Henning: Musings of a Stock Market Curmudgeon

The Fed Isn't Stupid; It's Panicked

By Thomas Henning

        The Fed is not stupid. It's panicked.
        The European bankers who own the Fed, which is headed up by Blackbeard Benny, are plundering pirates. They use taxes, inflation, fractional banking, and debt, instead of flintlocks and cutlasses.
        To keep the scam alive, which is to say to keep the debt slaves servicing the debt for the pirate/plunderers, secular inflation is an absolute necessity. Without secular inflation, the debt defaults, interest payments stop and the scam implodes.
        Enter the death knell for the scam, deflation. The debt slaves cannot make payments on the onerous debt levels with relatively deflating Rasbucknics. The Ponzi scheme bursteth.
        Benny Blackbeard knows this. He is responding in the only way he knows, by shoving printed Rasbucknics at the system through various means. The system is not responding. The debt default continues. Benny Blackbeard is in a panic.
        None of this can be changed, only diagnosed and exploited by the savvy player to profit.
        The bond market looks like the stock car demolition derby on Saturday night.
        A glance at the Monthly Bond chart shows a breakdown by the internals confirming a breakdown by the Weekly Hard Momentum (not shown).
        Near term, a rally is due and some sensitive buy signals have already flashed.
        Harmonizing with the Government bond market, the Municipal bond market has also imploded.
        Moral: The debt is worthless and the markets are suggesting that default is highly possible.
        Blackbeard Benny is up to his butt in bonds. The markets are saying that nobody wants them. No doubt he'll try to foist them off onto the sheeple. My hunch is that he won't be able to pull off this stunt, for various reasons. This may be a pipe dream on my part. However, we'll keep a very close eye on this potential. Be prepared here.
        The next step is this drama is the shape up of the currency markets.
        The Euro/Rasbucknic markets have evolved a very clean wave count as illustrated in the Euro as well as the inverse Rasbucknic.
        The inverse V waves are evolving about on schedule confirming the previously suggested count. The favored count suggests that the V wave has more to run with the Rasbucknic having a downside target at much lower levels. Do understand that this count is subject to restructuring. This presents an interesting potential situation, which will be correlated with the following gold comments.
        The cyclic bull market in gold is in high gear with the favored wave count as illustrated. The upleg off of the II corrective wave is most likely the 1 of the III with the 2 corrective wave becoming due. The immediate technicals are bending over in harmony with the wave count that suggests that the correction should indeed evolve. This is okay and is part of the bull cycle.
        There is a non-favored alternate count. (Sorry guys, there always is.) This count suggests that the 3 of the III is in gear. I tend to doubt it, but I can't rule it out, but again, don't get cute and trade this bull cycle.

Correlating the Rasbucknic and Gold

        The biggest problem regarding the cyclic gold trade has not been accumulating the long position, not sitting out the corrections and not taking the profits somewhere near the highs trying to gain 2/3rds of the move. No, none of this is a problem. That's the easy part.
        The hard part is this: The problem with the gold trade that I've been worried about for the last ten years is that, if the position works, and so far it has, when it's time to start scaling out of the position, what do you do with the proceeds? It's a cinch that the banks will be busto, along with imploding Federal, State and City structures. Government defaults will be rampant. The Fed will probably be history. (Good riddance.) Bye, bye free lunch. The natural selection process, which has only been delayed by the parasitic socialist claptrap, will be in high gear.
        At this stage, does one move into some worthless fiat currency, such as the Rasbucknic or Euro? Buy bonds backed up by Keynesian bull manure spewed forth by some closet Marxist Messiah?
        Study the Rasbucknic chart. So far, the wave count is clean and we're most probably in the terminal V wave. This count suggests that the Rasbucknic's downleg could carry down to the 50ish level and last a couple of more years, if the usual pattern evolves. Admittedly, it may not. We'll stay humble here.
        At that point the Rasbucknic decline should be complete. What follows is either a base or an uptrend.
        After a total societal/ government purge, the question arises as to what will make the Rasbucknic desirable as suggested b the wave count after the purge?
        The only answer that I can think of is that the Rasbucknic, somehow, someway, will have a gold injection. If this happens, this will turn the Rasbucknic back into the Dollar. For this to happen, the Fed will have imploded, along with the whole parasitic system. Remember, we are in the process of ending a century-long inflationary epoch and entering into a new epoch. There are no textbook explanations, so the markets must be watched to see which way the money flows to do the right thing.
        This all may be fantasy, but the savvy player has to stay ahead of the game and not be surprised, but be prepared. Remember - a good savvy player is almost never surprised by headlines.
        The crude oil market has waved out a cyclic uptrend as counted out on the Monthly chart. The up-cycle is mature and, as suggested in last month's article, was due for a serious decline.
        Since then, the Daily studies have moved into bearish divergences as Weekly and Monthly studies have begun to fail as indicated on the chart.
        Near term, a sensitive close below 86 would confirm the bearish internals. A close below 80 would be very bearish.
        I suggest this analysis because if crude takes a swan dive, this will squeeze the sheiks of Araby, which will no doubt effect the Bonds and the Rasbucknic, so an eye must be kept on the oil situation
        The stock market is in the terminal stage of a bull cycle that started in August, 1982. The favored wave count suggests that the upleg off of the November 2008 low is the final 5th primary move.
        The favored count is illustrated on the Weekly Amex chart. Do note the failure of the internals at the bottom of the chart.
        Nearer term, the wave count looks terminal as internal studies have moved into bearish divergences as sentiment, which I tend to minimize, has moved into very bearish mode. What is particularly ominous is the degree of upside churning which denotes high upside volume relative to the quantified advances. This relationship suggests internal distribution. This churning does not rule out higher prices, but does rule out upside sustainability.
        Ultra-near term, the uptrend is still intact, but closes below Dow 11,500, Transports, 5080, which are very sensitive levels, would hint at a breakdown. As of this writing, these levels are tentative.
        Meanwhile, don't fight the tape here, but do be prepared for a downside turn, which would be suggested by a bust of the aforementioned levels.
        Roughly 75% of the Fed's asset account is split half and half between government bonds, which have broken down, and Freddie and Fanny mortgage garbage, which is worth a dime on the Rasbucknic... maybe. In short, the Fed's asset base is sicko, along with the asset base of the world's banking system. The nostrums of Keynesian Theory are not stopping the hemorrhage. Is Benny Blackbeard and his gang in a panic? You bet they are. Their world is imploding.
       Editor's Note: Thomas Henning's column, "Musings of a Stock Market Curmudgeon," appears regularly in The Bull & Bear Financial Report, in both print and online editions.