Stock Market Crash 2011 Timeline and Chronology:
Keystone chronicles the broad markets topping and rolling over during 2011, leading into the July-August 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%.
Timeline and Chronology of Market Events Leading to the July August 2011 Crash:
In August 2010, the broad markets were going over the falls when Chairman Bernanke stepped in announcing quantitative easing, QE2. That immediately stopped the market collapse and sent the broad markets on an upward trajectory once again. The easy money flowed into emerging markets, copper, commodities and oil, creating new asset bubbles.
In January and February 2011, Tunisia and Egypt demonstrations result in outing their leaders. The Arab Spring, or Arab Awakening, is born. This Middle East turmoil causes oil, gold and silver to run higher. Food inflation accelerates since the demonstrations cause food shortages and disruption to food supplies. At the same time, for many months, Mother Nature has been reeking havoc around the globe causing further inflation in food and other commodities, like coal due to Aussie floods in late 2010.
In February 2011, the charts show that financials, technology, semiconductors and copper have topped and are rolling over. This is ominous considering the importance of these sectors. The weekly charts display negative divergence forecasting multi-week and multi-month weakness ahead for these sectors, and hence, the broad markets.
On 3/11/11, Japan is hit with an earthquake and tsunami. The disaster impacts the technology and auto supply parts areas which ripples thru affecting global markets.
On 4/18/11, S&P ratings agency, one of three major agencies that include S&P, Moody’s and Fitch, lowers the U.S.’s credit rating to ‘negative’ from ‘stable’.
On 4/29/11, the SPX closes at 1363.61, potentially the closing high for the year.
On 5/2/11, the SPX prints a HOD at 1370.58, potentially the highest intraday print for the year.
From late April to early May 2011, silver went parabolic towards $50. CME stepped in and slapped down silver by raising margin requirements several times. Silver dropped 35% from $50 to $33.
On 5/20/11, Keystone’s SPXA150R Indicator dropped under 80% indicating that the long bull rally had lost steam and the broad markets are turning bearish.
On 6/17/11, Keystone’s NYA 40 Week MA Cross Secular Indicator shows price falling under the 40 week MA signaling that the broad markets are falling into a secular bear market pattern. This fight between price and the 40 week MA continued into July until the change to a secular bear was locked in more firmly on 7/28/11. The broad markets have fallen into a secular bear market.
On 7/7/11, a Dow Theory Non-Confirmation signal is flashed with the Dow Transports placing a higher high than the May high, but the Dow Industrials languish over 200 points below its May high with no sign of strength. The non-confirmation signal places traders on high alert since the broad markets appear to be slipping into trouble.
On 7/11/11, Keystone’s proprietary algorithm, Keybot the Quant, a long-short algo, went short at SPX 1324 at 10:34 AM EST.
On 7/21/11, the SPX prints a HOD at 1347.00. This is the start of the waterfall crash.
On 7/22/11, the SPX closes at 1345.02. This is the start of the waterfall crash.
On 7/26/11, Keystone’s SPX:VIX Indicator fell under 68 signaling a large move down in equities is imminent. For 7/26/11 and 7/27/11, the SPX fell 2.5% and the Dow Industrials dropped 2.3%.
On 7/29/11, Friday, the SPX closes the day below 1300. Congress and President Obama continue to bicker like school children over raising the debt ceiling. The 8/2/11 deadline is fast approaching. The weekend, 7/30/11 and 7/31/11 is tense, with plenty of childish, finger-pointing political sound bites crossing the news wires continuously. Apple now has more cash at $76 billion than the U.S. government at $74 billion.
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On 8/2/11, Tuesday, President Obama signs the bill to raise the nation’s multi-trillion debt ceiling. The markets sell off large. SPX goes negative for the year, losing the 1258 level.
On 8/2/11, Keystone’s SPX 150 Day MA Slope Secular Indicator shows that the slope of the 150 day MA has leveled off and is now turning negative. A stutter step occurs 8/3 but 8/4 shows again that the slope has now reversed and the secular bull run from last December 2010 for the indexes has ended. The secular bear market has returned.
On 8/2/11, Keystone’s SPX 12 Month MA Cross Secular Indicator shows price falling under the 12 month MA signaling that the broad markets are falling into a secular bear market pattern. This was a major dagger in the broad markets and ends the one year long secular bull market. A secular bear market is born.
On 8/2/11, the SPX closes down 33 points, or 2.6%. The Dow Industrials drop below 12000, losing 265 points, or 2.2%.
On 8/3/11, Wednesday, copper collapsed around lunchtime.
On 8/3/11, Switzerland’s central bank takes steps to lower the franc’s exchange rate, saying the currency is ‘massively overvalued’ and threatening the Swiss economy’.
On 8/4/11, utilities collapsed in the morning which opened the flood gates for a market collapse. Once the utes, UTIL, lost their 50 week MA, a trap door was projected for the broad markets, which occurred during the afternoon.
On 8/4/11, the broad market selling moves towards exhaustion. The SPX loses 60 points, or 4.8%, and the Dow Industrials drop 513 points, or 4.3%.
On 8/4/11, Bank of New York Mellon Corporation said they will charge a fee to customers holding cash deposits over $50 million, effectively charging depositors for parking money at the bank.
On 8/4/11, investors moved strongly into the safety of very short-dated T-bills and the bidding was so overwhelming that the real rate was actually a negative yield. Investors are willing to pay the government to hold their money.
On 8/4/11, Dow Theory confirms a Sell Signal for the broad markets. The Dow Industrials and Transports both have closed under their June lows. Sell first and ask questions later.
On 8/5/11, Friday, markets attempt a recovery rally but it runs out of steam at lunchtime as a rumor circulates the trading floor that S&P has notified the U.S. Treasury that it was planning to downgrade the U.S. credit rating. A draft of the analysis was given to the White House. The White House identified a mathematical error in the analysis but S&P said the error has no impact on their decision and after the markets closed for the week, S&P downgraded the U.S. This sent the government, traders and the media into a tizzy all weekend long worrying about the effects on the markets for Monday’s open. The SPX loses the 1200 level today.
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On 8/7/11, Sunday evening, Asian markets open lower and U.S. futures plummet. The ECB announces that it would ‘actively implement’ its bond-buying program. Italy and Spanish bonds rally early Monday morning in anticipation of the ECB entering the market.
On 8/8/11, Monday, markets collapse at the open as the negativity from the S&P downgrade all weekend long causes traders to sell first and ask questions later. The SPX closes at 1119.46, dropping 80 points, or 6.66%, which many media analysts immediately highlight as the satanic 666. The Dow Industrials plummet 635 points, or 5.6%. Huge down day for the indexes.
On 8/9/11, The Federal Reserve makes a promise to hold short-term interest rates near zero through at least the middle of 2013. This signals that Chairman Bernanke and the Fed has written off the chances of an expansion strong enough to drive up wages and prices. The economic recovery is dying.
On 8/9/11, a snap back rally recovers much of Monday’s loss. The SPX places a LOD of 1101.54 but then catapults higher closing at 1172.53, regaining 53 points, or 4.7%. The move from 7/21/11 at SPX 1347 to 1101 is a drop of 246 spoo handles, or 18.3%, in only 13 trading days. The SPX LOD 1101 is now important support moving forward.
On 8/10/11, Wednesday, the market bears come to play again and drive the markets lower to close at the Monday closing lows again. The SPX closes at 1120.76, down 52 points, or 4.4%. The Dow Industrials lose the 11000 level, dropping 520 points, or 4.6%.
On 8/10/11, gold price has gone parabolic. CME steps in to raise margin requirements effective end of day 8/11/11.
On 8/11/11, Thursday, the market bulls drive the indexes up again recovering all the lost ground from Wednesday’s session. The SPX closes at 1172.64, up 52 points, or 4.4%. The last three days see a move from 1170-ish down to 1120-ish, back up to 1170-ish, then back down to 1120-ish. Fourth day in a row of unprecedented major market point moves for the broad indexes.
On 8/11/11, a short-selling ban on financial stocks is instituted for France, Belgium, Italy and Spain. A temporary short-sale ban remains for Greece and Turkey.
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On 8/15/11, Monday, Keystone’s SPX:VIX Ratio Indicator moves above 35 indicating that a big up day will occur in the markets. The SPX gains 26 points, or 2.2% and the Dow Industrials gain 214 points, or 1.9%.
On 8/15/11, the SPX, closing at 1204.49, has now regained the entire point loss that resulted from the S&P downgrade on 8/5/11 at SPX 1199.38.
On 8/16/11, Tuesday, broad index futures turn strongly red overnight to indicate a much lower open. All eyes are focused on the meeting between Sarkozy (France) and Merkel (Germany). The leaders downplay the hype surrounding the meeting to lower expectations. Talk heats up concerning the potential implementation of Euro bonds but Germany says nein. Merkel and Sarkozy, however, emphasize that Euro bonds are not the answer ‘today’, therefore hinting that perhaps in the future Euro bonds would be a possibility.
On 8/16/11, shortly after the markets opened, Fitch, one of the three rating agencies (S&P, Moody’s, Fitch), reaffirms a ‘stable’ outlook for U.S. debt. This decision flies in the face of the S&P downgrade and encourages bullish traders. The bulls and bears fight it out all day but only move within Monday’s SPX trading range of 1178-1205, closing at 1192.76.
On 8/17/11, Wednesday, Merkel and Sarkozy, announce a plan to raise taxes on financial transactions. Banks sell off on the news. Media outlets now referring to the two partners as ‘Merkozy’. The indexes pop at the open and have a chance to confirm a recovery rally if the SPX maintains the 1200 level, but, by late morning, 1200 failed and the indexes slipped away to close out the day unchanged. Keystone’s proprietary algorithm, Keybot the Quant, came within seconds of flipping to the long side, but remains short from 7/11/11 as the session ended.
On 8/18/11, Thursday, European banks are falling large on news that the ECB dollar facility was tapped for the first time since 2/23/11. A mystery bank borrowed $500 million worth of one-week dollars at a fixed interest rate of 1.1%. This rate is well above the rate that would be expected so traders sniffed out distress in the Euro banking system, selling first and asking questions later. Futures fell sharply and only worsened as Claims and CPI data thru gasoline on the fire. The Philly Fed data at 10 AM shows vast manufacturing weakness and locked in the day’s negativity. At the opening bell, the SPX fell 30 points, 2.6%, and the Dow fell 300 points, 2.5%, in only three seconds.
On 8/18/11, at 10 AM EST, the 10-Year Treasury Note yield drops to a record low under 2%, printing a spike low of 1.97% before recovering back above 2%. Traders are rushing into the relative safety of U.S. bonds considering that the global growth story is dead. 30-Year Bond yields touched 3.35%, the lowest since January 2009. The all-time low was 2.51% set in December 2008 during that equities crash. Gold moved above 1820 as traders seek safety.
On 8/18/11, Keystone’s SPX:VIX Ratio Indicator fell under 35 after the opening bell indicating that a large down day is in store for the indexes. The session ended with the SPX down 53 points, or 4.5%. The Dow Industrials closed under the 11000 level, down 420 points, or 3.7%.
On 8/19/11, Friday, the day begins with gold catapulting higher in the overnight session to reach 1880, the parabolic move now straight vertical. No sign yet of the CME raising gold margin requirements. The futures are deeply red and banks continue to sell off. BAC announces 3500 job cuts, in addition to the 2500 that already received pink slips this year. As the trading session started, BAC announces that as many as 10000 jobs will be eliminated this year. BAC has lost over 40% of its value in the last five weeks. Rumors are rampant with talk of an emergency Fed meeting occurring as well as the SNB, Swiss National Bank, implementing new tax on foreign held deposits over this coming weekend. JPM and C both lower their GDP forecasts.
On 8/19/11, the indexes drop at the opening bell but quickly stabilize as traders seek a temporary bottom for equities markets. The selling begins again at 11 AM and stocks drop into the closing bell. Traders pare back positions heading into the weekend. The SPX closes down 17 points, or 1.5%. The Dow Industrials close down 173 points, or 1.6%.
On 8/21/11, Sunday, German Chancellor Merkel reiterates once again that Euro bonds are not a possible solution, but, also says that perhaps in the future they must adapt. Thus, wiggle room is opened to Euro bonds at some future date. All in all, this weekend 8/20/11 and 8/21/11 is calm and quiet on the financial front considering the market turmoil over the last three weeks. On the war front, however, Colonel Gadaffi’s regime is on the brink of collapse as the rebels gain control of Tripoli.
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On 8/22/11, Monday, Tripoli is taken by the rebels overnight and considering that Gaddaffi’s days are ending, the futures steadily gain thru the morning hours on new found optimism. The markets jumped higher at the open, the Dow crossing above 11000, but then quickly collapsing lower as the day plays out. At the close, GS announces that Lloyd Blankfein previously hired a personal attorney; this news whacks GS in the final minutes of trading and continues to cast a dark cloud over the financials. Markets believe that Chairman Bernanke will announce a QE3-friendly course of action on Friday, 8/26/11, as the trading week begins. GLD, the gold ETF, now has the largest assets of any ETF, surpassing SPY.
On 8/22/11, Keystone’s UPS 20 and 50 Week MA Cross Indicator shows the 20 MA falling under the 50 MA, the first time in over two years. This indicates that the broad markets have now fallen into a secular bear pattern for the long term; this is the last of Keystone’s four secular market indicators to fall into place signaling a secular bear market moving forward. On 8/23/11, however, the UPS 20 MA regained the 50 MA but this shot across the bow is important; weakening shipping sector means no recovery.
On 8/23/11, Tuesday, Gold peaks at 1918 in the overnight session. Gold daily chart shows an outside reversal day where gold places a higher high than Monday, and then closed below Monday’s low—very bearish; the gold selloff begins. The indexes finish up huge on QE3 anticipation, the SPX jumping 39 points, or 3.5%. The Dow Industrials finish up 322 points, or 3.0%.
On 8/23/11, Keystone’s proprietary algo, Keybot the Quant, exits its short position at SPX 1146 at 11:51 AM EST. The algo initiated the short side on 7/11/11 at SPX 1324 accounting for a 178 handle gain, or 13.4%. The actual play was SDS resulting in a 25.6% gain.
On 8/24/11, Wednesday, Moody’s rating service downgrades Japan’s debt, slapping down buoyant Asian markets. The broad markets continue with the recovery rally. Gold sells off $100 ending the day at 1754, losing over 150 dollars, or 8.6%, in less than two days. CME raises gold margin requirements for the second time in two weeks after the markets close. Steve Jobs resigns as CEO of Apple and S&P futures immediately drop 5 points.
On 8/25/11, Thursday, weakness in tech occurs due to AAPL’s weighting in the indexes. Warren Buffett provides a $5 billion capital injection into BAC which bounces the indexes large at the open. But, minutes into trading, the indexes collapse on rumors of a sovereign downgrade of Germany’s debt. The DAX tumbles almost 2%. The rating agencies release statements that Germany’s ratings are not under a downgrade but traders sell first and ask questions later; the damage was done. Finland throws gasoline on the fire as they request collateral from Greece gumming up the prior agreements among the Euro countries. The SPX closes down 19 points, or 1.6% and the Dow Industrials close down 171 points, or 1.5%.
On 8/26/11, Friday, the GDP prints 1.0%. Chairman Bernanke stops short of signaling further stimulus. The Swiss, SNB, hints that further action is coming to stem the strength in the franc such as local banks starting to charge customers for franc deposits. The markets take a wild ride opening the day down large, then recovering to post big gains, then fading into the close as traders worry that the stock exchange may be closed on Monday due to Hurricane Irene hitting New York. The SPX moved thru a 45 point range today while the Dow Industrials moved thru a 397 point range. The SPX closed up 18 points today, or 1.5%. The Dow Industrials closed up 135 points today, or 1.2%. The Nasdaq and Russell 2000 were up over 2.5% today. The indexes produced a recovery rally this week with the SPX gaining 4.7% for the week and the Dow gaining 4.3%.
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………the saga continues……………
Coming Attractions:
Hurricane Irene—does the New York Stock Exchange open on Monday, 8/29/11?
Europe woes continue including DAX troubles, Greece default talk and Swiss currency strength.
Dollar/Yen intervention by the BOJ.
Potential further CME gold margin requirement raises.
EOM Wednesday, 8/31/11.
Economic data is heavy for the week of 8/29/11 thru 9/2/11 including Personal Income and Outlays, Pending Home Sales and Dallas Fed Mfg Survey on Monday, 8/29/11; Case-Shiller, Consumer Confidence and FOMC Minutes on Tuesday, 8/30/11; Challenger and ADP Job Reports, Chicago PMI and Oil Inventories on Wednesday, 8/31/11; Jobless Claims, Productivity and Costs, ISM Mfg Index and Construction Spending on Thursday, 9/1/11 and the Employment Report on Friday, 9/2/11. This data leads to a three day Labor Day holiday weekend and markets are typically buoyant the two days in front of a three day weekend (Thursday and Friday).
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President Obama is expected to release a Jobs Package, tentatively scheduled for sometime between 9/4/11 and 9/7/11.
ECB rate decision on 9/8/11.
Fed rate decision meeting, now expanded to a two-day meeting, 9/20/11 and 9/21/11. This is now a target for Chairman Bernanke to mention potential QE3 strategies.
