Financial Superstars Warn, Despite Bounce, Global Stock Market Carnage To Continue

With continued uncertainty in global markets, today a legend in the business sent King World News a powerful piece about the recent carnage in global markets with comments from superstars Jeff Gundlach, Ray Dalio and others.

By Art Cashin, Head Of Floor Operations At UBS

January 21 (King World News) – Some Other Thoughts On The Selloff’s Extremes – The morning carnage was not just intense and ugly, in many ways it was extreme. Here’s some examples from Keene Little of the Option Investor:

This morning’s decline had many analysts pointing out how strong the selling was and what it might mean (there was a lot of fear but interestingly, the VIX registered only a minor new high above last Friday’s and not even close to the August 2015 high). Jason Geopfert (sentimentrader.com) had tweeted this morning that the lopsided selling, if the market didn’t recover, was something the market had experienced only twice before since 1940 — October 19, 1987 and August 8, 2011.

Another analyst had noted that there were 30 stocks down for every one up. A 10-to-1 ratio is considered extreme (a 90% day) and here we were experiencing a 30-to-1 ratio, which is why many thought we were in the middle of a crash lower. It does show how quickly the market can get lopsided because of a generally low liquidity environment without the market makers like we used to have. When HFTs, which account for about 80% of our volume now, either step aside or step on the market’s throat we can see abnormal price action, although perhaps it’s becoming more normal to see large fast moves.

While I thought the morning selloff was very intense as noted, I would not have guessed that the internals put it on a scale alongside the crash of 1987. That truly is extreme.

How The Afternoon Rebound Helped Us Dodge A Key Bullet – Yesterday, my friend Jeff Saut sent out an email citing his associate, Andrew Adams. Here’s the opening paragraph:

Today has the feel of capitulation, similar to what we saw on August 24th, 2015 and October 15th, 2014 (the last two major market bottoms). As I write this, all of the major averages are down around 3%, and the S&P 500, at its current low of the day, was dragged 15% underneath its all-time closing high from last May. With that said, this time is a little different from those two prior capitulation lows because the severe selling we have recently experienced has caused both the S&P 500 and Dow Jones Industrial Average to break down beneath prior major lows, meaning these markets are now in a downtrend of lower highs and lower lows. If the DJIA closes today below 15666.44 that will also reconfirm the Dow Theory sell signal of August 24/25th that we have repeatedly mentioned in our commentaries and chose to ignore, which is another way of saying that the intermediate-term market trend has reversed to the downside.

So, if we had not had that sharp afternoon rally, we would have reconfirmed a Dow Theory sell signal. That could have broken an already wounded market…..More Here

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Financial Superstars Warn, Despite Bounce, Global Stock Market Carnage To Continue