Henning: Musings of a Stock Market Curmudgeon

Kipling Was Right

By Thomas Henning

        I've always maintained that the highest expression of business acumen is to make money in markets. Besides knowledge, talent and skill, the most challenging aspect, and the key to the venture, is ego strength, which I would define as the unflinching ability to stand on the top of a mountain and scream "I'm right, and the world is wrong," and then be right, make money, and be hated by the myth-clinging fools that make up virtually, but not all of, the whole of the remainder of the market.
        However, with a bit of maturity and good ego strength that does not require external validation from the herd, one does not need to stand on the top of a mountain and scream, but instead simply to make money as the rest of the herd gets slaughtered, and then try to keep the money.
        Of course, this begs the question, is the old expression about man does not live on bread alone a lot of bull manure? It is, for the man with a strong ego and for the savvy player who, I suspect, should throw this old saw into the garbage heap next to "you can't buy happiness." In short, the savvy player must be happy with the money, because that's all there is, along with good cigars, German beer, Count Basie and White Castle hamburgers.
        If I sound a bit peevish, it's because it is disconcerting to turn on the financial T.V. and hear some Fed-babbling, dip head distill the most difficult venture of making money in markets down to a couple of mythical trite clichés to appeal to the fools that comprise the lowest common denominator.
        Oh well. Here's where the ego strength has to become operative and to switch to the movie channel in hope of finding a Warner Brothers black and white Humphrey Bogart movie, preferable with Claude Rains, Peter Lorre and Sidney Greenstreet.
        Let's review the markets with channel changer firmly in hand.
        In my last article, I suggested that my slightly-favored bond wave count hinted that another upleg was in the cards, with the proviso that a close above 124 was needed to confirm this hint. That bullish close did not trigger and the bonds legged down to 112.
        Nearer term, the bonds have clarified the wave count, daily indicators have turned near-term bullish, and the Weekly Stochastics have turned upward. The technical action hints that the anticipated final upleg may have started. This suggested upleg would be negated given a close at 111 or lower.
        How this potential near-term bullish configuration harmonizes with the concept that the bilderbeast has to peddle a ton of bonds to pay for the Washington thievery in process is a mystery to me. However, this is what the bond market is suggesting, and it is not smart to buck the market.
        The Gold/Rasbucknic relationship is clashing as outlined in my caveat remarks in the last article.
        The gold market's favored count is outlined in the Comparative Weekly Gold/Rasbucknic chart. This count suggests that the III wave has started and that there is a near-term consolidation evolving to digest the upleg from 670 to 1000.

      Refer to the Rasbucknic Index. The slightly favored count, which is somewhat confirmed by the immediate daily and weekly technicals, suggests that another upleg is in the cards and would be confirmed by a close above 81.50 and negated by a close below 79.00. While the jury is out, potential problems must be anticipated.
        If the Rasbucknic confirms upward, the question remains as to how the gold will respond to the strength. Gold has been strong versus all currencies. If the Rasbucknic ceases to be the main currency of exchange, will the gold divorce from the inverse relationship?
        To muddy the picture even more, there is an alternate gold count that suggests another leg down to the 650/700 area if the Rasbucknic upleg evolves. I tend to doubt this gold count, but cannot rule it out.
        The question remains as to what to do. The answer is rather simple: "Go mechanical." If the gold closes above the 970 area, confirmed by the XAU above 164, this action would confirm the major bullish attitude. Obviously, lower entry points can be defined for more aggressive action, but that is beyond this article's scope.
        Hopefully, by the time the next article is out, the picture may be clarified.
        The stock market has started a cyclic bear market to complement the bull cycle that started in August, 1982. The bear has a life expectancy of about a decade.
        Near term, the market legged down and has moved into a bear market rally off of the March low as the internal measurements have adopted the shape of a rally as opposed to a new bull market. Supply has remained strong, demand weak, as external and internal bearish divergences have evolved.

      As illustrated by the comparative Dow/Transport chart trendlines, the Dow has scored a new high which was not confirmed by the Transports. This constitutes an alert suggesting that the rally is getting old.
        Closes below Dow 8220, confirmed by the Transports below 2999, would suggest the start of the next leg down. There is nothing very sophisticated here. This is technical analysis 101.
        What is important is to keep perspective and remember that there is a cyclic/primary bear market in gear. An intermediate counter rally has evolved. If the aforementioned critical lows are busted, this would suggest the start of the next intermediate downleg within the primary downtrend. Ugly.
        A few underground analysts have suggested that the bilderboyz/bankers are engineering this whole implosion to set up a gold-backed currency. I respect them. They may be right. Nothing can be ruled out. I have my doubts.
        The life-blood of the bilderbeast is tax collection feeding the government/central bank inflationary hustle, thus stripping a nation of its assets and giving control to the bankers. Of course the bankers have been in control since 1913. The only question has been the degree of overt versus covert control.
        Allegedly, Gandhi suggested that the fastest way to take down a government is to not pay taxes. Presently, tax collections are imploding, not from deliberate withholding, but from internal implosive rot. Tax collections feed the government/banking beast. When the tax collections crash, the government/banking beast starves. The banking system crashes. Without a viable banking system, centralized government/banking control is impossible.
        Just visualize the present monstrosity having thirty-five czars, at latest count, with tax receipts cut in half - for starters. There is no way that this dinosaur can function.
        This tax implosion is occurring on a world-wide basis. The insolvent banks are not viable and, therefore, central control is not viable. They're impotent. LaLafornia, as well as other states, is a preview of coming attractions.
        A concerted effort? I rather doubt it, because the banks, the control factor, are finished.
        Again, do not be preoccupied with the minutia of the busted, in-hock entities such as state, federal, city government, credit card, real estate debt, ad nauseam. The evolving implosion is a fait accompli.
        Instead, concentrate on how the markets respond to the bust. Make money, because that's all there is. And turn off the propaganda. No savvy player has a strong enough stomach to handle that. As Rudyard Kipling said, "If you can keep your head while the rest of the world goes nutso, you've got it made."
       Editor's Note: Thomas Henning's column, "The Musings of a Stock Market Curmudgeon," appears regularly in The Bull & Bear Financial Report, in both print and online editions.