It’s October. Is it time for a stock market crash?

Tuesday, October 5, 2010
By Paul Martin

There are some big macroeconomic signs that a U.S. stock market crash could be coming, but it’s important to keep an eye on how October surprises play out around the globe.

By Keith R. McCullough

Lately there seems to have been an almost perfect storm of economic and political warning signs — both domestic and global — that point me towards one conclusion: the stock market is due for a crash. However, before we look at these big warning signs, let’s take a step back. There’s a growing group of signals in the global macro risk-management model that we use at my research firm, Hedgeye, which indicate that an abrupt 1-3 day U.S. stock market crash in October is probable. To be clear, I’m not saying it’s likely, but I am saying it’s probable. There is a difference.

Probable means predictable. Likely means there’s a better than 50% chance. What I see here is a 33% chance that a crash could happen. For the sake of accountability, let me explain what it would take for a Heavier Crash to occur instead. We would need to see:

•the S&P 500 get squeezed one more time in the next few weeks to a price north of 1164;
•volatility (VIX) get oversold toward 20; and
•the world’s “reserve currency” (The U.S. Dollar) lose its credibility.

The Rest…HERE

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