Into The No World Order, Part 1

By Thomas Henning

       The Old-World Order was created when the 1913 Fed Act was passed and evolved into the New World Order in the 1990s as economic forces were internationalized. Presently, the New World Order is beginning to move into the No World Order as the onerous international debt begins to implode.
        To survive the coming debacle and to make a buck, a strong ego will be required as the No World Order evolves into a void, absent the mythological miasma of imploded fed-babble.
        Like right-wingers and jazz musicians, savvy players have a tendency to have an inferiority complex. The average right-winger wants the approval of the left; jazz musicians want the approval of classical musicians; and the savvy players want the approval of the fed-babblers. This is a waste of psychological energy. For the record, Alger Hiss was guilty as sin, and Art Tatum was arguably one of the finest musicians of the twentieth century. Let's address the weaker ego of the savvy player.
        The financial T.V. fed-babblers sell myths. The universal debt load has become onerous as illustrated by the recent auto industry bond downgrading to junk status. As this has occurred, the babblers ignored the gravity of this debt situation and continued to peddle their readily absorbed mythological opiate to the sheeple. These peddlers are either morally bankrupt, intellectually bankrupt, stupid, live in La la Land, or all of the above.
        To be fair, there's a good buck to be made selling this garbage, but eventually, when the debt implodes, their international economic New World Order will evaporate and that is what the savvy player must remember.
        Given the massive debt load, a bond market breakdown below 108 will trigger higher rates. Watch out. This is when the housing bubble bursts, Fannie and Freddie bust, consumer spending stops cold, profits plunge, the markets crack, the 5% margined hedge funds fail, corporate debt implodes (note the auto industry), the banks fail, the pension funds bust, tax receipts plunge, and the Federal Ponzi scheme free lunch defaults. (This is what the current Social Security brouhaha is all about.) And, all of this is only for starters.
        In short, bust the debt and the financial structure in existence, which is built on the debt, will cease to exist. To analyze the situation in those former terms is simply unreal.
        Yet, on the Internet technical underground, some very smart analysts analyze the market situation in terms of the Old World/New World Orders. The debt implosion will void these concepts as the financial structure will move into the No World Order. In short, while their analysis is shrewd, they are not taking the next step to anticipate the coming chaos that will be caused by massive debt default.
        Arise ye savvy players. You have nothing to lose but the chains of your inferiority complexes. You will never get the approval of these babblers. Have ego strength to let them be, for their world will evaporate. Understand that the financial structure is going to move into chaos.
        What is important is to adapt to this situation. Adaptation will not only require trading the markets successfully, which will be relatively easy, but anticipating and countering the pernicious actions of the self-indulgent herd that has a propensity toward thievery disguised as "social justice," sold using words like "fair," "share," and "common sense." Making the money will be relatively easy. Keeping the money will be relatively hard.
        In future articles, we'll take this grand adventure one step at a time, but let's handle the first step, the present market situation.
        The bond market has been in a topping pattern and has waved out a cyclic bull market that started in 1982. The last portion of the cycle waved up as marked and looks complete. A close below 108 would confirm the start of a cyclic bear market with a killer rise in interest rates busting the in-hock world.
        Near term, on June 3rd, a key downside reversal day occurred, which hints at a final top. While there could be more upside action, it would be non-confirmed internally, which would undermine any upside sustainability. (Editor: see the Curmudgeon's late update in the back of this issue.)
        The stock market is at the tail end of a bull cycle that started in 1982 and has been topping out in a narrow pattern for about the last year. When the bear swing starts, it should last about a decade, which harmonizes with the magnitude of the anticipated Gold, Dollar and bonds moves.
        Near term, the market has been in an Elliott 5th wave after busting the January lows and has assumed a standard 5-wave internal configuration. A bust of the April lows of Dow 10,000, Transports 3340, as marked on the chart, would bust indicators to the downside and would suggest the start of the bear market. Given the hedge fund margin situation, don't be surprised to see a downside vacuum.
        Gold bottomed in late 2000 and has legged up in a 5-wave move as counted out in the XAU chart. Since early 2004, the XAU has been in a somewhat standard A, B, C corrective pattern digesting the previous upleg. To be brutally honest, the internal structure of the correction is still chop suey, but near-term, there was a lovely recent washout with bullish internal divergences as the commercial players covered shorts and Daily Hard Momentum flashed a buy signal. The gold stock/gold ratios are bullish too. Good action. Early indicators suggest that the next upleg may be starting, but upside confirmation is needed. So far, so good.
        Meanwhile, the Dollar Index has been consolidating a downside regurgitation from 122 to 80. As the upside pause to refresh has been going on, the La la and T.V. financial press has been ecstatic as a pack of barefoot pot-soaked late 1960s hippies throwing daisies to the wind in the middle of a field. What idiots.
        Near term, the Dollar Index has had a downside key reversal day, and, like the bonds, any remaining upside action by the Dollar would be loaded with bearish non-confirmations and would be unsustainable. A break below 80 would confirm the start of the next downleg and would probably harmonize with an upside confirmation by the gold complex.
        To sum up the market situation, the bond market is topping out with near-term evidence suggesting that the recent uptrend is done. The gold complex has thrown on a low with a good probability that the next major upleg has started. Complementing this gold picture is the evidence that the Dollar rally is very old.
        The stock market has been topping with failing internals, and a bust of key lows would confirm a breakdown, no doubt harmonizing with a bond/dollar breakdown and upside gold move.

        Given these breakdowns, the debt will evaporate along with the financial structure that is built on debt as the world steps into the No World Order. It will be like the Saturday night demolition derby on the South Side of Chicago at the 87th Street Speedway as old Speedy De Bartolo, in his aluminum-painted 1937 Plymouth reigns supreme. Boy! That Plymouth was the ultimate definition of ugly. But this will be uglier!
        Editor's Note: Thomas Henning is a regular contributor to The Bull & Bear Financial Report.