By Thomas Henning
The central banks are busted. The sovereign countries are busted. The states, cities, and counties are busted. The individual banks are busted. The cell-phone-babbling, brain-dead zombies are busted. Any analysis of these clowns is a waste of time. They’re busted.
Meanwhile, Blackbeard Benny and his merry band of fellow central bank pirates, along with elected bozos in the Politburo, are like Mack Sennet’s 1920s Keystone Kops running up and down the hills in Glendale, California in Model T Fords doing prat falls and raising general havoc, trying to keep their Ponzi hustle alive.
Hats off, guys. You’ve had a good century-long, thieving run, but the systems have been saturated with unsustainable debt, and you’re busted too, just like everything else. The markets are responding accordingly.
The bond market internals have been breaking down. The Rasbucknic looks as if it’s ready to leg down. The CRB and crude oil markets have cracked to the downside. Gold’s uptrend is still in gear, and the stock market is under distribution.
The bond market has most probably started a cyclic bear market having 5 waves down from the 133 high, bottoming at 117 and throwing on a 3-wave A, B, C counter-rally as marked.
Nearer term, the rally has loaded in bearish non-confirmations as a new marginal rally high was scored as internals have begun to fail as marked.
A close at 122 or lower would bust the various hard momentums downward and would suggest the start of the next downleg to the par level.
Higher interest rates/ falling bond prices will crush financial institutional solvency into a probable melt-down.
A sweating Benny has sat before the Politburo blathering on about how everything is hunky dunky after a century of economic plundering and self abuse. What’s really making Benny sweat is the slug of debt that has to be rolled over in late August with a bond market in a probable cyclic decline absent any buyers. Given that the Fed has 70% of its assets in bonds, which are in a cyclic decline, and in worthless mortgage garbage, and are staring at a big debt roll-over, it’s no wonder Benny’s in a sweat, along with his fellow central bankers.
These boys have plundered assets and now they’re stuck with the debt, having sovereign countries with little productivity to service the debt. It’s the end of the line and, when the bond market breaks down, it will be the “Kiss of Death.”
For the last few articles, I’ve been suggesting that the players should keep the Rasbucknic bear suit on, but with fingers on the zipper.
This anticipation has worked out in an okay manner as the Rasbucknic has assumed the shape of a #4 counter-rally as marked on the Weekly chart. This wave count, which would be negated by a strong close above 77, suggests that a #5 of a 3 is due, which should carry it down to the high 60s level, if the usual pattern is followed.
If this evolves, the internals are set to move into bullish divergences, which would set up a strong IV counter-rally before the final plunge down.
The Euro is an almost perfect inverse picture of the Rasbucknic and, frankly, the Euro count looks rather clean. So, barring anything better coming along, I’m going with this count.
If the Euro legs up and the Rasbucknic legs down, this will only imply that the Euro stinks less than the Rasbucknic.
In the last couple of articles, we’ve been looking for a breakdown in the CRB Index and it too has come in about on schedule after the internal studies have failed. The favored wave count suggests that a cyclic decline has started, but near term, I can conjure up another upleg. If it evolves, the failing internals will suggest that it should not be sustainable.
Overall, this is a hint that the deflationists may win.
The anticipated breakdown in the crude-oil market has occurred after internal failures.
Near term, I can’t rule out a tag-on rally that could score a new high, but if it evolves, the internal deterioration suggests that it too will not be sustainable. While that jury is still out, a close below 88 would confirm the breakdown and pretty much rule out a potential tag-on rally.
The gold complex has been in Elliott Wave hell for the last six months. Much succor has been derived from the very high probability that a cyclic bull market is in gear.
A bit of clarity has developed with the recent action, which suggests the wave count as illustrated in the monthly XAU chart. After the I and II waves, the III started in 2008, and the slightly-favored count suggests that the 1 and 2 of the III are done, with the 3 of the III starting. If this count is valid – a big “if” –, oh boy! To validate this count, the XAU has to close cleanly above 233.
Sorry, guys, but there is an alternate count suggesting another downleg that could last a couple of weeks. It is not favored, but it is there and I must highlight it.
A strong point in favor of the illustrated count is the Commitment of Traders report, which recently turned extremely bullish, along with very bullish On-Balance-Volume in the gold stocks.
So I repeat, don’t get cute and trade this cyclic bull market. It’s the only way that you can mess up.
The stock market is at the terminal stage of a cyclic bull market that started in August, 1982.
Nearer term, the final primary move is shown using the Amex Index in a probably silly attempt on my part to try to dodge the front runners and plunge protection gang. For sake of perspective, what is anticipated is a bear cycle which should last about a decade.
Nearer term, in last month’s article, after severe internal deterioration, I suggested that a “tag-on” or Gann “failure rally” was possible, and it indeed did evolve. These moves typically start suddenly, and momentum buy signals usually flash on the late side. They look impressive, but are usually loaded with internal failures, end suddenly and are usually followed by downside smashes.
So far, the rally off of the June lows has generally followed the model.
From a Dow’s Theory perspective, there have been a number of minor divergences which have thrown the Theory into what Richard Russell would call “no-man’s land.”
As of this writing, and due to publication deadlines, I can’t identify a firm configuration as the fluid situation is still under development.
However, tentatively, closes below the June lows of Dow 12,070, Transports 5180, will likely constitute the breakdown point. If these lows are busted, both the Daily and Weekly Hard Momentums will turn very bearish.
In sum, the market is under distribution and is most probably in a topping phase which is fluid and still developing. If key lows are busted, a probable bear cycle is suggested. Until those lows are busted, the uptrend must be honored.
In sum, the bond market looks ready to start its next leg down to par, jacking up interest rates. The Rasbucknic’s best call suggests another downleg to round out the pattern. The CRB and crude look topped out save a possible unconfirmed tag-on rally. The stock market is under distribution and, as of this writing, is in no-man’s land loaded with divergences.
Many frustrated and honest analysts have asked why Benny and his central bank gang keep doing what they’ve been doing. This implies that the gang are stand-up guys.
They’re not. They’re plunderers. Supposedly, John Maynard Keynes suggested that not one in a million would figure out what they were doing. Hey, Johnny, I did.
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
