Friday, October 31, 2014
Wednesday, October 29, 2014
Friday, October 24, 2014
We rallied right up into Wednesday testing the convergence of overhead resistance and will now most likely return to retest support into Friday. The bulk of resistance stands at the 17000 level and support at 15960. This is the closing range of resistance and support. If this week proves to be the reaction high, then we should see one more new low ahead.
This is the timing that seems to be emerging. The rally for stocks seems to be pushed off into the 2017-2018 period for it looks like this 8.6 year wave will be the peak in the bond bubble. After that, interest rates will escalate and we will see a greater number of defaults in various governments. Keep in mind that the amount of capital invested in bonds v equity is about 3:1. Despite all the prognostications of a Great Depression based upon a bubble in stocks, sorry – we ain’t there yet.
Wednesday, October 15, 2014
Tuesday, October 14, 2014
Saturday, October 11, 2014
We have elected a Weekly sell signal in the Dow and this is warning that we may yet see that November low during the week of November 3rd. The critical support now lies at 15961 and a weekly closing beneath this area will warn of a sharp correction that will make people’s nose bleed. Nevertheless, our models show next week as a turning point with Directional Changes back-to-back for the next 2 weeks and high volatility for the week of 11/03. Critical support also lies at 15555/ Only a monthly closing below this area would warn of a sustained correction.
When we look at the cash S&P 500, the market is stronger than the Dow reflecting the shift is still in place for the broader market leading. Our energy models are still bullish for the broad-term. Here we do see support lies at 1814 and 1766. We would need to see a monthly closing below 1814 to signal a sustained correction is possible. Where the Dow tends to target November, the S&P 500 targets December for a turning point with high volatility in November. The weekly turning points still show choppiness 10/13, 10/27, and 11/10. Key days next week will be Monday and Friday. This is the same targets in the Dow on a daily level.
In the NASDAQ composite we see 10/13, 10/15, and 10/17 as daily targets with Wed showing high volatility. Here the key weekly targets are 10/13 and 10/27 followed by 11/10. Key support beings at 4239 and 4207. A monthly closing BELOW 4020 will signal a sustained correction. Keep in mind that November will be 72 months from the 2008 low in the NASDAQ. A low at that time on our long-range volatility models would imply we could set the stage for a strong rally after February.
Friday, October 3, 2014
France is bankrupt and part of the Sovereign Debt Crisis comes when a government has to roll its debt and there is no bid. Next year, France’s President Francois Hollande must face a budget deficit along with the country’s biggest-ever rollover of existing debt in history. If there is no bid, we are looking at a crash in the Euro to perhaps par to 103 by 2016. I have stated at conferences the city of Mainz was in debt and each new issue paid off the last. When they could not sell the debt any more, they defaulted. Mainz was the boom town because that is where the Johannes Gutenberg (c. 1398–1468) started the printing revolution. The city boomed and with that boom the politicians started to borrow against what they thought would be an endless stream of revenue from taxes. The higher the pushed taxes, the more the rich fled precisely the same human reaction Hollande has set in motion. When they chase the rich out, tax revenues collapsed, no one would buy their debt and they defaulted. The creditors eventually sacked the city and burned it to the ground and the Pope excommunicated the politicians for greed.
We never learn from history because nobody bothers to ask – has anyone done this before? How did it end? Today, French Sales of medium- and long-term bonds will jump to €188 billion euros ($237 billion) in 2015 from €173 billion euros this year. The problem we have with ALL governments is they only borrow with no intention of ever paying anything back. It is one giant Ponzi scheme then imprison people in the private sector all the time for following the very same path by which government manages the affairs of society.
The French economy has stalled and inflation has collapsed to virtually record lows. France has moved beyond all hope of reversing the trend. The French budget deficit will widen in 2014 for the first time in five years and barely change in 2015. Austerity is dead, but these people cannot create jobs by chasing capital out of France. No matter what evidence I could present, Hollande will never back-off and he will not resign to save the country. He intends to go full term into 2017.
France is the second largest economy in the EU. Germany cannot bailout France. This is the fate of Europe and this same debt disease will migrate to Japan and then America. We are staring into the eyes of how the west will fall – the same way Communism fell – with a sudden OMG event. Germany has no army thanks to its Constitution. The US cannot afford to defend Europe and Europe can’t afford to defend itself. Putin is not stupid. We are reaching the very same moment when Rome fell because it could no longer pay the pensions of the military and the barbarians were then free to enter. Hello – history does repeat because of the stupidity of mankind knows no bounds. If I keep saying this – will government ever listen? A popular question. My view – perhaps but only when the collapse becomes obvious to them when there is no time left to reverse the trend. Hence – the crash and burn.