Market comments from Henri

24-8-2015 Is it CHINA?


No!


The market collapse has nothing to do with China but everything with a meltdown in oilprices. China is only a result of a colling worldwide economy. Less oil projects - less work - less production - less oil consumption - lower demand for oil - lower oilprices - lower production (in China) etc etc


The good news about this? We pay less to drive...

The bad news? Nobody can't stop the spiral of going lower. We will lose a lot.


Unless..... you go SHORT the market NOW!


S&P is heading to 1003 - we are at 1883. That is a 40% plunge to profit from!


HN

 

15-12-2014 & 21-08-2015 Why the market is collapsing....

The bull-run brought the market in overbought territory. Many investors started adding stocks to their portfolio using credit. The bull-run is now for 50% financed by banks with stock as collateral. As long as the bull is not out of breath this is no problem. But.... the fall of the oilprices hit bulls eye!

Oil is down 45% in 6 months. Oilstocks/Energystocks are down 10% in 2 weeks. The total energysector is approx. 30% of the market. The plunge in oilstocks caused a total (extra) marketvalue depreciation of 3%. Because energystocks are a fundamental part of almost every stockportfolio all investors took a hit of 3%. That's the story of oil and the beginning of the story of the crash.


What is happening?

Because of the 3% loss in portfolio value those investors who are fully invested and make a maximum use of bankcredit take a hit of 3 till 4 times the 3% loss on their own money. This means -10%. As a result the lending capacity based on the portfolio value decreases with 10%. In other words 10% of the TOTAL portfolio has to be sold to bring the lending capacity in line with the creditrules. We saw last Friday in the last hour what those margin calls bring to the market. A Tsunami of sell orders - bringing the market down with another 1% and triggering in doing so a new recalculation of portfolio values and margin calls.


Let us try to calculate what this exactly means for the market in the next couple of days and for one specific stock: APPLE.

Assuming: 1- Oil goes down to $50. 2 - 50% of retail-investors use credit. 3 - Retial investor are 50% of the market. 4 - The max. credit they use is 50% of the portfolio value. 5 - The total US stockmarket has a value of 3.500.000.000.000 USD. 6 - APPLE has a value that represents 2% of the total stockmarket. 7 - Margin calls are automatically executed and the most liquid stocks (like AAPL and FB)are sold first


Calculation

A 1% drop of the total market causes a loss of 350.000.000.000. Half of this is a loss for the retailinvestors and half of those use credit. The credit retailers have a totl loss of 0,5 * 0,5 * 350.000.000.000 = 87.500.000.000 USD. This amount of collateral is lost so the retailers have to sell this amount of stock to compensate (margin calls will be executed). Assuming that everybody has some AAPL in his portfolio and that in 4% of the cases AAPL wil be selected as stock to be sold then the following is happening when AAPL has a quote of $100,=:

1% of 87.500.000.000 = 875.000.000 is the amount to be sold. This are 8.750.000 shares of AAPL. Selling this amount of shares in one session will have an substantial negative impact on the quote. Normal volume is 60 million and has a +2% or - 2% impact (spread). Bringing in 0,15 times that amount on the negative side would have  0,15 times the total spread as a negative result. In other words -1% in one session.

From this point in time on Apple will close max. -/- 1% for every 50 dollarcents that a barrel crude falls further.

Using this calculation I forecasted the closing prices of FB and AAPL for the next coming days.

You'll find the outcome HERE.


As far as I can see the bottom of the market will be reached the moment crude hits $40. But at that moment the stockmarket has gone mad already and is going its own course. A marketcrash that will cause billions to vanish in thin air.


15-12-2014 All major indexes are going down. DOW and S&P minus 5% since ATH. Crashcourse.

S&P will have support @1820 - below that there is none.....for a long time.....

8-9-2014 GMT 18:22 S&P500 Above @2000 the S&P is vulnerable. Small resistanceline @2002.60 broken.

26-8-2014 22:00 GMT SPX500 Topformation @2000. Chart2: Major supportlevels 1604, 1066 and 666.




12-8-2014 13:30 GMT SPX500 Futures are heading south. S&P will open today just above @1930. Is pivoting point. Below 1930 is support @1888.

 

 

 

12-8-2014 09:05 GMT - Markets in Europe are almost unchanged - waiting for news that gives new directions. Ukraine situation makes investors still nervous. Around noon the charts indicate a move south seen the fact that all major indexes are on resistance levels.

Actual AEX chart (5 minute candlestick):

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