Note: This document is too lengthy so it is split into two parts as of 9/23/11. To review how the August crash was forecasted this year by Keystone on a technical basis as well as the chronology and timeline for the key market events up thru September, simply type “2011 crash 9-23-11” into the search box and it will come right up. This document now continues from 9/23/11 forward.
Stock Market Crash 2011 Timeline and Chronology:
Keystone chronicles the broad markets topping and rolling over during 2011, leading into the July-August-September-October 2011 crash. The charts and technical’s accurately forecasted the move all year long.
Keystone’s proprietary algorithm, Keybot the Quant, that trades the indexes long-short, using the SPX as a benchmark index, went short on 7/11/11 at SPX 1324 and covered on 8/23/11 at SPX 1146, a 178 handle gain in six weeks time, or 13.4%. The actual trade in SDS gained 25.6%. On 8/23/11, Keybot flips to the long side simultaneously at SPX 1146.
On 9/1/11, Keybot exits the long position at SPX 1207, a 61 handle gain in 8 trading days, or 5.3%. The actual trade in SSO gained 12.1%. On 9/1/11, Keybot flips to the short side simultaneously at SPX 1207.
On 9/8/11, as the indexes compress into a tighter band, Keybot flips to the long side at SPX 1200, a 7 handle gain, but a whipsaw occurs during the session as Chairman Bernanke tanks the markets and Keybot flips back to the short side at SPX 1186 taking a 14 handle loss.
On 9/14/11, on the happy Sarkozy-Merkel-Papandreou conference call euphoria, Keybot exits the short side at SPX 1180 for a 6 handle gain. Keybot flips to the long side simultaneously at SPX 1180.
On 9/22/11, at the open, Keybot exits the long side at SPX 1150 for a 30 handle loss, or 2.5%. Keybot flips to the short side simultaneously at SPX 1150.
On 9/26/11, Keybot closes the short side at SPX 1148 and flips to the long side.
On 9/29/11, Keybot closes the long side at SPX 1146 and flips to the short side.
On 10/6/11, Keybot closes the short side at SPX 1146 and flips to the long side.
On 10/20/11, Keybot closes the long side at SPX 1206 and flips to the short side.
Timeline and Chronology of Market Events Leading to the July August September October 2011 Stock Market Crash:
August 2010 thru September 2011 is described in the “2011 crash 9-23-11” document. The following continues from late September forward. Skip down to the larger print for last week’s update and the agenda moving forward.
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On 9/25/11, Sunday, G-20 leaders promise action on the European problem before the 11/3/11 meeting in Cannes. The futures are up significantly.
On 9/26/11, Monday, Asia sells off strongly overnight and the futures tumble lower. By the open, however, the markets are moving upwards. Lots of mixed messages coming out of Europe, first the ECB is contemplating rate cuts at the next meeting but then another official dispels that statement. A CNBC news correspondent reports that the EFSF facility will be expanded and well-funded and a solution to the Euro problems is close at hand. The markets shoot upwards like a rocket. The SPX finishes up 27 points, or 2.3%. The Dow Industrials finish up 272 points, or 2.5%.
On 9/26/11, Keybot the Quant algorithm flips to the long side at 11:41 AM EST at SPX 1148. The trade from 9/22/11 is flat. Markets remain highly volatile.
On 9/27/11, Tuesday, Asia markets moves higher on the positive Euro news. Germany’s Merkel takes a more conciliatory stance with Greece stating that they will offer all aid possible. The futures as well as gold and silver are up large on the happy Euro talk as well as EOQ3 window dressing. The Dow Industrials moved up and over 300 points at midday. Major indexes were up huge between 2% and 3%. In the afternoon, the Eurozone members said they want to restructure the Greece bailout terms. Markets immediately started selling off the final hour of trading. The major indexes salvaged about a 1% up day. Gold recovered 4% today.
On 9/28/11, Wednesday, optimism on a Euro solution is fading ahead of the German vote overnight tonight that decides on the funding the EFSF and holds the balance of the markets in its hands. The major indexes finished about 2% lower across the board with the early week euphoria fading away.
On 9/29/11, Thursday, Germany votes in support of the EFSF so the futures move up. The markets start the day up large on better-than-expected GDP and Claims data. Copper, however, continues to collapse, now printing 3.25, a 13-month low. Markets sell off as the day proceeds but then take a large spike upwards in the final minutes. The Dow Industrials cover over a 6% range today, up big, down big, then up big, due to the high volatility (VIX).
On 9/29/11, Keybot the Quant algorithm flips back to the short side at 2:10 PM at SPX 1146. The trade from 9/26/11 is flat. Markets remain highly volatile.
On 9/30/11, Friday, IR cuts sales and profit forecasts. IR is a global bellwether stock, with 40% of its business overseas, a very good proxy for the status of the global economy, and the news is not pretty. The CRB Commodities Index dropped under 300, the first time since November 2010, forecasting the coming deflation. The dollar continues to strengthen. The Eurozone leaders continue to discuss ways, such as using leverage, to increase the EFSF’s available funds to deal with Italy and Spain. Germany’s Finance Minister Schaeuble says using leverage to increase the EFSF is out of the question since that will destroy Germany’s AAA credit rating. Today is the last session in September, the EOM (end of the month) and EOQ3 (end of the third quarter for 2011; Jul-Aug-Sept). The SPX benchmark index fell 14.3% in Q3, the worst quarterly performance since 2008. NYSE announced the circuit breaker levels for the Dow Industrials for Q4 with a first stage halt occurring at a drop of 1100 points, second halt level at a drop of 2250 points and third halt level at a drop of 3350 points, where the exchange would close for the remainder of the day. After the bell, ACI lowers its coal business estimates which will affect the rails as well.
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On 10/2/11, Sunday, the “Occupy Wall Street” protest is now in its 16th day with over 700 people arrested thus far. The group is protesting the growing split between the rich and the poor, the haves and the have-nots, especially in light of the financials and banks causing the housing mess creating three years of suffering thus far. BAC announces a $5 surcharge fee on depositors.
On 10/3/11, Monday, the anecdotal data out of China becomes more worrisome, Chinese factories are going bankrupt. BAC web site slows then shuts down at the noon hour as unhappy depositor’s voice their dislike over the new fees. MS credit default swaps indicate a 35% chance of failure due to their European exposure and the stock sells off 8%. The financials are leading the broad markets lower. The 10-year to 30-year spread drops under 100 basis points, just like summer 2010. WTIC Oil is under $80 and Brent is testing $100. GS drops under 90 just before the close. Gold gains about 40 on the Euro woes. Stocks tumble into the close with the SPX ending down 32 points, or 2.9%. The S&P is now down 19.4% on the verge of confirming a bear market which is generally accepted at a 20% loss. Dow Industrials fall 258 points, or 2.4%.
On 10/4/11, Tuesday, Kospi (Korea) Index tumbles about 8% overnight. Moody warns Dexia, a Franco-Belgium bank stock, of a coming downgrade, prompting France and Belgium to step in stating they will support the bank; shares tumble 25%. Deutshe Bank drops 7% stating it will not meet its profit goals. Moody’s downgrades State Bank of India. The financials around the world are selling off. Greece can now survive until November, not mid-October as originally thought, providing Troika more time to find solutions. GS lowers copper and oil estimates for 2012. GS cuts China’s growth forecasts for 2012. S&P cuts Europe’s growth forecasts for 2012 and indicates a double-dip recession is likely. Copper loses the 3.00 level. Chairman Bernanke gives his testimony and states that the recovery will be weak. The markets sell off at the open. The SPX falls under the 1090 level indicating over a 20% drop from the April top which triggers the technical level of an official bear market.
On 10/4/11, Euro Finance Ministers say they will recapitalize the banks with a coordinated effort. The markets jump on the news and run upwards into the close. The SPX ends the day up recovering from down 20 points, pulling back from the negative 20% bear market level.
On 10/4/11, after the close, Moody’s announces a downgrade of Italy’s debt. Europe announces the formation of a bad bank for Dexia.
On 10/5/11, Wednesday, markets continue along with a recovery rally on optimism that the Eurozone can get its act together.
On 10/5/11, in the evening, Moody’s downgrades the Italian banks. Apple’s Steve Jobs, 56, loses his long battle with cancer. Strikes and protests in Greece ramp up again. The Wall Street protests also grow in size and other protests pop up in major U.S. cities.
On 10/6/11, Thursday, the ECB leaves rates unchanged, no surprise considering it is Trichet’s last meeting. Markets continue a three day short-covering rally.
On 10/6/11, Keybot the Quant algorithm flips back to the long side at 10:21 AM at SPX 1146. The trade from 9/29/11 is flat. Markets remain highly volatile.
On 10/7/11, Friday, Moody’s downgrades 12 U.K. banks. The CRB moves above 300 and the 10-year yield moves over 2% lessening the current deflation risk only slightly. The monthly Jobs Report is better than expected and the market’s rally. Fitch downgrades Italy and Spain debt so the markets sell off on the news.
On 10/7/11, after the close, Moody’s places Belgium’s debt on review for potential downgrade.
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On 10/9/11, Sunday, Merkel and Sarkozy say that a plan to address the Greece default, including handling any potential contagion, will be provided by 11/3/11. Futures markets sky rocket. Global markets rally.
On 10/10/11, Monday, the futures are up large on the Merkel Sarkozy announcement of a plan within 3 ½ weeks. Markets jump at the open and never look back. Keystone’s SPX:VIX Ratio Indicator moves above 35 verifying the huge market up day. The SPX finishes up 39 points, or 3.4%. The Dow Industrials finish up 330 points, or 3%.
On 10/10/11, the Occupy Wall Street movement is gaining steam and the politicians and Wall Street are concerned.
On 10/11/11, Tuesday, Trichet (ECB) says the crisis has become systemic across Europe and there is an increased chance of contagion. Futures indicate a pull back for the markets, but the overall positive effects of “Merkozy” having a plan by the end of the month is keeping markets happy. Slovakia is a hold out and unenthusiastic about supporting the Euro mess but they will eventually vote to approve the enhancements to the EFSF and the markets remain buoyant. AA kicks off the earnings season with lackluster earnings.
On 10/12/11, Wednesday, BOJ (Bank of Japan) sees global markets as unstable and higher risk but markets remain happy on the Merkozy constructive news from Sunday. Harrisburg, Pennsylvania, files for bankruptcy causing new fears over the stability of the muni market. Semiconductors, retail, and as of today financials, are elevating the broad markets. The Dow Industrials turn positive on the year at 11578 but by the close dropped back below. The S&P moved back up over 1200. Markets sold off in the final hour of trading after the FOMC Minutes were released showing that big downside risks remain ahead for the economy.
On 10/13/11, Thursday, China exports continue to fall due to weak U.S. and Europe growth. JPM earnings beat estimates but the financials weaken. Retail sales are better than expected boosting markets. The Occupy Wall Street protests spread to London. S&P downgrades Spain. GOOG releases blow-out earnings that will keep the Q4 tech rally humming.
On 10/14/11, Friday, Fitch downgrades UBS, Royal Bank of Scotland and Lloyds and places other banks such as BAS, GS, MS, Barclay’s, BNP Paribas, Credit Suisse and SocGen on ratings watch negative. G-20 leaders meet in Europe to address how to boost the firepower of the EU, ECB and IMF to save Europe; Spain and Italy remain the key problem. Markets rally into the close ending the week at the highs, the Merkozy announcement on Sunday created the bull buoyancy that lasted all week long. The SPX gained 6% this week, the best week since July 2009. The Dow Industrials is slightly positive for the year after jumping over 9% off the bottom ten trading days ago. Tech is a main driver for the markets with the Nasdaq up 8% this week.
On 10/14/11, Occupy Wall Street movement goes global with the Asia-Pacific area now joining in protests. New York announced that it will send in crews to clean Zuccotti Park where the protestors are assembled saying that protestors will need to leave, but can return, although they would be prohibited from bringing in sleeping bags, tents and so forth. The protestors realize this was an excuse to break them up and clear the area so they stood strong locking arms and awaiting a confrontation. New York flinches announcing that the park cleanup is postponed. The protestors cheer and the festive mood returns. Protestors march towards the stock exchange to test the outer police boundaries but a heavy police presence pushes them back, police horses become frightened due to the protestor’s drums, arrests are made, tension is escalating. New York costs to handle the protestors are increasing. Italian student organize and march on GS’s office in Milan.
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On 10/16/11, Sunday, the G-20 Finance Ministers announce that a plan will be provided within a week’s time. Futures rise overnight as global markets celebrate the happy talk.
On 10/17/11, Monday, Merkel warns against hoping that all of Europe’s debt problems would be resolved and cautions against ‘dreams’ that the situation would be resolved quickly. Futures immediately weaken and turn negative. Big down day with the SPX dropping 24 points, or 1.9%. The Dow Industrials fell 247 points, or 2.1%.
On 10/18/11, Tuesday, China GDP is lower than expected fueling more negativity with global growth forecasts. Copper sells off. Europe lowers expectations for the meetings this weekend. Futures are negative and markets tumble lower after the opening bell. A news release from The Guardian says that Germany and France have agreed to boost the EFSF to $2 trillion euro’s. The markets catapult higher, straight up like a rocket. Analysts poke holes in the $2 trillion euro number, but the day ends with a strong up move. The SPX closes up 25 points, or 2.0%. The Dow Industrials gained 180 points, or 1.6%, retracing Monday’s loss.
On 10/19/11, Wednesday, the anniversary of the 1987 Black Monday crash, Moody’s downgrades Spain for the third time this year. S&P downgrades 24 Italian banks. Market’s rally into the Beige Book release at 2 PM, and then collapse. Europe news says the EU summit meeting on the weekend is in jeopardy. Markets close the day down.
On 10/20/11, Thursday, Brazil cuts rates; the trade wars vibe grows stronger. Colonel Kaddafi, the dethroned Libyan leader, was killed as he fled Sirte. The oil was already coming back on line so the effect of his death to global markets may be minimal although some premium should come out of the oil, gold and silver prices. Greece austerity riots continue each day. Markets sell off after the opening bell on further troubling Europe news concerning the weekend meeting and start to accelerate downwards as lunch time approaches. Merkel says the weekend meeting will definitely occur and solutions are on the way. The markets are at the mercy of the Europe news flow so once again the indexes reverse and run higher. News is also leaked that the Fed may provide further quantitative easing so the markets jump into full buy mode again.
On 10/20/11, Keybot the Quant algorithm flips back to the short side at 10:59 AM at SPX 1206. The trade from 10/6/11 gains about 5%. Markets were saved today, however, by the Fed hinting at further quantitative easing.
On 10/21/11, Friday, Europe says that Merkel and Sarkozy will talk on the phone Saturday night, and meet on Sunday, and also meet on Wednesday. Merkozy down plays the shaky news over the last day and say that a plan is coming. Markets are set for a higher open on Friday. The Fed hinting at further quantitative easing provides a bid under commodities, gold and silver and buoys the equities markets. The SPX ends up 23 points, or 1.9%, and is up three weeks in a row. The Dow Industrials are up 267 points, or 2.3%, and is up four weeks in a row.
On 10/21/11, the weekend begins with the markets expecting a firm outline from the EU meeting come Monday morning, then a concrete plan by Wednesday, 10/26/11. Germany and France continue to work out their differences. The problem is that Europe needs a plan that handles the Greece default without creating contagion, and if contagion occurs, have additional funds available to meet any outcome, while, on the other hand, if an extensive plan is put forth, France may lose its credit rating thereby bringing down the house of cards from a different angle. This is the quandary that France and Germany is dealing with leading to indecision and erratic global markets.
………………………the saga continues…………..
Looking ahead,
Eurozone problems continue. Global recovery is stalling. China bubble popping. Copper and commodities languish. Semiconductors, retail, utilities and financials are the main pillars of support for the markets currently. Commodities and high volatility continue to support the bear case.
Earnings continue, about 75% of companies are beating estimates.
On 10/24/11, the weekend EU meeting will provide news, positive or negative, an outline for a plan is expected then a concrete plan on Wednesday, 10/26/11.
On 10/25/11, the morning brings Case-Shiller data and Consumer Confidence. 2-Year Note Auction.
On 10/26/11, EU meeting provides a concrete plan. Durable Goods Orders and New Home Sales data.
On 10/27/11, GDP, Jobless Claims, Pending Home Sales.
On 10/28/11, Personal Income and Outlays and Consumer Sentiment.
On 11/2/11, FOMC meeting.
On 11/3/11, deadline for the Merkozy plan to save Europe and prevent contagion.
On 11/13/11, Troika decision.
On 11/23/11, the Deficit Commission deadline looms.
On 12/13/11, FOMC meeting.
On 12/23/11, Congress will conduct the debt vote. Merry Christmas.
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