Update 9/14/2012: In the update below, I noted that the 12,200 trigger was breached, but this is the problem with using absolute thresholds with any of nature’s processes. For example, not all Pine trees look exactly the same, yet all are obviously pine trees. The same is true about stock market fractal growth and the rules-driven psychological patterns that govern them – a slight breach of an identified threshold obviously isn’t enough to declare something a done deal. A Pine tree can look slightly different (but not a lot different) and its still a Pine tree.
The same is true of the stock market. Price patterns are a manifestation of hard-programmed human psychology, nothing is random, movement is virtually 100% predictable at the right scale. Example: I know with near 100% certainty a Pine tree will grow to be triangular in shape. If I try to predict exactly where a branch will sprout, I can get it right most of the time, but not 100% of the time. If I try to predict the day a Pine Cone will appear, that is harder still. But nevertheless, knowing you are dealing with a natural growth pattern that must behave according to laws and rules (Pine Tree DNA or in the case of the stock market, human DNA) gives one an enormous advantage in predicting future development over someone who thinks group human behavior is random. It’s not. Far from it.
The long sideways correction pointed out before it happened in my updates below appear to have ended, and right on the original timeline. That means the market is ready to spike hard and irrationally. The larger behavioral pattern dictates roughly 15,300 as the peak of such a zoom. But this is short term, so that is somewhat up for grabs.
What is not in doubt, and has never been in doubt, is the massive meander-down that follows. That takes us to 1960’s price levels (Dow 1,500 or lower) with virtually 100% certainty, within a decade or two. The same 90% stock decline happened to kick off our previous 25 year long Great Depression. A 90% stock market crash has already completed in Japan, current day.
In the short term, a spike to 15,000+ seems likely given the recent exit from the months long, sideways move.
There is a reason for the spike. It isn’t random. Spikes like these, at all fractals and scales of public price behavior, are sell points. When the more powerful realize they have accumulated a bad hand relative to the less powerful, they pool their power to create a spike to exit: a sell point. In this case, that spike is so big it requires artificial help from some of the world’s largest institutions.
It’s sad that Ben Bernanke, the public’s spokesman for the privately owned, 100% for-profit Federal Reserve Bank, has announced that the “independent from America” (=internationally owned) Federal Reserve, now feels they have Americans in a place where they cannot prevent them from printing unlimited electronic and paper dollars for their personal and exclusive profit.
It’s ironic that Bernanke see his role as a conduit from the Fed, to the People. In fact, his role was formed to be a check on the Fed’s private ownership, from the people, exactly the opposite of what he is doing. Talk about a clueless dude, he doesn’t even understand the historical conditions that created his job in 1913 (by voice vote of 5 congressman during the Christmas recess). But his ego obviously doesn’t allow his role as the voice of the people to stand up against the international central planners to manifest, so he becomes part of the problem instead of part of the solution (which is to abolish the private Fed’s monopoly to control American currency, and thus Americans).
Where does the privately owned Fed’s new money come from? Nowhere, it is printed. The Fed has no public money.
Where does it go? They are buying $40B of distressed American mortgages per month, and pocketing them as pure (printed) private profit. It’s svelte as counterfeit money laundering gets.
What is the result? Normally, Americans would pay to hand over their property to the international Fed in the form of an inflation tax (which is historical, by far, the largest tax levied on Americans). Most American’s don’t realize that the inflation tax is levied by decree of the international shareholders of the Federal Reserve Bank from afar. The Fed simply prints as much as they want and buy US Treasuries with the new counterfeit money. Americans then cough up the interest. But it the current case, the economy has been so impaired by the dupes in charge, that the rules dictate massive deflation will be the result. We’ll simply wind up property-less as a nation when the crash finally levels, decades from now.
The U.S. government loves the international hate crime against America, because #1 Congress is a collection of the dimmest people on Earth (as is the Executive and Judiciary). But more to the point, #2 the government gets to spend the infusion of internationally counterfeited cash to buy votes (i.e. government spending). We call it “deficit spending” but all that really means is the U.S. government is duped into borrowing printed cash from the internationally owned Fed, while promising our real money to pay them back with interest.
We currently pay the private international shareholders of the “independent” Federal Reserve about $400B a year in interest plus forfeit the securities they dupe us into “purchasing.” Of course, printing money to buy something is called “purchasing” when you are international horse thieves like the Fed’s unnamed private shareholders, but others call it stealing.
There is no end in sight for the insatiable appetite for crime of the current, previous, and future administrations and congresses.
Update 6/23/2012: Since my trigger level of 12,200 was breached, and then a sharp upward retracement occurred (but might not be quiiiite complete), an acute down-leg in the immediate future (weeks) is likely.
Not much time left to run away.
The Economic Depression is rapidly developing and from this point forward, any reprieve from massive stock market losses should be considered the occasional upward motion of a bouncing ball careening down a steep and treacherous staircase. Kiss the stock market B-bye.
Minus occasional blips and bounces, all asset classes (paper stocks and funds, metals, commodities, real estate) will deflate (= shrinking prices) as our Depression accelerates thru 2018 or so, then stabilizes in the gutter for decades.
Not much time left to run away.
The Economic Depression is rapidly developing and from this point forward, any reprieve from massive stock market losses should be considered the occasional upward motion of a bouncing ball careening down a steep and treacherous staircase. Kiss the stock market B-bye.
Minus occasional blips and bounces, all asset classes (paper stocks and funds, metals, commodities, real estate) will deflate (= shrinking prices) as our Depression accelerates thru 2018 or so, then stabilizes in the gutter for decades.
Update 12, 5/25/12: For those withdrawing cash, I recommend withdrawing no more frequently than every other day and in amounts no more than $2,499.99. A $2,500 cash withdraw forces the bank to put you on the government-maintained Patriot Act Watch List for future fleecing and flags you for IRS audit under the IRS's latest heuristic analytics which maintain a catalog of every taxpayer's private behavior.
The Bank Secrecy Act limit of $10,000 has been secretly lowered by the Federal Reserve to $2,500 under the auspices of the Patriot Act to track as many US citizens who possess cash as possible.
Do not rule out a modern analog of the FDR Gold Confiscation Act of 1933 if you are flagged as a citizen who stockpiles cash.
Update 11, 5/24/12: Gold and Silver have finished their correction and are gearing up for a strong push higher. It will most likely be a bumpy start since liquidity is sure to be scarce in the coming months, causing severe downside pressure on all things paper. Yes, gold and silver have become largely paper assets because their burgeoning ETFs are unbacked by physical metal--contrary to the intentionally muddled insinuations, but never legal declarations, of their shady administrators.
Once I see the upside move I can assign metal price targets and timing. My expectation is for these paper metals to fully participate in the impending market crash, but with delayed timing of the price peak followed by a similar long term deflationary collapse.
In general, the traditional financial picture is disintegrating faster than anticipated. When the Dow breaks below 12,200 (we've come awfully close several times) then the relentless stock market crash has begun and should complete in approx 2018. Until then, our current sideways correction technically remains in place and we could see one more significant push higher.
The impending crash mechanics are that of deflation, which means given our bank-run government, dramatically lower levels of lending leading to fewer dollars in circulation to compete for goods. Cash starvation ultimately re-prices all things with dollar bills that have fewer zeros on them. Except, of course, heavily zeroed dollar bills themselves. Therefore, the way to beat deflation is to hold a cash position as prices collapse. Hold minimum assets priced in dollars, and avoid debt at all costs since you have to repay using more valuable dollars..
It's the opposite of inflation where you want to short cash (borrow it to buy assets), and where banks go absolutely nuts speculating with their customers' deposits using maximum leverage, and as they usually do in the end, lose it all. That's why we have the FDIC to eliminate their risk and corresponding massive losses.
It is important to understand that the FDIC is currently on the verge of bankruptcy with more than 7 trillion in crumbling deposits backed by less than $50 billion in assets. It is not too early to phase out of all bank deposits, bank administered money markets, bank backed CDs and hold a simple 100% cash position avoiding any instrument linked to a bank. Government insured bank deposits and other instruments are at the highest risk of failure since bank administrators are free to take virtually unlimited risk and often apply speculative leverage more than 40:1. Store your cash in a safe at home, or any mattress will do.
I recommend withdrawing cash every other day in amounts lower than $2,500. A $2,500 cash withraw forces the bank to put you on the government-maintained Patriot Act target list for future fleecing and flags you for IRS audit under the IRS's latest heuristic analytics to analyze your behavior. The Bank Secrecy Act cash limit of $10,000 has been secretly lowered by the Feds to $2,500 under the auspices of the Patriot Act to track as many US citizens who have money as possible.
Update 10, 3/23/12: Silver and gold have been very profitable to the downside from their Update 6 peaks, but the way this fall has developed presents signals that they may not reach my original downside targets of 24/1400 before resuming a climb. While there is likely some downside left, I am phasing out of my metals position with a great profit until I see a more unfair opportunity to trade.
The Dow is doing a similar thing but not to the same extent. The sideways correction is in progress, but as it is developing the lowest point in the fall might not quite reach my 12750 target. There is room left to fall so the trade stays in place.
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Update 9: The Dow has achieved a short term interim target of 13,250 and is due for a several week long 500+ hundred point loss as the first leg of a mostly sideways, months long fluctuation before continuing a march to new highs in late '12 early or '13.
Long traders may want to side step the beefy first leg of this correction, then step back in around 12,700. Using minimum leverage will be an advantage as the Dow tries to shake off overly aggressive long an short positions with harrowing twists and turns before rewarding patience this summer. "Sell in May" might look smart initially, but "Walk Away" at your peril as the next upward leg takes shape probably in early summer.
Silver and gold zig zag lower from the highs I called in Update 6.
Oil contiues it's march from $106 today to $122 in a few months. Oil's rise will be blamed in the mass media for the Dow's coming correction, no doubt. The stories are already being written. So predictable.
The truth is completely different: all markets are simply topping at slightly different times. In the big picture of the overall inflationary Moon shot of all markets since the 1932 low, whether commodities top in early 2012 and stocks top in late 2012 will be virtually indistinguishable to future scholars looking back to the setup which led to our near total economic collapse.
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Update 8: The Dow climbs a little higher into a long sideways trading range, ultimately popping higher still before relentless declines begin around year end, tumbling into a protracted Bear market until a 2018ish bottom.
Oil resumes a steady march to $122 then halves within 6 months.
Gold and Silver stage a brief rally on their way to much lower prices.
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Update 7: Look for a continued paper asset rise to a mid-Spring targets of: S&P 1450, Dow 13500, NASDAQ 3100.
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Update 6: Silver to top shortly at 37.51, then decline below $25/oz in the coming months. Gold to 1400.
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Update 5: Just a word on oil. High priced oil is always paraded as a sign the economic world is swirling down the toilet. This is perpetrated by a commercially-driven mass media, specifically to steal your money.
Here is what high oil prices actually mean:
Gasoline and other petroleum-based energy is probably the most transparent and immediate economic indicator, because of the intense trading volume (the number of daily purchases/sales) and the long supply chain which forces continuous liquidation at every point of sale (reason: resupply is always on the way). That means that every dealer is forced to yield to market value, there is no holding out for a better price--people will either divert to one of their 50 different options, or the dealer will have no room for continuously arriving resupply.
Therefore gasoline prices, in particular, always reflect current market value. Higher prices mean demand is high and dealers can charge more. The instant demand falls, so do prices, as dealers must sell-out.
So high oil prices mean one simple thing - people have both the need and the ability to pay = the economy is heating up. Just the opposite of news media disinformation.
Look for oil to top in the $120/br price range towards late summer as the bubble inflates.
Expect the old "hurricane story" to replay ad infinitum. Unfortunately another well documented phenomenon is that market cycles follow the Sun's well understood temperature cycles. Probably because people get out and spend more in warmer weather. As an interesting result, market peaks are accompanied by the Sun's temperature peaks, and vice versa. There are more hurricanes during warmer Sun cycles, so expect this year to bring some.
There is nothing new under the Sun cycles.
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Update 4: As the stock market embarks on a saw-toothed dash to new highs in late 2012, quickly followed by unmitigated economic meltdown, it actually saddens me to make money as I watch. Not because I'm against making money, to the contrary I think people who take the time to master the unbreakable equations that govern and precisely quantify collective human behavior should be rewarded--there are many who've done so--Barron's recently tipped their cards that they have reached the same, inevitable (and correct but rounded-off) answer...
...no, I'm saddened because sometimes Natural Selection is a cruel bitch. But this is the process God has chosen, who am I to fight the mathematics of our collective programming? In the long run, the forest is better off for the fire. Still, as but a squirrel on a branch cursed with self-awareness, it is hard to watch.
When you discover that major market outcomes are well known before they occur, and trust me all successful pro traders and all large trading houses do or they wouldn't be where they are today, it's captivating to observe the string of human behaviors that are, quite simply, caused by their result.
Will it be a large capital gains tax increase that forces a waterfall of paper asset liquidation before Dec 31 ends a frantic race to the bottom? Or will it be a realization that Euro-driven loss of sovereignty is the opening act of WWIII? Will our depression hold a repeat of the Jacksononian abolition of our private central bank, after a furious populace awakens to trillions paid in interest on loans consisting of $20-some trillion in worthless printed paper devoid of real assets? Or, will our implosion replay the 1929-1932 free market 90% nose-dive that successfully anticipated 25 years of economic carnage and world ruin from total war, stocks hitting rock-bottom the day FDR set foot in the White House?
Whatever the cause, the results are known. The time has come to brace for severe turbulence, likely starting in very late-2012/early-13, with a crash landing around 2018.
Ride, but do not be fooled by the irrational market Moon Shot in the making. RC fliers know better than most what follows a 6S scorching of a 3S motor.
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Update 3: It looks like the previous 12,876 DJIA interim high will be taken out within 3 days or so, inevitably leading to the "pop" scenario. This will lead to an a new DJIA all time high, probably in late 2012 or early 2013, but this is utterly catastrophic news for the total collapse quickly on it's heals. Looks for unbridled carnage, bottoming in approximately 2018. America's very future in doubt.
This is what happens when you let commercial banks run the country with absolute political power: dollar inflation from rampant unchecked currency printing, short term market pop, massive new long term debt, total market collapse = slavery of the indebted left now with no assets to pay. That's (always) their plan, and unfortunately it is becoming apparent that they've succeeded in ruining America once again. Mega Depression coming within a few years to a community near you.
Strategy to beat it: Wait for Dow 12,877+ confirmation. Phase in slowly (look for a solid pull back below that new interim high) to ride the irrational wave way, way up 1928-29-style. Target hold time frame = 10 months to 1 year. Phase out slowly in new-high territory to set a 100% cash (or part short) position as the economy collapses around you. Aside from upside gains, 100% cash in the mattress will grow in buying power as deflation drains everyone else's buying power. You are now rich.
Be careful of banks holding your cash stash on the downside, as many will not survive their wild speculations during the flash boom. The FDIC is not to be trusted during this downturn, they currently hold about $40B in financial reserves to cover $6 to $7 trillion in bank deposits. After a home safe (AKA mattress), US Treasuries or a Treasury Dept C of I account is the best cash storage.
Look for Gold and Silver to rise during the coming mega bubble, but as usual, not as much as pure paper during a boom. They too will collapse upon a deflation realization too, as they are also assets priced in dollars.
Alternate scenario: 12876 holds, markets go sharply lower for a few months, then become much more erratic and hard to play as they work higher, again to some irrational--but probably not as high--bank sell point, target TBD.
FYIs:
- Objective monetary analysis shows that deflation has already taken root and will dominate in force for about two decades.
- The expected market pop will therefore be counter-fundamental = a bubble. Again, 1929-style, but more appropriately akin to the 1830s through Andrew Jackson's "army of one" destruction of central banking in the Untied States which directly led to a brief, deep depression. More importantly, Jackson's strong-minded path to competitive sound money sparked the Industrial Revolution.
- Our Depression will likely last longer, but so will the new Age of growth to follow after the Federal Reserve Corporation is abolished in kind by our modern day Andrew Jackson, probably yet to be fingered.
- There is nothing new under the Sun.
Update 2: One of the interesting things about stock trading for a living is identifying the twists and turns in the road to stay alive and prosper. One must follow the path nature dictates.
Good news and bad news.
Bad news: The path remains Depression following 80 years of uninterrupted Boom. Good news (sort of): Those who've carved out a position of market influence have taken apparent action to avoid said fall. Bad news: Nature's cycles are inevitable and cannot be avoided. Good news: This presents an even greater money making opportunity for those with good vision.
Today, our privately held Central Bank tipped its hand. The Federal Reserve could not cut interest rates further as they are pinned at 0%, so they got creative. They took an action that is so unique, so unprecedented, that in a way it was almost intelligent. Out of ammunition and ideas, they did the only thing they could do, they "promised not to raise rates for at least 3 years."
I contend there has never been a more damning forward assessment of a long term financial picture in all of US history (the vast majority of which is of course, Federal Reserve-less). One possible exception was President Andrew Jackson's open pledge to kill the (first) central bank before they killed the economy. He did. That was 1836. It is hard to believe that a late 17th century extinct species like a King's central bank has has crept back onto the modern scene, a left-over from when "divine" royalty ripped off the people by divine right. But as a relatively small fish, a target in the food chain, all large predator moves must be respected.
It is not that the Fed's actions will stave off economic collapse, to the contrary, it will worsen it. But what it shows is a rock solid commitment to create a bubble. The fact that it is an election year probably only encourages bubble blowing bedfellows.
A "bubble" is any counter-fundamental, and thus irrational, rise in prices. All bubbles pop, causing a whiplash reaction far worse than if the bubble had never been blown. And so our fate has been sealed, here comes the mother of all bubbles.
What does this mean? A few things. The economy is worse than the Federal Reserve Corporation is overtly acknowledging. It means they are willing to act irrationally to "save it' (more on that in a moment), and it means that ultimate downside targets must be revised lower, not higher.
Here is what is about to happen - hear me now and believe me later. The overall economic picture has been worsened by these acts, not improved. But...... as a stock trader one must live in the world of price action, not in the world of self righteousness--at least not immediately.
Bottom line: Today the short term technical pricing picture has shifted higher. The long term picture has shifted lower. Get ready for the financial roller coaster of a lifetime, maybe two.
Expect a temporary bubble in 2012 driving prices higher than the most recent 12,800 market high, possibly setting a new all time high in what will be an obviously unhealthy, somewhat uneasy irrational 1929-like blowoff, followed by an equally unnatural 2013+ relentless collapse to at or about Dow 1,500 (probably a 5 year+ outlook).
I said 1,500. No typo. 80% declines are so commonplace in the stock market they are best described as inevitable. Just ask Japan: The Nikkei has dropped from 40,000 to 8,000 and is careening lower. From 1929-32, the Dow dropped 90%. In fact, GE, the only surviving Dow component, was selling around $400 in 1929; today it fluctuates below $20. If the Dow 30 were a fixed lineup of companies instead of rotating in new ones at will, the 1929 Dow 30 would be down 90+% between then and now.
So yes, large falls are possible.
As if that picture isn't dire enough, one has to acknowledge one more thing to really see the picture for what it is worth, then I'll get off my soapbox and back to some really cool RC innovations I have lined up.
(More follows, now...) These large commercial banking interests, like the Federal Reserve Corp and 5 or so other trillion dollar-class banks, are not trying to "save the market." They have no fiduciary duty to save another person or any person, the bubble they have pulled out the kitchen sink to blow is not to save you, or me, it is to save themselves. In other words, they intend to create their own sell point. This is an exit strategy. And they are large enough to do it. Again, this is the same Play that occurred in 1929.
There is nothing new under the Sun.
And so is the law of the jungle. The predators have been granted, whatever the reason, an unalterable right to eat the innocent producers. The purpose is likely a form of natural selection for the sufficiently financially nimble. My advise is to be one of those.
Some will see this as gloom and doom. Far from it. The stock market is not the world, it is a relatively small collection of companies whose once private owners wanted to sell off to the public. So the world isn't ending. What this is, is a chance to make a large amount of money in a reasonably short amount of time.
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Update 1: We've drifted under miniscule trading volume since I first posted this [slightly off topic blog entry], but IBM's big revenue decrease and Google's massive earnings miss likely mark the beginning of a months-long mega-leg lower.
Signs show the economy is entering Depression status with the latest quarterly gasoline demand at 1999 levels (and with 310M people vs 280M) and mortgage rates plunging to attract business (= low housing demand).
Additionally, massive Euro problems (future break-up unavoidable) make the dollar's 3 year long bull market even stronger, and dollars price stocks directly so that actually matters more than anything else. That is why most stocks move in the same direction most of the time--currency value fluctuation.
IBM is very important because the Dow Jones Industrial Average is a sales gimmick intended to rip you off, it is jury-rigged to always go up even when stocks are going down, it is not a stock index.
In case you don't know, here is the way one of the greatest scams on Earth works to rip you off: The DJIA treats the movement of all 30 stock components as equal in point value, not in percentage. That means the more expensive stocks matter much more than the cheaper stock components, because an X% move creates a much bigger point move. As companies succeed they count more and more every day, the losers quickly become irrelevant in their ability to influence the Dow's movement. That means that if half the components move higher and half move lower, by the exact same percentage, the DJIA will go up.
IBM, being the most expensive stock in the DJIA, counts as much as the bottom 9 of 30 Dow components.
IBM will likely pop higher on its revenue miss, initially, because whenever the Dow is ready to move sharply lower, your government (confirmed by Alan Greenspan in retirement) buys index futures in the low volume after and pre-markets to stabilize and pump the stock market as much as possible, thus improving their own political lives. Since they understand how the DJIA is calculated, they try to influence the expensive stocks the most when there is a breakdown.
This is all wasted, of course, because the taxpayer money they use to create the pop is simply captured by the professional traders in the Wall Street firms they use to place the trades who take their own position next to the government position, then jump out of it after the pop.
This is all wasted, of course, because the taxpayer money they use to create the pop is simply captured by the professional traders in the Wall Street firms they use to place the trades who take their own position next to the government position, then jump out of it after the pop.
Perhaps the more obvious DJIA scam is the rotating door, failing components are simply kicked out and replaced by the best company they can find. In fact, since the original Dow 30 was formed, every single DJIA company has failed and been kicked out of the "index" except GE. That isn't because capitalism is failing, it is simply because all stocks that "go public" are usually sold by their owners to the masses for good reason.
I try to keep my blog on topic, but as a stock trader by nature I thought I would put out a warning for those interested. Look for stocks to begin to fall sharply in the coming months. I believe the next few years will be brutal, and the next decade will bring the most prolonged and relentless market crumble in US history. This crash is actually so big it started in late 2007. The bounce is wrapping up and down goes the roller-coaster again.
Lower high to lower low.
Just sayin...