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Greedo 7000

Greedometer Gauge

 

The Greedometer® gauge represents strategic risk levels in the S&P500 stock market index. The gauge is intended to warn prior to major / historically important  stock market crashes and is supported by a database initiating in January 1999. As of January 2015, we are in the 10th Greedometer sequence. Each of the previous nine sequences were followed by the S&P500 crashing or beginning to crash. Each of these crashes were stopped by the Fed and/or European Central Bank (ECB). There have been no missed calls, and no false alarms.

The time between sequences has been steadily and rapidly dropping.

Greedometer inter-sequence

This chart clearly demonstrates the time between Greedometer sequences is following an exponential decay with a near uniform decay constant.  The fact this data follows an exponential decay suggests the underlying cause of the decay remains the same — and is inescapable.   I have long maintained the U.S. economy has been coping with a balance sheet recession since year 2000 resulting from the 1982-2000 debt binge.

 

 

UPSHOT:  The Greedometer data suggests (as of February 2016):

  • We are in the 10th Greedometer /  mini Greedometer sequence.
  • More central bank actions (I call them sugar bombs) have been taken over the course of the past year than over the previous 9 sequences combined. These actions have not stopped the sequence but have slowed it. This has prolonged the S&P500 topping process, slowed the pace of collapse, and built up a great deal of near term market risk.
  • We are going to see a protracted stock market collapse in 2016 unless the Fed and/or ECB (and other major economy central banks) do something to stop it — if they can. Because the time between Greedometer sequences has dropped to 0, the default scenario is this sequence cannot be stopped. Translation: this S&P500 crash cannot be stopped.
  • The crash will not end until the S&P500 CAPE (adjusted P/E) drops to the 6-7-8 range. This suggests a 65-75% drop in the S&P500 from the 2135 peak to the 550-750 range.