by Thomas Henning
There is a tendency to assume that the one-world gang is all-wise and powerful. Wrong!
About twenty years ago, a company was formed by all of the usual suspects whose names would be readily recognized by anyone not living on Mars.
About a decade ago, this gang bought up a load of New York real estate about a year before the real estate peak. After reading about this three times in the business section of the local Sunday Pravda, this action confirmed my strong suspicion that these boys do indeed believe their own bull manure.
Their belief system is based on the inflationary epoch that started with the Fed founding in 1913. Now that this inflationary epoch is saturated with unsustainable and defaulting debt, they are incapable of conceiving that they are no longer in control. Thus these fools are now in denial, frantically trying to keep their larceny alive through futile programs to keep their cancerous imploding debt serviced. To do so they need inflation. Deflation kills the hustle, hence Q4, 5, 6, etc. Their actions are boringly predictable. They know no other.
Currently, there is, I believe, a transitional phase from the old, imploding, inflationary epoch into the new deflationary epoch. Obviously, I could be dead wrong. I don't care. I only care to be on the right side of the markets. Being right or wrong does not matter. That's why stop-loss orders were invented.
The form of the transition, if it indeed evolves, will be revealed by the ebb and flow of money, the only source of truth.
Currently, there are very early hints that the CRB Index is nearing exhaustion: bonds are consolidating a major downleg preparatory to a suggested smash down to par; the Rasbucknic is still in a cyclic bear market; gold is in a cyclic bull market; and the cyclic bull stock market that started in 1982, is terminal with some possible near-term upside topping life remaining.
Note the CRB Index. The favored wave count is illustrated and is fairly clean. The V wave has extended, has become overbought, and internals have moved into bearish divergences with early warning sell signals.
Obviously, this is very thin evidence, but evidence nonetheless. At this stage, for the wave count to be valid, a breakdown by the Weekly Hard Momentum is needed and that is a ways off.
On a more sensitive basis, if the CRB closes at 336 or lower, this would turn the Daily Hard Momentum downward and would give the deflationists a much stronger case.
The bond markets have fallen out of bed as denoted on the 5-wave structure on the Government and Municipal Bond chart.
Near term, as anticipated in last month's article, the bonds have moved into a rally to digest the downleg. A downside bust below the recent 116 low would suggest the start of the next downleg down to par.
A bond breakdown below the aforementioned low would be the kiss of death, with higher interest rates. This would also undermine balance sheets in every financial institution in existence.
In the face of enormous selling pressure, Benny Blackbeard has been buying this worthless garbage. Given that nobody wants this junk, it's a cinch that he and his merry band of pirates plan to foist the offal onto the brain-dead zombies. The question remains: Can he "get, 'er done?"
My hunch is that he will, given the bought-and-paid-for bank stooges in Washington. No doubt the zombies will be screaming about their busted 40lKs and pensions, so the elected bozos will probably deliver their usual rip-off by some sort of bond swap using the words fair and share and by-partisanship. The odd question remains as to what the Washington geniuses will do with the 401Ks and pensions when the stock market is in a cyclic bear market. That should be fun.
The Crude Oil market has developed a 5-wave cycle off of the 1998 low and waved up as counted out on the chart. The V-wave is terminal.
Nearer term, as the 5th of the V has evolved, internal bearish divergences have not confirmed the recent strength. This is not readily discernable on the Monthly Crude chart.
Near term, the wave count has a complete look to it and has moved into a blow off. To confirm that count, which is still questionable, a close at 102 or lower is needed. This would bust the Daily Hard Momentum to the downside and would suggest that the bull cycle is done. A close below 94 would confirm the start of a bear cycle. I suspect that, if and when the Crude breaks down, the CRB will do likewise.
The Rasbucknic is locked into a cyclic downtrend with the favored tea leaf count illustrated. In broad terms, the wave count suggests a final downleg to the 50ish level, if the usual measurement objectives are met. This is just beginning to look like a big "if."
Nearer term, as the Index has punched lower, the internal studies have not confirmed, but the downtrend must be respected simply because it exists.
Do keep the bear suit on, but with thumb and forefinger on the zipper, due to the bullish internal divergences. Watch the action of the Rasbucknic if and when the bonds, CRB, and Crude Oil crack downward.
Gold is in a cyclic bull market. The favored cyclic count is illustrated.
Near term, the wave tea leaves have turned to chop suey, having taken on three potential corrective forms, all with their juries still out. Sorry guys, that's the way it is. I don't like it either, but like it or not, one has to live with it. As the wave count clarifies, I'll identify it in future articles.
However, keep in mind that we're in a cyclic bull market which, I suggest, should not be traded. To profit, you must be virtually perfect, must give the Washington parasites a cut of the profits, with short-term capital gains, along with a serious draw- down of psychological capital. If not perfect, you'll lose the position and get left at the train station. So, I repeat the suggestion that one should not trade this bull cycle. It's the only way you can mess it up.
The stock market is in the terminal stage of a bull cycle that started in August, 1982. The upleg of the 2008 November low has a waved-out look to it as suggested by the Amex Index, which is being used to try to circumvent the brokerage front runners and the plunge-protection team.
The stock market is loaded with internal cancer, such as upside churning, internal bearish divergences, which have not confirmed the market's recent highs. The negative volume has been in a solid uptrend since last December, and sentiment has turned very bearish as the lemmings have become too bullish.
However, very tentatively, closes below Dow 11,500, Transports 4940, can be defined as potential breakdown points. Until breakdown levels are taken out, the uptrend must be respected, with the thought that the bull cycle is terminal but not dead - only suffering every technical pathology in the book.
The near-term topping process is still developing.
In sum, the inflation/deflation fight is still raging as the CRB, Rasbucknic, Bonds, Crude Oil, Gold and Stock markets are in established trends full of reversing divergences. While the trends must be honored because they exist, they are at tipping points. Be prepared for the tip-overs.
Recently, the media mouthpieces have been decrying a lack of leadership.
When any country cedes control of its currency to a central bank, it gives up its sovereignty to that central bank. The central bank then owns the country and controls that country's whole social and political structure. The country ceases to exist as a nationalistic entity, but only exists to be plundered of its assets through inflation, taxation, and interest payments to that central bank. Thus, any head of state is nothing but a banking stooge standing up in front of a plundered, non-nationalistic, hollowed-out void. A stooge cannot lead a void.
To offer three examples of the plundering: The Rasbucknic is now worth about a nickel versus the Dollar when the Fed was founded in 1913. Roughly a third of England's gold supply was sold off at the "Brown Bottom," under $300 per ounce. Recently, it was revealed that the Fed pumped a slug of the TARP dough into foreign /Mid-East banks. Get the picture?
Currently, these boys have reached the debt saturation point and, being stuck with their own bull manure, are frantically trying to keep their debt Ponzi scheme, their debt bubble, from bursting. They are failing. To drone on about Q3, Q4, Q5 ad nauseam is but an exercise in the recitation of irrelevant minutia. Their epoch is imploding.
Meanwhile, the zombies are mad because they sense that their free lunch is going bye bye. However, to wean them away from their free lunch is like getting a hard core heroin addict off of the dope.
The only thing for the savvy player to do is to diagnose the form of the implosion, try to stay on the right side of the markets to profit, and hope that the checks don't bounce.
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
