Stock Market Cycle: Will “Three Strikes and You’re Out!” Determine the Fate of the PhiSYx?
In the 1990s, the last leg of the stock market cycle marked by the 6-year bull market, which began in 1991, saw three of its major trend line break in a year. It was the “three strikes and you’re out!” dynamic.
The violation of the third trend line laid the groundwork for a 19-month 68.09% collapse, pillared by the Asian Crisis.
History may not repeat exactly but rhyme instead.
In this “final” leg of the secular bull market cycle that originated in 2009, there were three major trend lines which were rooted in 2009. While the first trend line was broken back in 2015, the transgression of the second and the latest fledging trend line occurred stunningly over the last 5 months. It may have signaled the modern-day variant of “three strikes and you’re out!”
Of course, the 1990s and today have distinct features. Today, brazen price fixing has massively deformed the price signals that have spurred monumental malinvestments in the deployment of capital.
In desperation to rescue headline index, in three straight sessions, closing pumps were deployed equivalent to a stunning 1.6% of the last Friday's closing price!
The bigger the scale of price distortions, the more intense the accrued imbalances, thereby the more virulent the adjustments process
Or, the desecration of the laws of economics will have nasty and unpalatable consequences.
“Three strikes and you’re out” may not only be the factor against the PSYEi/PhiSYx.
With today’s close, the PhiSYx priced in US dollars has pierced the January 2016 low today.
Prices do not emerge from a black hole.
With public and bank credit racing to historic heights in the face of rocketing rates, not only will the stock market be affected by violent adjustments to correct imbalances, but also the bubble sectors of the real economy.
Will “three strikes and you’re out” translate to the next transition of the boom-bust stock market cycle?
No comments:
Post a Comment