NIRP Crash Indicator’s Sell Signals Very Reliable For April 2016
The NIRP Crash Indicator’s signals were very reliable during April 2016. April was the first month in which the signal fluctuated since it became operational on March 1, 2016. In the ensuing days after the reading was elevated to a pre-crash or crash imminent Orange warning from its Yellow cautionary readings on April 1 and April 28, 2016, the volatility of the markets was immediate. In both instances, the S&P 500 experienced declines of 1.2% or greater in four days or less after the Orange signals went off. Since the NIRP Crash Indicator is still reading Orange, meaning that a crash could be imminent and market volatility has not yet abated, the probability of a sudden crash occurring remains high. The NIRP Crash Indicator was developed from research conducted on the Crash of 2008, which revealed the metrics that could have been used to predict the Crash of 2008 and its V-shaped reversal off of the March 2009 bottom. See my Seeking Alpha “Japan’s NIRP Increases Probability of Global Market Crash” March 4, 2016 report. The metrics are now powering the indicator. Information about the NIRP Crash Indicator and the daily updating of its four signals ( Red: Full-Crash; Orange: Pre-Crash; Yellow: Caution; Green: All-Clear) is available at www.dynastywealth.com . Throughout the entire month of March, the signal for the NIRP Crash Indicator had remained at the cautionary Yellow and the S&P 500 experienced little volatility as compared to the extremely volatile first two months of 2016. For the month of March, the S&P 500 increased by 4%. The indicator’s reading went from Yellow to Orange after the market’s close on Friday April 1, 2016 . For the following week ended April 8, 2016, the S&P 500 experienced its most volatility since February of 2016 and closed down 1.5% for the week. The signal’s second Orange reading occurred before the market’s April 28, 2016 open. From the Thursday, April 28 open to the Friday, April 29 close, the S&P 500 declined by 1.2%. The S&P 500 (NYSEARCA: SPY ) and the Dow 30 (NYSEARCA: DIA ) ETFs closing at their lowest prices since April 12, 2016 on April 29. The primary metric that I discovered that now powers the NIRP Crash Indicator are sudden increases in volatility for the exchange rates of the yen versus the dollar and other currencies. The significant changes in the yen-dollar exchange rate accurately predicted the crash of 2008, and the recent declines of the markets to multi-year lows in August of 2015 and February 2016. In my April 11, 2016 ” Yen Volatility Is Leading Indicator For Market Sell-Offs ” SA post and my video interview below entitled “Yen Volatility Causes Market Crashes”, I provide further details on the phenomenon of the yen being a leading indicator of market crashes. The only logical conclusion I could come up with for yen volatility or significant appreciation versus the dollar being a leading indicator of crashes is because the Japanese yen and the U.S. dollar are the world’s two largest single country reserve currencies. For this reason, the yen is the best default safe-haven currency utilized by investors during any U.S. and global economic and market crises. When crises unfold, historically the U.S. dollar — by far the world’s most liquid and largest safe-haven currency — is susceptible to dramatic declines until the storm has passed. Savvy investors know that the U.S. is, unquestionably, considered the world’s leading economy and markets. They know that upon a crash of the U.S. stock market, the initial knee-jerk reaction would be a simultaneous crash of the U.S. dollar versus the world’s second leading single-nation currency. The yen is currently the default-hedge currency. Even though the euro, arguably, ranks with the U.S. dollar as the world’s top reserve currency, it is not the preferred hedge against the greenback. The euro is shared by 19 of the European Union’s member countries that have wide-ranging social and economic policies, and political persuasions. For this reason, and also because Japan is considered to be one of the most fiscally conservative countries on the planet, the default currency is the yen. The U.S. dollar does not experience extended crashes versus the Swiss franc and the British pound during times of crises because each of the underlying countries has economies much smaller than Japan’s. From my ongoing research coverage of the spreading negative rates and the devastating effect that they could potentially have on the global banking system, the probability is high that the major global stock indices including the S&P 500 will begin a significant decline by 2018 at the latest. My April 11, 2016 article entitled, “Negative Rates Could Send S&P 500 to 925 If Not Eliminated” , provides details about the potential mark down of the S&P 500 likely being in stages. I highly recommend you also watch my 9 minute, 34 second video interview with SCN’s Jane King entitled “Why Negative Rates could send the S&P 500 to 925”. In the video ,I explain the math behind why the S&P 500’s declining to below 1000 may be the only remedy to eliminate the negative rates. The video also reveals some of my additional findings on the crash of 2008. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.