By Thomas Henning

        The old epoch is evaporating. So how does the savvy player position himself to make money? Answer: Simply follow rule one: Truth is the ebb and flow of money to the absolute exclusion of all other factors. Rule two: Never forget rule one.
        The old debt epoch, which is based on fractional banking, inflation and taxation to plunder the world's assets, is imploding as the debt has become onerous.
        Recently, the Bilderboyz met over in Greece. They broke into a cold sweat when somebody "talked real" about a potential ten-year bust. That's when they expressed doubts about saving their individual hides. Every man for himself?
        Meanwhile, Benny da Book, good stooge that he is, has engineered the Fed Funds rate down to zero. This facilitated the carry trade, which allowed the incestuous hedge fund fools financed by the banks to move into the Rasbucknic on the cheap, leverage it up to a zillion to one, and buy the junk that the Bilderbeast is trying to support. If they don't support the junk, it will implode, and even the banks' cooked books won't cover up the stench of bank insolvency as the garbage on the bank balance sheets is valued down to . . . . zero. Wait until the derivatives have to be valued on that basis. Ho. Ho.
        If you have any doubts about bank insolvency, just take note of the Bank Index's diving relative strength. Bearish.
        This hedge fund carry game can go on until the Rasbucknic decides to start upwards, thus shifting the super leveraged positions into reverse. That's when the unwinding stampede will be on as the long side will be liquidated to meet margin calls. Interestingly, on an interday basis, the stock market has been running inversely to the Rasbucknic Index on a virtual minute by minute basis. With the S&P 500 trading at 150 times earnings, it's no wonder.
        Of course, the Bilderboyz who own the Federal government and every news organization that promotes the various mythologies, figure that they can tap the sheeple for another TARP to bail out the banks. The only problem with that idea is that the sheeple are busted too, and tax receipts are in a swan dive as most of the cities and states are running a step in front of insolvency. The Federal tax receipts are tanking too.
        So the name of the game for the savvy player is to be governed by the market action of the whole complex, because we're in the transitional phase from the old epoch of inflation and rising parasitic taxes to deflation and falling taxes. Let the markets alone determine your activity, starting with the Dollar. Understand that we're in uncharted waters, and an open mind must be maintained.
        For the last couple of articles, I've been grinding on about a Rasbucknic bottom as internal bullish divergences have compounded ad nauseam. Recently, the Bucknic finally got the lead out and closed above the 77 level confirming the bullish internals. At the risk of being a weasel here, it remains to be seen if the upside move is but an exercise in relieving an oversold condition, or is a bigger move up, putting the screws to the carry trade.
        Best call here, subject to change: Looking at the inverse action of the Euro and Swiss Franc, the recent strength is probably a move up, which will be longer in duration than most expect.
        Again, stay open-minded here and go with the flow. We're in transitional uncharted waters here.
        The bond market is in the terminal phase of a bull cycle that started in August, 1982. My favored tea leaf count suggests that the bull cycle is almost complete.
        The Fed stooges have been soaking up the garbage bonds because nobody else wants them. The question remains as to how much the hedge fund boys have bought. No matter, because if the bonds bust 117 and then 111, triggering higher rates, dive for the nearest foxhole. Lower bond prices would undermine every financial balance sheet in the world.
        Don't turn sour on the bonds until the bond market breakdown. Let the market itself govern your actions. Again, stay open-minded in this transitional situation.
        The gold complex has kicked off a possible III wave of the cyclic bull market that started in 2000 as marked on the Monthly Gold chart. Note that this count is subject to change. Frustratingly, the gold stocks, while acting well recently, have not confirmed above the 2007 highs. However, this may be a proximity divergence due to the extreme pounding that the gold stocks suffered in the last stock market smash. This situation has my attention.
        Near term, as the Rasbucknic firmed up, gold, which looks waved out and due for a breather, corrected downward. The question remains as to whether gold will retain its inverse Rasbucknic relationship. So far the near-term downward correction suggests that it will.
        "On the other hand," given the beginning of a central bank implosion, along with the worthless fiat currencies and the uncharted waters that the world's economies are in (along with a possible currency panic and bank failures), it's difficult to say if that inverse Bucknic/Gold relationship will be maintained. We're in a state of flux.
        As this Gold/Rasbucknic dynamic has been evolving, the wave tea leaves have shaped up to suggest the possibility that the gold upleg/inverse Rasbucknic downleg is a large B-wave within a larger and longer corrective process that is digesting the inverse Gold/Rasbucknic move that started in 2000. The internal wave structure of the inverse Gold/Rasbucknic move is suggestive of this possibility. Understand that at this stage of the game, more market action evidence is needed. I'm saying that until that evidence is forthcoming to the contrary, this possibility can't be ruled out.
        So what to do? Given that we're in a gold cyclic bull market, don't get cute. If the gold simply corrects downward here, becoming oversold on a Daily basis and then legs up within the uptrend, that's okay. If we go into a complementary major corrective downleg, which would be a C-wave of a larger A,B,C pattern within the bull cycle, that's okay too. What's not okay is to lose the position.
        The stock market has been in the terminal phase of the bull cycle that started in August 1982.
        Nearer term, for the last three months, the internal structure of the market has been deteriorating as the positive volume has been declining, the negative volume rising, with increasing upside selectivity. Virtually all other internal studies suggest that the recent upleg is loaded with distribution.
        Throwing a monkey wrench into the whole shebang, the Transport Average, which has been in a bearish divergence, has recently stuck its nose above a key high as the other indices non-confirmed.
        Interestingly, the big cap stocks have been relatively strong versus the small/mid cap stocks. I suspect that the plunge protection gang has had their fine hand in this game simply because only the big cap volume can handle the amount of gelt that they have to throw around.

        At any rate, it must be assumed that the uptrend is still intact and must be honored only because it's there.
        However, if the November 30 lows of the Dow 10,220, Transports 3950, are taken out, start zipping up the bear suit. If the November 2nd lows of Dow 9850, Transports 3650, are busted, then get set for real trouble.
        In short, honor the uptrend, as putrid as it is, until it cracks downward busting key levels.
        In sum, the Rasbucknic, after forming an internal bottom, has started upward, no doubt putting pressure on the other markets. If bonds bust key levels, worldwide balance sheets will get hammered. Gold is inversely correcting counter to the Rasbucknic upmove with the possibility that this inverse relationship could be bigger than most expect. We'll see. Stocks, which are under severe distribution, will get ugly when key levels are busted.
       The One World Order is imploding. The economies that the central bank fools have been plundering have been tapped out, and the debt is defaulting. All of the futile actions that they are taking to hold the Ponzi scheme together are failing. Understand that the recent Dubai failure was only the first domino to fall.
        Some analysts have been suggesting that a new universal currency will be set up. I don't buy that line, simply because a banking system is needed to facilitate a new currency and the banking system is failing. Secondly, given an implosion, a cohesive effort is needed for a new currency and, as the territorial imperative arises, which is already has, a necessary cohesiveness is beyond reality when it becomes every man for himself.
        In short, given market breakdowns, the Bilderboyz will have nothing left to plunder, and what they have plundered will become totally worthless, along with the central bank structure that was the instrument of plunder. The Bilderboyz win - nothing. What irony.
        We're in uncharted waters here. Stay humble. It's difficult to say exactly how this mess will implode, so follow rule one: Follow the ebb and flow of money.
        Editor's Note: Thomas Henning's column, "Musings of a Stock Market Curmudgeon," appears regularly in The Bull & Bear Financial Report, in both print an online editions.