Stock Market Crash: If You Own Stocks, You Need to Read This

Stock_Market_CrashAre We “Due” for a Stock Market Crash in 2016? Take a Look at These Numbers

The bull is dead at this point as it looks more like U.S. and global markets are heading dangerously towards a bigger stock market crash in 2016.

The third quarter was the worst quarter in four years with the Dow Jones Industrial Average and NASDAQ down over seven percent. We are seeing stocks and sectors across the board get smacked around. The reality is that it would get worse before getting better.

After some optimism at the beginning of the year from Wall Street, the feeling is growing more pessimistic as investors run to the exits and dump stocks in a selling capitulation. Nothing is safe at this time. Small-caps, blue chips, value—they are all getting sold.

If you think because the major stock market indices are not yet in a technical bear market, you should think again. The reality is the majority of stocks are already in a bear market. The fact the indices are not there yet is because of the influence of some of the major momentum stocks that have helped to drive them higher.

The month of September witnessed the collapse of small-caps and technology. The Russell 2000 declined 5.03%, representing the third straight down month. The index is down 15% from its high and is potentially moving towards a technical bear market.

RUT_1Oct15_Chart

Chart courtesy of www.StockCharts.com

All four major indices are in correction mode and holding to a bearish death cross on weak relative strength.

It is clear that investors are not feeling good at this time with bearish sentiment in 10 straight sessions on the NYSE as at September 30th.

The number of S&P 500 companies above their 200-day MA is declining as reflected on the chart.

S&P500_30Sep15_Chart

Chart courtesy of www.StockCharts.com

Make no mistake about it; the bears are in control. There is no staying power in stock market as we continue to see selling into strength limit any upside moves.

The failure of the broader market to find support or any leadership is bearish despite a technically oversold condition.

In the best case scenario, a move back to the neutral line by the year-end for the indices may be the best hope at this point.

The Smart Money is Predicting a Stock Market Crash in 2016

We are hearing more bearish overtones emerge from Wall Street.

Goldman Sachs lowered its estimate for the S&P 500 to 2,000 this year. It was at over 2,200 at the start of the year.

I recently talked about Robert Shiller who called the stock market “overheated” and vulnerable to selling.

Then there is activist investor Carl Icahn, who when not trying to talk up Apple Inc. (NASDAQ:AAPL) on CNBC and in the media (he does own some 56 million shares), is now calling for a stock market sell-off. The investor is saying stocks are “way overpriced” and “this market is in very dangerous territory.” (Carl Icahn: I think markets are overpriced, earnings are misstated, CNBC,  September 30, 2015.) Icahn believes earnings are “misstated” and a “complete mirage.” Except Apple, of course.

Then there is Wall Street bull Jonathan Golub who estimated the S&P 500 would hit 2,325 by the year end, just slashed his targets to 2,100, which still seems somewhat ambitious given that the index would have to rise over 10% in the fourth quarter. (One of Wall Street’s stock market uber bulls just tapped out, Business Insider, September 28, 2015.)

So whether you are willing to accept it or not, unless we see a good earnings season and China doesn’t fall apart, the stock market may be on the verge of a nastier downturn. Of course with this also comes opportunity for the aggressive trader on either the short side or buying on major weakness.

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