Black Monday

[xafalcon]

What people don't realise atm is the major reason for the correction..simply put Wall St is extremely overvalued..
As I said over and over again..all the market needs is a catalyst to bust the Bull Cycle..The catalyst could be as miniscule as airflow from butterfly wings (The Butterfly Effect).
If Trump wins and the Sharemarket tanks, the media will make Trump a major causative issue when in reality Trump was just the "butterfly" in the wrong place at the wrong time.
My assumption is that if Clinton wins, a short term relief rally "may?" occur with Wall St however the real problem (overvalued) doesn't go away and the overvalued market awaits for another catalyst to present itself..in other words, the Trump worry will immediately be replaced with another worry and there's plenty of worries out there..

A 135yr chart below simply emphasises how overvalued Wall St really is..
PE10 (Shiller) value around 25 is considered an area where most cyclic reversals are likely to occur...only three times in the last 135years did the price go above 25 without an immediate cyclic reversal and all 3 of those times resulted in a very destructive outcomes.


Edit: without earnings growth imagine what a PE10 value of 5 would look like in say 5 years time ..An S&P500 dropping from 2100 to 430..
Impossible you ask..Well, its the same as saying that PE25+ today was impossible...both have previously occurred 3 times in the last 135 years,,,

Agree with this 100%

NZX potentially over-valued as well, although some heat has recently come out with NZX moving into correction

[arc]

Hoop, That graph ends in 2010, do you have a recent image..

Edit: All good, I found a site with the info.

http://www.multpl.com/shiller-pe/

Looking through the other charts you can see the "Stalled" nature of the US economy since roughly the beginning of 2015.

[pierre]

Up 164 points and +2.4%. If today was a Black Monday - let's have one like it every week.

As long as we don't end up with a Tentative Tuesday tomorrow, or a Washed out Wednesday or Trumpled Thursday later in the week. A Fabulous Friday would be OK though.

[Valuegrowth]

Up 164 points and +2.4%. If today was a Black Monday - let's have one like it every week.

As long as we don't end up with a Tentative Tuesday tomorrow, or a Washed out Wednesday or Trumpled Thursday later in the week. A Fabulous Friday would be OK though.

If everything goes well, we should see fabulous Friday as well. According my study, I expected rebound in markets today.

[Hoop]

Hoop, That graph ends in 2010, do you have a recent image..

Edit: All good, I found a site with the info.

http://www.multpl.com/shiller-pe/

Looking through the other charts you can see the "Stalled" nature of the US economy since roughly the beginning of 2015.

The chart doesn't end in 2010, its up to 2015..I couldn't copy & paste the latest up to the day chart from the multpl.com over to the ST forum nor to my paint.net program..These guys are getting smarter with their anti-copying sites...eh..

The stalled nature of the US economy..yes this high debt to GDP is hampering the growth rate...recently there's been a spark of growth developing and Aunty Janet wants to increase interest rates....Well..The dismissed Austrian Economic Theory says the Central Banks create recessions..maybe they might be right...

[pierre]

Dow Jones up 371 points! Looks like US investors are pretty confident that Hillary will reach the summit - and knock the bastard off!

[blackcap]

Dow Jones up 371 points! Looks like US investors are pretty confident that Hillary will reach the summit - and knock the bastard off!

Indeed, but what are the implications of a Trump victory considering its about a 1 in 6 chance? If dow is up 370 on a 70% chance becoming a 84% chance what havoc would the 16% chance wreck if it did come in......

[pierre]

Indeed, but what are the implications of a Trump victory considering its about a 1 in 6 chance? If dow is up 370 on a 70% chance becoming a 84% chance what havoc would the 16% chance wreck if it did come in......

Not sure - but I think the formula for calculating the odds is E=MC2 or something like that.

[arc]

The chart doesn't end in 2010, its up to 2015..I couldn't copy & paste the latest up to the day chart from the multpl.com over to the ST forum nor to my paint.net program..These guys are getting smarter with their anti-copying sites...eh..

The stalled nature of the US economy..yes this high debt to GDP is hampering the growth rate...recently there's been a spark of growth developing and Aunty Janet wants to increase interest rates....Well..The dismissed Austrian Economic Theory says the Central Banks create recessions..maybe they might be right...

Apologies.. yes your right, I just needed to look closer at the graph

[Joshuatree]

Something else to worry about that a friend sent me.Chinese devaluation could also cause the mkts to plunge.This excerpt from"TTMYGH"

Chinese Capital Outflows Send FX Reserves To Lowest Since 2011


Overnight, China reported that the PBOC’s FX reserves fell another US$46bn to US$3.121 trillion in October as the central banks struggled to offset the impact of accelerating capital outflows, a bigger drop than the consensus estimate of US$34bn, triple the official September decline of US$19bn (recall that according to Goldman, the true FX outflow in recent months has been far greater

), and the biggest drop since January. The October decline brought China's total reserves the lowest amount since 2011.

As we have shown previously, a separate dataset called "PBOC's FX position", which shows the amount of PBOC's FX assets at book value and is usually released around the middle of the month, should provide a cross-check on PBOC's FX sales net of valuation effects.
As Bloomberg notes, the data come amid a period of renewed weakness for China’s currency. The yuan fell 1.53 percent last month, the most since a devaluation in August last year that shook investor confidence and ignited global market turmoil. Policy makers were suspected of propping up the exchange rate in the weeks leading up to a Group of 20 meeting in September and before the yuan’s entry into the International Monetary Fund’s reserves on Oct. 1 - and then reducing support after exports plunged the most in seven months. The currency fell to a six-year low of 6.7856 a dollar on Oct. 28.
The chart below which correlated China's outflows with the value of the Yuan suggests that either the currency is temporarily undervalued, or that the real amount of Chinese reserves, which may be unreported by the PBOC to prevent an even greater retail outflow scramble, may be as much as half a trillion dollars less than what has been officially reported.

And with Chinese capital outflows speculated as soon becoming the biggest risk factor to global financial stability, in a repeat of late 2015, once the chaos surrounding the US presidential election is over, below are some economist reactions to the reported number:

• “The yuan was sprinting all the way to approach 6.8 in October, which may have prompted the PBOC to sell some reserves to stabilize the market," said Gao Qi, a Singapore-based foreign-exchange strategist at Scotiabank. "Capital outflows will continue, the only questions is how fast, and that depends on the dollar’s move."
• "Capital outflow pressures will be sustained at least for the coming months," said Frederik Kunze, chief China economist at Norddeutsche Landesbank in Hanover, Germany. "Growing anxiety with regard to the soundness of the Chinese financial markets and the fear of a property bubble have to be seen in this context."
• "The number indicates relatively light intervention by PBOC during the month," said Ding Shuang, head of Greater China economic research at Standard Chartered Plc. in Hong Kong. Most of the drop comes from valuation effects, he said.
• Faster yuan depreciation against the dollar, higher interbank interest rates, and PBOC liquidity injections via open market operations "pointed to continued capital outflows in October," said Robin Xing, an economist at Morgan Stanley in Hong Kong.

Should Clinton win tomorrow, and push the USD even higher on expectations of a December Fed rate hike, many strategists believe that the next stop for the Yuan will be to drop to a level somewhere in the vicinity of USDCNY 7.00.