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The Summer Stock Market Crash: Where Do We Go From Here?


The Wall Street spin cycle continues.

August has indeed been busy and lest you were sunning your buns on the beach, there has been a slew of movement in the global financial sphere. Let's take a moment to reflect on where we've been as we navigate the probability spectrum of where we're going.

The United States Blues, July 29, 2011
"235 Years old and feeling it; will the Crash Indicator strike again?"

Debt Ceilings vs. Stock Floors, August 1, 2011
"There is the matter of those black swans swimming across Europe."

Economic Issue Remain in the Wake of Debt Resolution, August 3, 2011
"Rather than using this crisis as a battle cry to unite our fractured financial fabric, policymakers seem intent on grinding it to dust."

Will the Stock Market Crash? August 5, 2011
"Markets crash when -- by definition -- traditional metrics of measurement break."

The USA Downgrade: Where Do We Go From Here? August 8, 2011
"S&P 1130 -- the target we mapped last Tuesday -- remains in play."

With No Bailouts Coming, the US Must Take Its Medicine, Yahoo Daily Ticker, August 8, 2011
"While some expect China to come to the US' aid, Todd isn't holding his breath."

Will Turnaround Tuesday Save the Day? August 9, 2011
"There was once a natural order to recessions; much like forest fires, they were scary and dangerous yet paved the way for a fertile re-birthing."

The Second Side of the Perfect Storm, August 10, 2011
"A single word continues to resonate in my mind's eye as we edge our way through this historic juncture. That word is "cumulative."

Explaining the Market's Reaction to Yesterday's Fed Statement, The Dylan Ratigan Show, August 11, 2011
"Until we stop being Democrats or Republicans and start being Americans, this is going to fester."

Why the European Short-Sale Bans Won't Work, August 12, 2011
"To wag a finger and place blame makes me wonder if they're still in the denial phase."

Will the Next War be Bulletless? August 12, 2011
"Cue the grassy knoll and the tinfoil hats but stranger things have happened."

What Are the Financial Stocks Telling Us?
August 12, 2011
"The signs are there if you choose to see them."

The Legend of Turnaround Tuesday Continues, August 14, 2011
"Did I really just witness several financial commentators giggle -- yes, giggle -- as they openly mocked, 'US downgrade what?'"

What a Proposed Transaction Tax Means for the Market, August 16, 2011
"This will quell HFT and impact the banks and institutions that make cake on those microsecond strategies."

Handicapping the Global Economic Recovery, August 17, 2011
"The stock market has recently endured more swings than a Hedonism vacation."

What Needs to Happen for Jobs to Return, Talking Stock with Pimm Fox, August 18, 2011
"We continue to keep our eye out for young, hungry talent looking to make their mark."

Fed Dissension and Financial Market Fatigue
, August 18, 2011
"The culprit? One word, two syllables. The first syllable sounds like "your" and the second sounds like 'rope'..."

Revisiting the Transaction Tax, August 19. 2011
""There is a healthy level of computer driven programs where the market can "legally" drive without being dangerous to others."

Heading into the weekend, those three words above -- "financial," "market" and "fatigue" -- seem to be manifesting in kind. And you know what? It's not your fault!

As I write, the bulls are making a noble effort to establish a "higher low" in the S&P into the weekend so they can, at the very least, claim the near-term technical battle in the context of the broader war.

The bears, for their part, have one word for you -- banks -- and will offer that until they find a bid, the tape is working off the oversold condition as a function of time rather than price. Deutsche Bank (DB), Barclays (BCS), Bank America (BAC), JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC) and Goldman Sachs (GS) remain viable tells in that regard, as demonstrated in the chart below.

Click to enlarge

There are two sides to every trade; see them both, and respect risk yet unforeseen. We're at a critical juncture, not only for the market but for the world at large, and this is the time to get long lucidity and short noise -- in size --until we find our way to better days.

We'll get there, that I know; for a wise man once told me, "This too shall pass."


Twitter: @todd_harrison

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