The Roxylander in Flame, a financial blogger, doesn’t post often, but when he does, it’s worth paying attention to. Like yesterday’s post titled “Red Alert.”
Today we had a first grade panic in [two] credit default swaps and second grade panic in [another].
In the past two occasions that kind of panic was a very reliable indicator that the chain reaction will happen. The next thing to happen before the stock market starts moving down is the decline of junk bonds.
He sees the probability of stock market crash in the next 2-3 weeks as over 50%. That a crash or at least a major correction is coming soon seems unavoidable. The talking heads in D.C. and Wall Street put on a happy face as the subprime debacle metasticized. Now the rot is everywhere. The dollar is falling and billionaire investors are shorting it, which will only lead to a further fall. The wars have produced nothing but ruinous debt. The home equity ATM has been shut down so consumer spending, in turn, must slow. Oil may well hit $100 a barrel soon and stay there. The only thing propping up the market are a few absurdly valued tech stocks
Roughly 25%, or nearly 450 points, gained by the Nasdaq 100, a whopping 230 points, or over half the index’s rise, has come from just three issues: Apple (135 points), Research In Motion (60 points) and Google (35 points).
Those stocks are starting to wobble now too. Seems to me the stock market is running on fumes. Look out below.