The Traders Network
Scalped By Yet Another Indian
Originally posted Monday Oct 27
And then there were four! Let’s just hope that by the time all is said and done there aren’t ten little Indians in this game, or we will all be dead in the short run instead of the long run. Perhaps the “Three Little Indian” pattern is best considered a potential reversal pattern in bull markets. In really bad bear markets, expect to see four or more Indians show up on the scene.
Four Little Indians Pattern on SP 500 Signaling Bottom to 2008 Bear Market
At 3.00 am, when the Asian markets were closing, the SP 500 was down roughly 4.5% and has since recovered somewhat. Apparently, it was right to be very afraid of the Asian markets this evening when they opened up. According to FT, Japanese banks took a big hit after a report “said they would have to raise capital to cover the falling value of their stockholdings.” The problem for the Japanese banks is a legacy of the Zaibatsu days. Zaibatsu’s were large family-controlled monopolies, with a holding company on top and a wholly-owned banking subsidiary providing finance. Mitsui, Mitsubishi, Sumitomo and Yasuda are part of the BIG Four Zaibatsu’s. The early Zaibatsu’s permitted some public shareholding of some subsidiary companies. Around the end of WW II, they were targeted for complete dissolution, but that was never fully achieved.
The point is that banks can wind up in serious trouble when they hold public shares of public companies. It is a form of shaky collateral, particularly when confidence is undermined. A local report said Mitsubishi needed to “cover a decline in its capital adequacy ratio stemming” from its rotting investment in Morgan Stanley. Mitsui and other banks are considering capital raises as well. And so it goes….we have not learned a thing from the 1907 Rich Man’s Panic and the failure of the Knickerbocker Trust for excessive speculating in the publicly traded shares of United Copper.
The Crash Analog of 1929 to 2008
Editors post script note on Tuesday Oct 28: We got the daily low close on Monday by an end of day fluke most likely attributable to the FBI charging two neo-nazis with plotting to kill Obama. The neo-nazi event preserved the script of a low close to be followed by a gap up higher today. So Voila! C'est le meme chose as the first crash of 1929 or as close as we will ever see in our lifetimes. Oh, the implication is a 50% rally off this weeks lows to roughly 1210 in the SP500 in the next few months if the correlation persists. Other models will have to be considered, personally, I tthink the index goes a tad higher than 50% based on other metrics beyond the scope of this post
And then there were four! Let’s just hope that by the time all is said and done there aren’t ten little Indians in this game, or we will all be dead in the short run instead of the long run. Perhaps the “Three Little Indian” pattern is best considered a potential reversal pattern in bull markets. In really bad bear markets, expect to see four or more Indians show up on the scene.
Four Little Indians Pattern on SP 500 Signaling Bottom to 2008 Bear Market
At 3.00 am, when the Asian markets were closing, the SP 500 was down roughly 4.5% and has since recovered somewhat. Apparently, it was right to be very afraid of the Asian markets this evening when they opened up. According to FT, Japanese banks took a big hit after a report “said they would have to raise capital to cover the falling value of their stockholdings.” The problem for the Japanese banks is a legacy of the Zaibatsu days. Zaibatsu’s were large family-controlled monopolies, with a holding company on top and a wholly-owned banking subsidiary providing finance. Mitsui, Mitsubishi, Sumitomo and Yasuda are part of the BIG Four Zaibatsu’s. The early Zaibatsu’s permitted some public shareholding of some subsidiary companies. Around the end of WW II, they were targeted for complete dissolution, but that was never fully achieved.
The point is that banks can wind up in serious trouble when they hold public shares of public companies. It is a form of shaky collateral, particularly when confidence is undermined. A local report said Mitsubishi needed to “cover a decline in its capital adequacy ratio stemming” from its rotting investment in Morgan Stanley. Mitsui and other banks are considering capital raises as well. And so it goes….we have not learned a thing from the 1907 Rich Man’s Panic and the failure of the Knickerbocker Trust for excessive speculating in the publicly traded shares of United Copper.
The Crash Analog of 1929 to 2008
Editors post script note on Tuesday Oct 28: We got the daily low close on Monday by an end of day fluke most likely attributable to the FBI charging two neo-nazis with plotting to kill Obama. The neo-nazi event preserved the script of a low close to be followed by a gap up higher today. So Voila! C'est le meme chose as the first crash of 1929 or as close as we will ever see in our lifetimes. Oh, the implication is a 50% rally off this weeks lows to roughly 1210 in the SP500 in the next few months if the correlation persists. Other models will have to be considered, personally, I tthink the index goes a tad higher than 50% based on other metrics beyond the scope of this post
Comment
© 2010 Created by Michael Yorba
var headerLink = dojo.byId('application_name_header_link');
headerLink.href = 'http://www.yorba.tv';
You need to be a member of Yorba TV to add comments!
Join Yorba TV