Stock Market Crash in 2016: These Warnings Signs Suggest Misery Ahead

Stock Market Could Crash in 2016Stock Market Could Crash in 2016?

Despite the gains over the past few days, a stock market crash in 2016 still can’t be ruled out.

Don’t buy the optimism; just look at the facts. They suggest a big sell-off could be ahead.

Before going into any details, please look at the daily chart of the S&P 500 below and pay close attention to the lines and circled areas.

spx s and p 500 large cap index chart


Chart courtesy of

You see, everything was great until March of 2015. After that time, we saw trading ranges get smaller. By mid-year, we saw the S&P 500 reach its all-time high. Sadly, for a few months, we never made any progress to the upside. Buyers declined in numbers or they were just not powerful enough to take the stock market higher.

At the very core, technical analysis suggests we saw a top built on the stock market in mid-2015.

Moving forward, in August, we saw a rigorous sell-off and all the gains made were pretty much wiped off until mid-December. Then in early 2016, we saw another sell-off. The stock market crashed to the lows made in August of 2015. Since then, it’s been on a move to the upside.

Dear reader, the move between August until now shouldn’t be taken lightly. Technical analysts will agree with me on this; we could be in the midst of forming a bearish chart pattern called a “head and shoulder” on the stock market. This pattern suggests that if the S&P 500 drops below the blue line drawn under the two circles in the chart above (around 1,800), we could see a very steep and rapid sell-off.

On the upside, it shouldn’t be forgotten that there’s a massive resistance level around 2,150 on the S&P 500.

Mind you, that’s just one reason to be bearish on the stock market. Pay attention to the institutional investors or the so-called smart money, as well. They don’t like stocks right now. Why do institutional investors matter? Well, for starters, combined, they have a significant amount of buying power; they can move the markets.

With this said, look at the chart below of Wall Street Sentiment Bulls Index. It’s essentially the results of a survey of Wall Street analysts and traders, tracked on a weekly basis.

ffbull wall street sentiment bulls indx chart

Chart courtesy of

In mid-December, 75% of those surveyed were bullish. Now, this figure is just 29%. In other words, the majority of the bulls on Wall Street have changed their opinion towards the stock market. That’s not good, no matter how you look at it.

Mind you, these aren’t the only signs that suggest a stock market crash could be ahead. I have been warning my readers for several months now. At this point, caution might just be the best investment strategy.

Investing 101 for Investors to Remember

With all this said, I leave my readers with the three most important lessons I have learnt over time about investing:

  1. You don’t have to be the first one in or the first one out. As long as you are ahead of the majority, you will do just fine. Simply listen to the market and pay attention to key indicators.
  2. Cut your losses quick. The longer you keep your losing positions, the bigger the misery. Know that if your position declines by 50%, it has to increase 100% for you to just break even.
  3. Don’t predict where the top or the bottom is going to be. It’s an impossible game to win. By doing this, you will only hurt your portfolio—big time.