Yesterday's stock market chart can be viewed as a fractal (a sort of microcosm for those not familiar with the term) for the stock market chart of the last few years. Big drop, partial recovery, downward trend. What caused the air pocket is of little interest at Econblogreview. Facts are stubborn things. 10% off one day, why not 20% or 30% off the next? And then why not a 70% overnight devaluation of the dollar, a la Argentina? Against what, you ask? Against gold; that is how the reserve currency can devalue.
No charts for a few more days due to limited Internet access due to travel.
According to "q" as interpreted by Andrew Smithers and various measures of the "CAPE" (cyclically-adjusted price/earnings ratio), stock averages should drop about 33% simply to get to fair value. To get to a mere 25% undervaluation implies a 50% off sale.
The chart structures tell you much, more more valid information than whatever you see in the WSJ or NYT. By the time the MSM tells you why stocks have fallen, they have largely finished doing so.
There has been precautionary selling on the Stock Exchange . . .
To be long a lot of conventional stocks here is problematic. All sorts of good arguments exist as to why they may be undervalued. Selling ROST now, 7 points off the high, is crazy given that Greek riots have nothing to do with sales of packaway out of fashion pants at deep discounts. Yet a butterfly's wings may theoretically affect the weather in faraway places . . . even if the mind cannot comprehend it.
Right now eyes are pointed to disarray in Euroland. Yet there is an underlying rot and disarray Stateside. Liquidity has been poorly rewarded the past year plus. The times they may be a'changing.
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