The futures market also continues to surge while the ETF short interests are at all time lows and the bulls are losing faith with the FED because even with the current stimulus the price continues to surge. Just a few days ago the S&P500 jumped back to 3,124 levels after the interest rates cut but the price later dropped back to the 2,990 level. Right now, the stock markets are too erratic and even the best market analysts cannot explain what is happening. There might be some catalysts for the rebound in the market, but based on history, none of the will push the markets up in the long term. It seems that a big stock market collapse has already begun and it will be irreversible regardless of the economic stimuli that will be initiated by the Federal Reserve. This kind of market movement was last seen during the great depression. We have only had 65 occasions in history where the Dow has recorded a daily loss that exceeds three standard deviations over the average dairy return. This has happened last week and most similar occasions happened in 1900-1950’s.
What is now happening to the stock market is a very rare event in the whole historical spectrum. Even during the great depression and two world wars, nothing seems to match with the current situation in the market. In those events, historic data shows that we never had a similar pattern in the markets. There is only one time where we had a similar occurrence throughout the history. Back in 1933, the US abandoned the gold standard in the midst of the great depression and this was after a market rally. Even after the great depression, the stock market was still in a freefall similar to what we have now and this lead to the signing of Executive Order 6102 by the Federal Reserve. This confiscated all gold from the public and also devalued the dollar against the gold. To many economists, this is what lead to the recovery of the stock market after the great depression. Experts are predicting that the Federal Reserve is planning to do this to prevent the collapse of the stock market.
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