By Thomas Henning

       The game is over. There is nothing left for the central banks to plunder, and the debt is onerously unserviceable. The panicked banking stooges in the world’s politboros don’t have the gelt to deliver the promised free lunch to the tapped-out, brain-dead zombies who have sold their freedom for that free lunch.
       Watching these central bank clowns is like watching zoo monkeys re-arrange the deck chairs on the S.S. Keynesian Titanic.
       These impotent fools are irrelevant except to be watched for forms of theft under the guise of “shared sacrifice.”
       With the probable death of the old inflationary Keynesian cycle and the birth of the new deflationary cycle, the century-long Keynesian rules have become irrelevant. Those rules were never valid except to facilitate central bank plundering. The savvy player must comprehend this concept and not get bogged down in the quagmire of irrelevant Fed-babble.
       Frustrated, honest, and good analysts commonly drone on about how the stimulus has failed and the central banks should avoid more of the same failed policies. Guys, they’re thieves. To do the opposite would not be in harmony with their thieving activity. These boys are selling the free lunch for the souls of the zombies. You are trying to sell an unsalable product: reality and discipline.
       Instead, the focus should be on the form of the implosion to profit. The markets must be watched because the old relationships are highly questionable. We’ll start with the Rasbucknic.
       The Rasbucknic is in a cyclic bear market that is terminal in broad terms and is most probably due for a substantial rally. The favored count is illustrated in the monthly chart.
       Near term, in last months article, the favored count suggested that a minor 5th wave down was due. It did evolve, but assumed the shape of what I call a “feeble 5th” that slops downward with little negative momentum, scores marginal new lows that are unconfirmed by the Daily and Weekly internals. The Euro is an almost perfect inverse picture. Do understand that it is difficult to inversely correlate the Euro and the Rasbucknic because the Euro is a single entity, while the Rasbucknic is an amalgam of garbage.
       Ultra-near term, internals have flashed sensitive lead buy signals. To confirm the rally, which should assume the shape of an A,B,C counter move, a close at 76 or higher is needed to turn the Daily and Weekly Hard Momentums bullish. Inversely, the Euro needs a 140 close to bust the momentum to the downside.
       Obviously, to validate the wave counts and internals, those key levels must be busted, but until they are, humility dictates that the trends must be honored because they exist.
       A strong Rasbucknic rally would imply a deflationary bent. The question remains as to how this will affect gold, especially because gold is strong against all currencies. Again we’re in a probable transitional phase from inflation to deflation and the usual market relationships are questionable.
       The CRB Index has cracked to the downside after internals have turned bearish. (Note the internals.) The favored count is illustrated on the monthly chart.
       There is the possibility of another upleg to round out a potential pattern, but it is not favored. A close below 315 would negate that possibility and, while prices are but a symptom of inflation/ deflation, that bearish downside close would be a point in favor of the deflation camp.
       The Oil market has toped out at the 115 level after waving out a bull cycle as illustrated, thus suggesting the start of a cyclic bear cycle. Again, while prices are but a symptom of inflation/deflation, this bearish set-up is a vote for deflation.
       The question arises as to how this picture will affect the finances of the Sheiks of Araby and the relationships with the rest of the world’s economies. This is a question that must be watched for an answer.

       The bond market has busted to the upside as a stampede evolved in search of a “safe haven.” This strength gives Benny a chance to peddle his near term roll-over garbage to the suckers chasing this move. This upside bust clarified the wave count into a rather clean up cycle starting in 1995, as illustrated. (For the record, I did restructure.) Every internal bearish divergence in the book has evolved, as suggested by the down arrow.
       Ultra-near term, the interday wave count looks complete and as of this writing, an initial early breakdown point can be tentatively defined by a close at 134 or lower by the spot price. Do note: this level is fluid and in flux.
       If this count is right, and it does look clean, a breakdown would be catastrophic in terms of the world’s financial balance sheets and would crank up interest rates, which would shut down the world’s economies.
       All of this bond action will be harmonized with the overall picture later in this article.
       The precious metal complex is in a cyclic bull market, the gold itself strong as garlic with the gold stocks basis the XAU moving sideways with very bullish “On-Balance-Volume” needing an upside breakout.
       In last month’s article, I suggested that the complex was in Elliott Wave hell with the possibility of another downleg within the 2 of the III wave that started after the 2008 smash. Given that the gold itself is hyper-overbought with some internal divergences, this is not illogical and appears to be in the cards given that the Rasbucknic is probably due for a bear rally.
       While the whole world (including the alderman’s nephew who rides shotgun on a Chicago garbage truck) knows that the gold is hyper-overbought, it must be remembered that gold and silver have been under downside manipulation for over a decade, and it is difficult to measure the upside pressure in the bull‘s boiler. A lot of manipulative sins have to be paid for, so I would tend to discount the overbought condition a bit. I repeat, don’t get cute and trade his bull cycle. It’s the only way one can mess it up.
       The stock market has been in a bull cycle since August, 1982, has waved up, topped out and has broken down, most probably starting a bear cycle having a life expectancy of about a decade.
       In last month’s article, I suggested that various Dow’s Theory bearish divergences were evolving, but publication constraints did not facilitate a firm definition in the fluid situation. However, the key breakdown levels were defined, and they were busted with a vengeance. Note the breakdown levels on the Weekly chart along with the divergence arrows. To confirm the breakdown, the near-term August lows must be busted as marked.
       At the risk of causing fatal “eye rolls,” I can conjure up another upleg in an alternate wave count. It is not favored and a bust of the aforementioned August lows would pretty much rule the upleg out.
       Perspective must be kept in mind here. The decline is most probably a downside bear cycle that is following a 30-year bull cycle that started in 1982. Overbought or oversold parameters are developed from the intermediate and primary degrees within the previous bull cycle. To apply these parameters to the new bear cycle is highly questionable.
       The only relationship that the two cycles have, the old bull and the new bear, is that the new bear cycle is the natural progression after the bull cycle. However, it must be recognized that the new bear cycle is a separate entity in itself and will, no doubt, define new parameters that are unique to that cycle. Therefore, to apply the old bull cycle parameters to the new bear cycle is a very questionable step. In other words, the bear is a unique animal and is different than the bull.

The Big Picture Summarized

       We’re at the end of an inflationary epoch. The Rasbucknic appears ready to move into a rally, given hard buy signals which need to flash to confirm this anticipation. The CRB and Oil have most likely topped out. The Bonds are blowing off, cleanly waved out with every bear divergence in the book flashing, as the precious metals complex continues in its bull cycle, albeit with near-term chop suey in terms of its wave development. The stock market has most probably started a bear cycle having a life expectancy of about a decade.
       This overall market configuration is one that confirms the concept that a massive debt implosion is beginning, and a new epoch is starting.

One-World-Order ?

       I’ve long believed that the One-World-Order movement would fail for two reasons. Firstly, to gain control of the world’s economies, the central banks needed to enslave the world in debt. However, this very enslavement is self-destructive because the world’s economies cannot support the debt, be it private or sovereign. Thus the banking system would fail and, without an international banking system, a One-World-Order cannot function.
       Secondly, as the system matures and then implodes, the territorial imperative would surface – every man for himself. Thus the necessary cohesiveness for the One-World-Order would evaporate. The hustle presupposes that the individual countries would deny their territory. It presupposes a denial of basic human nature. This denial is folly. Human nationalistic expression is presently evolving with the implosion of the European Union. The central bank efforts to hold that Union together are futile.
       There is a tendency to hold this central bank gang in awe, believing that they are all wise and powerful. They are not. In the final analysis, these men are mortal, subject to all of the usual mortal weaknesses. And just like all mortals, while they rarely believe it, they are subject to the natural selection process of the markets. The markets are selecting them for extinction.
       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.