is the us stock market crash an accident waiting to happen?

Factory orders have now been negative over the prior year for a whopping 12 consecutive months, which is just 3 shy of the 15 months of Y/Y declines recorded during the great recession.

ISM Manufacturing just fell below 50 for the first time since Nov 2012, crashing to 48.6 – the weakest since June 2009.

This won’t end well…

The US Services economy is weakening in its usual lagged way to manufacturing. This is a problem as the narrative has been that Services will save the economy even as manufacturing collapses.

You should pay careful attention to retail sales because there is a strong correlation between plunging retail sales and plunging stock prices!

Growth in global trade has been slowing down for some time...

Dr. Copper – the metal with a PhD in economics – is always the first to know which way the economy will go.

When copper prices rise, economic activity soon increases. When copper prices fall the economy often then stagnates. Thus, stocks may soon follow…

Remember: crises often start slowly… then erupt suddenly, and equity markets are always (without exception) the last to figure it out.

Since it is not where you “are” that matters but where you “are headed”, the place is very scary indeed.

Equities peak 12-18 months after a peak in margins; we are now 15 months after the peak in margins…

You can manipulate earnings, but the S&P 500 is as expensive now on a cash flow basis as it was at the peak of the dot-com bubble…

Margin debt is at all-time highs!

Just remember who is selling these stocks…

On average, stocks in the Nifty Nine trade at a 746% premium to the S&P 500…

Fed tightening in H1’37 was followed in H2’37 by a severe recession and a 49% collapse in the Dow Jones.

Source: www.MoneyWeek.com

CONCLUSION

The data above suggest that we could see a big increase in market volatility next year. The decline that occurred seemingly out of the blue in late August is best seen as a warning shot in this context.

Long term risk has increased quite a bit, no matter which data points one happens to consider. Whether one looks at valuations, market internals, leverage or positioning, there are now more warning signs than ever! Therefore, it is an accident waiting to happen…