Business Insider reported that Murray Gunn, head of technical analysis for HSBC, citing the Elliott Wave Principle, said that he had become on “RED ALERT” for an imminent sell-off in stocks given the price action he had seen over the previous few weeks.
In late September, Gunn said the stock market’s moves looked eerily similar to those just before the 1987 stock market crash. Citi’s Tom Fitzpatrick also highlighted the market’s similarities to the 1987 crash just weeks later. On September 30, Gunn said stocks were under an “orange alert,” as they looked to him as if they had topped out.
“With the US stock market selling off aggressively on 11 October, we now issue a RED ALERT,” Gunn said in the note. “The fall was broad-based and the Traders Index (TRIN) showed intense selling pressure as the market moved to the lows of the day. The VIX index, a barometer of nervousness, has been making a series of higher lows since August.”
The Bigger Issue
Gunn said the selling would truly set in if the Dow Jones Industrial Average were to fall below 17,992 or if the S&P 500 were to dip under 2,116.
Since the time of that statement, both have briefly dipped below those markers on different days. However, Gunn went on to say “But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast. The possibility of a severe fall in the stock market is now very high.”
The Point: November 2, 2016, the Dow Jones Industrial Average closed at 17,959.64 and the S&P 500 at 2,097.94.
I provide this economic heads-up to present potential influences moving forward.
Bryan, B. (2016, October 12). RED ALERT — get ready for a ’severe fall’ in the stock market, HSBC says. Retrieved November 2, 2016, from Business Insider, http://www.businessinsider.com/hsbc-red-alert-get-ready-for-a-severe-fall-in-the-stock-market-2016-10