HSBC Sees Massive Stock Drop Coming

Putting out the warning:

HSBC’s technical-analysis team has thrown up the ultimate warning signal.

In a note to clients released Wednesday, Murray Gunn, the head of technical analysis for HSBC, said he had become on “RED ALERT” for an imminent sell-off in stocks given the price action over the past few weeks…

In late September, Gunn said the stock market’s moves looked eerily similar to those just before the 1987 stock market crash. Citi’s Tom Fitzpatrick also highlighted the market’s similarities to the 1987 crash just a few days ago. On September 30, Gunn said stocks were under an “orange alert,” as they looked to him as if they had topped out.

And now, given the 200-point decline for the Dow on Tuesday, Gunn thinks the drop is here.

“With the US stock market selling off aggressively on 11 October, we now issue a RED ALERT,” Gunn said in the note. “The fall was broad-based and the Traders Index (TRIN) showed intense selling pressure as the market moved to the lows of the day. The VIX index, a barometer of nervousness, has been making a series of higher lows since August.”

Gunn said the selling would truly set in if the Dow Jones Industrial Average were to fall below 17,992 or if the S&P 500 were to dip under 2,116. The Dow closed at 18,128 on Tuesday, while the S&P settled at 2,136.

There are a myriad of weak spots in this house of cards, and no way to know when the event will occur that will snap amygdalae out of their complacency and trigger the protectionist behaviors that will cause it all to fall. But one thing is certain. Amygdalae are firing off, and developing faster and faster.

As they do, they come online, and in an environment of economic threat like we see today, that means all roads lead to Apocalypse. The only question is how fast we get there.