by Thomas Henning
The New World Order is finished. The needed elements of a viable banking system, a denial of the territorial imperative and a producing society have been replaced by insolvent banks loaded with worthless defaulting debt paper, individual countries shouting "every man for himself," and the zombies grabbing their pitchforks screaming for "social justice," as their self-indulgent, debt-laden, world implodes. The zombies, who can't understand buy low, sell high or spend less than you make, can't understand that the gravy train is out of coal.
Of course, as the implosion evolves, nobody wants to "get real." However, the markets are always "real."
The bond market is busted as default and bankruptcy looms; the "relative stink index," known as the Rasbucknic, is in a cyclic bear market; the Gold is in a cyclic bull market. In spite of recent strength, the oil looks like it's topping out, and the stock market's uptrend, while in gear externally, is loaded with internal cancer and is beginning to break down.
The bond market has fallen out of bed as illustrated on the Weekly Bond chart as Blackbeard Benny has been buying bonds to hold the whole shebang together. While a near-term rally is due, the decline is precipitous. This tells me that, in spite of Benny's massive buying, the rest of the world is applying selling pressure which is overwhelming Benny's buying.
Why has Blackbeard Benny been buying? Two probable answers: First, any rise in interest rates will freeze up credit, and secondly the Frankenstein monster called derivatives is down in the dungeon, ready to arise if the bonds confirm downward below the recent lows.
The Rasbucknic is in a cyclic bear market as counted out on the Monthly chart. The favored count suggests that a downleg down to the 50ish level is in gear. To confirm this projection, a punch below 77 is needed.
There is a problem here. The Rasbucknic Index is an amalgam of different currencies, all having different supply/demand forces. The Euro looks like it's ready to move higher; the Swiss Franc, while looking like it's ready to move higher, acts like a tired 5th wave at the end of a bull cycle; and the Yen looks similar.
The Rasbucknic Index is an inverse reflection of these various currencies. These various component forces confuse the picture. Remember that the Rasbucknic Index is but a relative stick index-which currency stinks the least.
As a practical matter, simply assume that the Index is in a downtrend for no other reason than that the downtrend exists. The central bank hustle is imploding as these central bank fools are trying to keep the debt Titanic afloat. The form of the implosion is open to debate-that is which currency will smash the most versus the Rasbucknic.
So keep the bear suit on with thumb and forefinger on the zipper.
To clear the picture a bit, remember that all of these garbage currencies are weak versus gold.
The gold has been in a cyclic bull market since 2000. The favored wave count suggests that we are probably in a III wave as illustrated.
Near term, the very slightly-favored wave tea leaf count suggests that we may be in the 2 of the III. There is an alternate count that suggests another new high may occur before the 2 of the III evolves. Sorry folks, but the jury is out.
However, it really does not matter because the bull cycle is intact and the only way one can mess it up is to get cute and trade it.
The crude oil market is in the terminal V wave of a bull cycle that started in 1998, as marked.
Nearer term, the 5th of the V has evolved, and as usual, the internal studies have moved into bearish divergences, a move which makes the sustainability of the recent strength questionable.
If the overall count is right, this upleg should be the terminal phase of the V wave, which is the terminal phase of the bull cycle that started in 1998.
Tentatively, a close below 93 would suggest the start of the anticipated bear cycle in oil. A close below 83 would strongly suggest the start of the bear cycle.
If the wave tea leaf count is right and a top is confirmed followed by a bear cycle, this would no doubt influence the bond, currency, and gold markets. My strong suspicion is that it will bust the mid-east banks. So watch the oil, but watch the money, the mid-east banks closer.
The stock market is in the terminal stage of a bull cycle that started in August, 1982. The favored nearer-term wave count is illustrated on the Amex chart, which, I hope, is relatively free of the influences of the Plunge Protection Team and the brokerage front runners.
As the market developed its recent strength, internal deterioration evolved, suggesting distribution within the uptrend. A myriad of indicators did not confirm the external strength, but the most telling was the upside churning that evidenced itself since last October. Upside volume was extreme versus quantified advances. In short, it took too much upside volume to drive the market upward. Since late December, the negative volume has started a solid uptrend. This internal action suggests distribution. This distributive structure, along with the background atmospheric of extremely bearish sentiment, suggests an uptrend that is not sustainable.
Nearer term, a Dow's Theory bearish divergence that was highlighted in last month's article was aborted in favor of the bulls, but recently the market cracked downward with key intermediate indicators locking to the downside. How this configuration will harmonize with Dow's Theory remains to be seen.
In short, the market is breaking down, at the end of a terminal phase of a bull cycle that started in 1982. The near term form of the peak or top is still open to further development.
In sum, the bond market has busted downward; the Rasbucknic is in a solid downtrend; and gold is in an uptrend with corrective action. The oil looks waved out and is loaded with bearish divergences, and the stock market, which is loaded with internal distribution, is beginning to break down.
The central banks, having confiscated the world's assets through inflation, taxation, and debt which has become onerous, are impotent and irrelevant as the economic train engine has run out of coal.
The inflationary epoch that started in 1913, is imploding into the deflationary epoch. Having sat in the citadel of Keynesian bull manure at the University of Chicago, I'm acutely aware of the inflationary forces and talk that is currently espoused. While I'm skeptical of that inflationary view, I can't rule it out. However, we'll let the markets, which are at inflection points, clarify and assert themselves to drag in the inflation/deflation debate jury, but meanwhile, the one world order is disintegrating - the train is out of coal
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.
