Briefly Revisiting the 1987 Meltdown ~ The Risk Averse Alert

Wednesday, March 16, 2011

Briefly Revisiting the 1987 Meltdown

There is but one, present risk of meltdown whose impact will threaten millions upon millions across the globe in a most direct fashion, unlike anything a half dozen crippled nuclear reactors could surmount even if they were to simultaneously explode. That is, namely, the meltdown of the trans-Atlantic financial system. This, and this alone, is the threat whose imminence has become elevated by the natural disaster to hit Japan last week.

Much as a growing mass strike movement throughout the globe likewise threatens financial meltdown, so too does anything upsetting the applecart making impossible the necessary gouging of society required to marshal every last penny available for bailing out a hopeless cause. We will see if an economically advanced nation like Japan — suckered these past twenty years into ransoming its treasury for the sake of propping up its banking system [also turned insolvent via real estate speculation] — will further sacrifice its future for the sake of remaining a player in Team Fraud's globalization scam.

Indeed, it appears blunt tools are being pressed into service, that Japan's answer might be promptly given. With a 233% debt to GDP ratio, the Japanese appear ripe for swindle, as well as being provoked in such a manner as could detonate a collapse of the trans-Atlantic casino.

Yet could there ever have been better cover given to such ongoing effort as seeks to paralyze sovereigns the world over (including the U.S. Treasury), that some neo-feudal, post-Westphalian fantasy might be furthered? Surely, this seemingly incredible goal's reality stands as a testament to why such perfect misfits as Bernanke and Geithner (and many, many others) could ever be thought "qualified" for their respective offices. These men were built to fail (much like that Herbert Hoover, Jimmy Carter clone who was made our nation's blundering fascist-in-chief, following his election season coronation by the Financial Times of London).

Needless to say, the stage still appears perfectly set for some series of events astronomically raising probability that, first, over days ahead western stock markets are swept into the downdraft battering Japan's this week, leading then to what could become the worst year ever in the U.S. stock market's history. All things technical continue their weakening, and with no sign yet of a letup.

Leading to March options and futures expiration on Friday (3/18) it will be interesting to see if respective 200-day moving averages are challenged. If so, then next Monday could set up to be a day like October 19, 1987 (itself a Monday following an options expiration)...

$SPX (1987)
S&P 500, August 1st - October 31st, 1987

Duly note the respective, relative positions of the S&P 500's 50-day and 200-day moving averages, and the fact that, both were rising right into the week of October options expiration.

Note, too, the depth to which relative strength had fallen (and so, appeared "oversold") upon October options expiration (green line).

Remarkably, conditions presently are much the same. If past is prologue, then, it appears Mr. Market could be in for a serious hurting these next few days.

Oddly enough, I recall there being a dollar crisis at the time of the October 1987 crash, and a lot of hubris about Japan's trade surplus, too. So, if history never repeats itself, but will sometimes rhyme, we might be looking at one such demonstration of how this sort of thing works...

Fast Money
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