Whats up with the Dow Jones?

[zellfaze]

Anyone know exactly what is going on?  I don't do investing, but this looks bad.  Far worse than Bitcoin on bad days.

The Dow Jones industrial average tumbled more than 470 points, and other indexes followed suit.

At 7:45 a.m. PDT, the Dow was down about 474 points, or 4.2%, to 10,932. The broader Standard & Poor’s 500 was off 4.4%.

Investors scrambled into Treasury bonds, with the yield on the 10-year Treasury note threatening to fall below the formerly unimaginable level of 2%. The yield dropped to 2.02% from 2.16% on Monday.

http://latimesblogs.latimes.com/money_co/2011/08/global-stock-markets-sink-again.html

[miscreanity]

Agreed on the technicals from viper. Very ominous chart formations. Fundamentally, the rise in market "value" has been held aloft by newly-infused money supply since 2008. Basically, the markets are being propped up by an illusion. When the illusion becomes exposed, it all comes crashing down because investors realize there's no real production behind the rise. As more notice this or follow those who do, they start to bail and that then is reflected in panic-selling chart patterns which take the formations viper described.

It's also a scare tactic that was used by the Fed to force acceptance of QE/2. The gist of it is described here as the "Great Excuse". Bernanke and Geithner might as well be parents telling their children that if they don't eat the burnt toast they made, the child will die.

Call bullshit on them and you'll start to see the lies propping up other lies, built upon more lies that have come to be the fraudulent system that exists today.

[KenJackson]

Within the next year and a half gold is going to pass $5,000 and the Dow will drop down to $6,000ish again. Unemployment will breach 10% again, but it should be a pretty quick recovery from there to around 8%, then slowly over the next decade it should get better.

A year and a half from now we will be rid of a many of the proponents of Keynsian economics that currently pollute the US government.  So you are probably right--assuming we don't fall off the cliff before then.

[miscreanity]

I figured out why they were right, but none of them knew why, it's because once the Dow/Gold ratio starts dropping, it's a sure thing that the ratio will flirt with 1:1. Just as it was in the 1880s, 1930s, 1970s, and now. Best advice I ever gave myself, I wish I didn't have to have figured it out on my own.

The Dow/gold ratio is not what drives the markets; it is derived from underlying factors related to the index and the metal which are in turn representative of real productive value. That said, there is definitely increasing potential that it will return to a 1:1 ratio.

The USD$2,000 that has been bandied about is an initial ramp-up in price level for gold. Full monetization of outstanding global debt in the form of derivatives would bring the market value of gold up to about USD$250,000. I think the price will eventually be at a minimum, 30% of that or USD$75,000/troy oz. If Bitcoin takes root and gains adoption, it could see a similar rise in value.

I strongly suggest taking note of this post. If you can't trade because the markets are temporarily closed by government decree, will you be comfortable with your positions for an extended period of time?

[OgNasty]

The dollar strengthened... Buy SDS if you're scared.

[johnyj]

Now it is not the same as 2008, at that time people are mostly holding assets and loans, now they hold cash. If price goes down, they now have the cash to buy, and as long as FED is producing more cash, this is not a big problem.

[CurbsideProphet]

The dollar strengthened... Buy SDS if you're scared.

I would consider SH as an alternative.

SDS is better for day traders or short-term shorts.  Long-term, holding a double inverse is generally not a good idea because it tracks the index very poorly. 

[indio007]

The stock market is fundamentally rigged. Every week a portion of millions of paychecks go in. It has to go up. The gamers wait for it to go up 11% then take they profits dropping the price 11%. Then they repeat. It's been like this since the end of the .com bubble.

[fiatpirate]

The stock market is fundamentally rigged. Every week a portion of millions of paychecks go in. It has to go up. The gamers wait for it to go up 11% then take they profits dropping the price 11%. Then they repeat. It's been like this since the end of the .com bubble.

What is truly amazing is that with all this massive influx in capital every week, values would remain quite volatile. The VIX (volatility index) has stayed up near 40 for most of the last two weeks.

Even more interesting is that a lot of mutual fund managers have been saying many private individuals have been pulling their portfolios in favor of cash or treasury investments. Since people have been pulling their long term investments in such high numbers, and ceasing to input more money into stocks, I would expect some steady but serious declines. Until people gain confidence in the market again, they will continue to deinvest.

This is just a theory, but I would not put it past the Fed and/or the U.S. Treasury to directly invest in the market in order to prop it up. This would be especially true when it hits certain historic markers. I know there are a lot of deal seekers out there, but just anecdotally, I think that the loss of repeat investments through mutual funds would seriously limit the upswing in the market. Unless, of course, you have someone with "unlimited" resources that tries to trick the market to rally from time to time.

If my theory is correct, the dollar market will slowly adapt to the new amount of currency created in the economy and certain prices will rise much faster than normal.

[niemivh]

Anyone know exactly what is going on?  I don't do investing, but this looks bad.  Far worse than Bitcoin on bad days.

The Dow Jones industrial average tumbled more than 470 points, and other indexes followed suit.

At 7:45 a.m. PDT, the Dow was down about 474 points, or 4.2%, to 10,932. The broader Standard & Poor’s 500 was off 4.4%.

Investors scrambled into Treasury bonds, with the yield on the 10-year Treasury note threatening to fall below the formerly unimaginable level of 2%. The yield dropped to 2.02% from 2.16% on Monday.

http://latimesblogs.latimes.com/money_co/2011/08/global-stock-markets-sink-again.html

In no particular order.

1) We are in a Global Economic Depression and what looks like the beginning (middle?) of the end of the Dollar as a world reserve currency.
2) High Frequency Trading and Algorithmic trading have destroyed price discovery in the markets
3) The hyper-liquidity of the market + the tremendous amount of speculation capital = high volatility
4) The average US household is soaked with debt
5) 70% of our economy is consumer consumption, a sign of a very, very weak economy in general
6) Globalization is a failure yet our bankrupt elites refuse to see it (too much money and power at stake)
7) The idea of the "Post Industrial" society is a failure (same with "Service Based Economy")
'Zero growthers' (as if all economic growth is expansionary) are another bankrupt school of quasi-economics that imped progress
9) Our political process is basically bought and paid for with few exceptions
10) 95% of debt-money issued is from private banks, not Government spending, a huge portion of this money exists as derivatives and insane leverage ratios on Wall St.. This 'money' represents fictitious capital as it is mostly in derivatives that are unmoored from the real productive economy of wages, labor, productivity, products and development.

That's some of the problems we face in reality.  But if you ask the wrong person around here that bases their entire knowledge of the world on 1 Von Mises book then you'll get different answers.

[HappyFunnyFoo]

Great buying opportunity right now.  Forward P/E and current P/E point to a historical undervaluation of the stock market.  Stock prices should be based upon predicted and current earnings of the companies for which purchase of equity is in question.  There is a lot of irrational fear, much of which is propagated and catalyzed by AustrianDumbDumbs/TeaParty/LibertarianGoldLover ignorami.  It's great redemption for people like me that bought a TON of companies at Dow 6500-7000 but have been waiting to make more buy-ins after the massive rally to 12,500.

Forward signals are neutral to good, and company productivity is at all-time highs.  One of the top 5 stock buying opportunities in the last 100 years, similar to the market before its epic climb at the start of the credit super-bubble in the 80s.