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Stock Market Crash 2011

 

 

The 2011 Crash 

Greedometer 7300

The next time the Greedometer® climbed through 6500rpm was January 2011. It reached redline (7000) in February, and peaked at 7300 in April 2011 (matching the reading seen in pre-crash June 2007).  A similar sized economic collapse (and stock market crash) to the 2007-09 Great Recession was likely to unfold. Interestingly, while the Greedometer was providing a clear warning, the S&P500 had only managed to climb to a level that remained 300 points below the previous stock market peak (1270 vs 1570) — reinforcing that the Greedometer gauge is not directly influenced by stock market levels, but that it represents risk associated with stock market levels. Not long after the S&P500 flirted with a 20% drop from the April 2011 peak, the economic collapse was stopped by the Fed’s Operation Twist announcement in September, and the ECB’s LTRO program.  Once again, underlying economic imbalances were not addressed, but time was bought.

Greedometer sequence 2011

 

The mini Greedometer presented a tighter focus. Again, months of advance warning was provided, and insight was provided into S&P500 interim inflection points (a week after it occurred).

mg11 2011

Notice the reaction by the mini Greedometer to the Fed changing its policy stance from one of expected rate hikes to one where rates would remain low for an extended period. That announcement in August 2011 prevented the baseline from being seen where indicated in August –and stopped the SPX with a mere 20% drop. This Fed announcement plus Operation Twist and ECB LTRO warped the sequence slower and truncated it.