Massive head and shoulders in gold miners; do they signal a market panic?

I noticed this pattern today and I'm not the only one. The downside target is the 2009 lows! Are miners signaling a major correction in stocks?


WHAT WILL HAPPEN TO THE PM SECTOR IF THE BROAD MARKET TANKS...

In the light of all this, how do the PM stock index charts look right now? – in a word they look terrible.

Our 6-year chart for the HUI index shows a massive completing Head-and-Shoulders top. We have observed this menacing pattern for some considerable time, but for a while thought it would abort because of the negative extremes of sentiment already afflicting the sector. However, we should recall from 2008 that sentiment can get even worse as prices plunge precipitously. The relative strength of the sector against the broad market in the recent past has been appalling, and this does not bode at all well for it in the event that the broad market goes into reverse as expected. While we are aware that the sector could go contra-cyclical at any point, as it has traditionally done in the past, and we will always be on the lookout for signs of this happening, at this point it looks like it will be subject to a similar cycle of forced liquidation as in 2008. If the broad stockmarket reverses hard it looks likely that the HUI index will crash the crucial support at the lower boundary of the Head-and-Shoulders top pattern and plunge, with a probable downside target in the vicinity of the 2008 lows, and possibly lower. We have a general stop at 358 on this index and will be out of all remaining holdings in the sector if this fails – we are not going to be caught napping like the unfortunate folks in 2008.

Click the link for much more on the current market technicals, including some Elliot Wave analysis.

Bank run in Vietnam

Nguyen Duc Kien's arrest in Vietnam prompts ACB fears

Depositors in Vietnam have withdrawn hundreds of millions of dollars from one of the country's largest banks after the arrest of one of its founders.

Nguyen Duc Kien, one of Vietnam's richest businessmen, was arrested in Hanoi on Monday on suspicion of "economic violations".

Second tycoon arrested amid bank run in Vietnam

Vietnam arrested another top banker Thursday, state media said, widening a police probe into the communist country's banking sector which has rattled markets and triggered a run on deposits.

The arrest of Ly Xuan Hai for "deliberate wrongdoing causing serious consequences" came just hours after the Asia Commercial Bank announced he had resigned from the position of director general, Thanh Nien online reported.

Market Vectors Vietnam (VNM) fell 10% in the past three trading days, but the Vietnamese stock market is rebounding today.

Physical gold insures against the greatest risk

Mallory Factor writes about collapse from the perspective of time, that the Internet has accelerated the speed at which events take place.

Collapse In Internet Time

So what of America? What could happen here? In normal times our nation's economy adapts to change and weathers small and large crises all the time. But our country has been weakened by massive debt, unbridled government spending and excessive burdens on our private sector, and there will come a point at which stressful events will be too much for our economy to bear. If our economy reaches this tipping point, we will not bounce back from crisis.

The immediate cause of our demise will be a single event--one of our creditor nations dumping U.S. dollars on the world market, the oil nations switching away from dollar-based contracts, a political crisis, another natural disaster, even a large trading error that inadvertently causes dislocation in our markets. But if the tipping point is reached and the downward spiral begins, our economic collapse will be over before we can take steps to address our weaknesses.

A major currency collapse in the United States will be over before it begins, which is to say that it will happen so quickly that there will be no time to act. With the Internet, information spreads instantly and to everyone. Add to that the fact that almost everyone in the world holds dollars, holds a currency backed by dollars or a currency backed by a central bank that holds dollars, trades with the United States, or has a financial system that borrows dollars. A major crisis in the U.S. dollar would lead to torschlusspanik.

The world can watch Thailand implode, it can watch the euro struggle, just as you can watch the Russian wildfires on TV and not feel a need to get a bucket of water. But in a dollar crisis, the world will be in flames.

Flash Crash Redux

The Wall Street Journal reports the details on why it was a panic.
Did a Big Bet Help Trigger 'Black Swan' Stock Swoon?

On any other day, this $7.5 million trade for 50,000 options contracts might have briefly hurt stock prices, though not caused much of a ripple. But coming on a day when all varieties of financial markets were deeply unsettled, the trade may have played a key role in the stock-market collapse just 20 minutes later.

The trade by Universa, a hedge fund advised by Nassim Taleb, author of "Black Swan: The Impact of the Highly Improbable," led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank Barclays PLC—to do their own selling to offset some of the risk, according to traders in Chicago.

It was a big trade, but nothing out of the ordinary. The crash was caused by panic, no different than the rush to exit a burning building. Europe and the markets were burning and this trade what happened was a cascade of fear.

"Universa alone couldn't have caused the meltdown," said Mark Spitznagel, Universa's founder. "We had reached a critical point in the market, and it was poised to collapse." Barclays Capital declined to comment.

Exactly right. The market was ready to crash. And it still may be.

With the high-frequency funds either selling or pulling out of the market, Wall Street brokerage firms pulling back and the NYSE stock exchange temporarily halting trading on some stocks, offers to buy stocks vanished from underneath the market. Normally there can be hundreds of offers to buy the iShares Russell 1000 Growth Index exchange-traded fund, but at 2:46 p.m., there were just four bids north of $14 for a fund that had been trading at $51 minutes earlier, according to data reviewed by The Wall Street Journal.

Thus, the price of $14 wasn't necessarily the "real" price under normal conditions, but it was a price and the one that was offered during those 15 minutes of panic.

1987...2010...What's changed?

It was a panic

Listen to the action from the open outcry pits at ZeroHedge.

Mish Shedlock shows how a huge spike in the yen preceded the panic by 45 minutes.
Equity Plunge Yen Connection; Reflections on Ponzi Markets and Program Trading