Stock Market Crash July August 2011 Chronology and Timeline

Stock Market Crash July August 2011

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.

Chronology of Market Events Leading to the 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 over a few days time.

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 7/11/11, Keystone’s proprietary algorithm, Keybot the Quant, a long-short algo, went short at SPX 1324 at 10:34 AM EST.

On 7/12/11, Keystone's 2-10 Spread Indicator loses the critical 255 level indicating that the yield curve is no longer advantageous for the banks, hence, further serious downside for financials is anticipated moving forward.

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%.

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On 8/2/11, Tuesday, 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 8/3/11, 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, Thursday, Japan intervened into the currency markets, defending the 77 dollar/yen level. A spike from 77 to 80 occurs quickly but peter's out as all previous interventions had.

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 8/5/11, 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.

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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, Tuesday, 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.

On 8/9/11, Keystone's Inflation Deflation Indicator flashes Disinflation after many months where the inflationists and deflationists battled in the neutral zone. The move was short-lived, only a couple days, and then the indicator moved Neutral again. But, the move towards disinflation and deflation appears underway.

On 8/9/11, Keystone highlights the TRAN (Transportation Index), DAX (Germany), RUT (Russell 2000), XLI (Industrials), SOX (Semiconductors) and XLF (Financials) charts showing all have fallen into a bear market correcting in excess of 20% off their tops.

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%.

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 remains firmly against this move.

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, Merkel and Sarkozy, announce a plan to raise taxes on financial transactions.  Banks sell off on the news.

……………the saga continues……………