Chart warns of possible stock crash

Chart warns of possible stock crash

We can’t predict the future. But we prudently can make preparations for unfortunate events. That’s why the California government and local governments should make sure they have budget surpluses.

Check out the following chart.
Chart of the Day, market rallies


It shows that the current DJIA stock rally (blue line) is similar to the 2002 Nasdaq rally (grey line). If the pattern holds, a correction could be right around the corner.

Given that California’s state revenues notoriously depend on taxing high incomes and capital gains — what’s called “volatility” — a stock crash always slams revenues. So if a crash is coming, it could mean the return of the post-crash deficits of the early 2000s, which helped oust Gov. Gray Davis from office in the 2003 recall.

Again, I’m not predicting this. I’m only saying: Be prepared.

7 comments

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  1. maximilian
    maximilian 18 June, 2014, 14:04

    Here are elements of the economy to stay focused on…
    …and, they must be breached before we have a large sell-off.

    The yield curve must invert. (long way to go)
    ISM Manufacturing will report in the low 40s. (not yet)
    Capacity Utilization will readily decline (hasn’t happened)
    Housing sector will decline (not happening)
    Average hours worked (per week) will decline. (not yet)

    Keep an eye on these. A recession could be likely if, and when, you see negative activity, as noted.

    Reply this comment
  2. BillyBS
    BillyBS 18 June, 2014, 14:52

    Great chart. When factored in with the adjacent article on California’s record spending, i.e high speed rail, preschool, increased Med-Cal…prudence is advised on an individual basis.

    Reply this comment
  3. Bob
    Bob 18 June, 2014, 19:03

    John,

    Whatever happened with the effort to split the state? Is there going to be an initiative in November?

    When will be able to move to Seilerville?

    And here’s an article to cheer y’all up…

    http://www.lewrockwell.com/2014/06/jim-quinn/the-4th-turning-4/

    Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 18 June, 2014, 20:02

    Yes…yes…..split the state….Pack and ship….call us for your Bug Out Kit Check List recently prepared by the Adelanto Doomers…..it’s really neat!

    Reply this comment
  5. Buds Led Ted S.
    Buds Led Ted S. 19 June, 2014, 07:14

    The state will never split.

    The market will correct again.

    We should always have a rainy day fund.

    We should spend less.

    Most people on both sides of the spectrum agree on this.

    Here endeth the lesson.

    Reply this comment
  6. Seanmorhamcpoly
    Seanmorhamcpoly 20 June, 2014, 01:02

    Great, all true, now, let’s spend like fools.

    Reply this comment

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DJIAJohn Seilerstock market

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