Stock Market Thursday Thump, Economic Depression Sets In

Stock-Markets / Stock Markets 2010
May 20, 2010 - 01:27 PM

By: PhilStockWorld

What a difference a title makes!

Yesterday, I titled my morning post "WTF Wednesday?" and I had, at 5:36 am, already sent out a major Alert (rare thing to do) in which we discussed Raoul Pal’s statement that a major crash is coming in 2 days to 2 weeks, to which I said: http://www.philstockworld.com/2010/05/1 ... ent-313320 "I think it’s insane not to be mainly in cash right now and hedged for at least a 40% drop. If the guy’s wrong - our buy/writes pay "just" 20% and if he’s right, then we get to DD at good prices with the profits from our Disaster Hedges!" As I’m not one to ignore a great opportunity to profit from catastrophe, we added 3 more hedges that pay 1,000% if the market does tank in the next few weeks, or days (using DIA, FAZ and TZA).

I commented that the riots in Thailand may be the first of many around the world and that "Europe is in full panic mode and is hitting the 2.5% rule at 5am, about 11 am for them - very, very bearish if they can’t hold 2.5% in a day and not very good if they finish near that line anyway. CAC must hold 3,500, DAX 6,000 and FTSE 5,175" and we all sang "Smoke on the Water" http://www.youtube.com/watch?v=YQ3EtcE_ ... re=related as we sat back and watched the world burning on the news at 6am. SO - when the futures were UP soundly into the market open, my article title was "WTF Wednesday?" indicating our incredulous take on the move. I noticed on Seeking Alpha, they decided to change the title to Wacky Wednesday - a very different tone and that’s a shame because I think it washed out my stern warning to revisit our disaster hedges, 16 of which I published for free this weekend to help protect the general public. http://www.philstockworld.com/2010/05/1 ... -now-what/

Having our bearish plays set, we attempted 3 bullish plays in our next morning Alert at 9:46 but those got quickly blown out of the water as the S&P failed our 1,115 line at 10:13. At 11:37, just before we bottomed out for the day, I said to Members: http://www.philstockworld.com/2010/05/1 ... ent-313509 "Well, this is ugly but we couldn’t have a better setup for a massive reversal on the Fed minutes at 2pm. Not that there’s any real reason for a turnaround on the minutes of a 2-week old meeting but it’s a great excuse to run the Bots as they will have a few pages of text to point to and say "that’s why." That helped us catch a 100 point move up that started 12 minutes later but by 2:24 we looked over the minutes and were disappointed as I said to our Members: http://www.philstockworld.com/2010/05/1 ... ent-313604 "Well this is annoying as we had such a good run that we ran out of gas at the minutes. Since the meeting was before the EU blew up, no one is putting much stock int he Fed’s nice outlook."



We barely struggled to hold support on the S&P’s 200 dma and it was a sad little stick save that took us back to our 1,115 line at the close. Pragmatic Capitalist has a great article in our "Favorites" section yesterday http://www.philstockworld.com/2010/05/2 ... i-think-6/ where he made the following key observations:

The dominoes appear to be lining up in an eerie fashion at this point in time – there are now dozens of negative catalysts in the coming 12 months (which I will detail in a soon to be released report). Although the markets are once again oversold and at risk of a bounce the fundamentals are quickly deteriorating and my expectation of a weak second half appears to be right on cue. I would continue to approach this market with a great deal of caution despite the current oversold conditions.

What do the Germans know? This short selling ban is very desperate looking. I hate to speculate, but my gut tells me that they are beginning to realize how bad the situation is over there. They now understand that the problems in the Euro cannot be solved through intra-country debt issuance and bailouts. The short ban looks like one more act of desperation from a group of nations that have severely underestimated the problems they confront.

Will we scare ourselves into a double dip or even a second great depression? Everyone and their mother appears to be in the same camp regarding all the very scary “money printing