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Published On: Thu, Oct 13th, 2016

Murray Gunn, HSBC warns of ‘Red Alert’ on sell-off of stocks, ‘very high’ chance of severe fail

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.

Gunn uses a type of technical analysis called the Elliott Wave Principle, which tracks alternating patterns in the stock market to discern investors’ behavior and possible next moves.

There have been a lot of finger pointing to the 1987 stock market crash. Citi’s Tom Fitzpatrick also highlighted the market’s similarities to the 1987 crash just a few days ago.

photo/ См. ниже via wikimedia commons

photo/ См. ниже via wikimedia commons

On September 30, Gunn said stocks were under an “orange alert,” as they looked to him as if they had topped out.

A 200-drop this week indicates to Gunn the beginning 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.

“As long as those levels remain intact, the bulls still have a slight hope,” Gunn said.

“But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast. The possibility of a severe fall in the stock market is now very high.”

Wall Street stocks closed slightly higher on Wednesday – the Dow rose 15.54 points, or 0.09 percent, to 18,144.2.

photo Gerd Altmann via Pixabay

photo Gerd Altmann via Pixabay

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About the Author

- Roxanne "Butter" Bracco began with the Dispatch as Pittsburgh Correspondent, but will be providing reports and insights from Washington DC, Maryland and the surrounding region. Contact Roxie aka "Butter" at [email protected] ATTN: Roxie or Butter Bracco

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