By Thomas Henning
Those sounds that you hear are the sinking gasps of the One-World Order S.S. Keynesian Titanic as it plunges into the dark depths of the Atlantic Ocean.
A few survivors are floating on the surface. They are content. They are long-term investors. The brain-dead Zombies have their cell phones to their ears, happily oblivious to their condition as they blather in blah-blah land.
Buy low, sell high? Spend less than you earn? Don’t own stocks in a bear market? Nah! Blah...blah...blah.
Back in the real world, Blackbeard Benny the Pirate is in deep trouble. He’s up to his butt in mortgage garbage and bonds which are waved out and loaded with bear divergences with nobody but himself buying them. On any downside crack, and it will happen, he can kiss off any semblance of Fed solvency along with the solvency of virtually every other financial institution, and it’s “hello implosion.”
Do not impute any integrity to this gang. This hustle was done by design, facilitated by a bunch of brain washed Keynesian fools. Now their world is imploding from internal debt rot. The central bank gang has been schooled in Keynesian bull manure for generations and this garbage has been inculcated into their subconscious as holy dogma. Undreamed of heights have been reached in intellectual incest. They know nothing else as they frantically try to keep their bubbled Ponzi scheme from sinking.
The only thing for the savvy player to do is to watch the form of the sinking and try to profit and survive.
The bonds are blowing off; the CRB and oil are giving off deflationary hints; gold has finally begun to define its wave pattern within a cyclic uptrend; and the stock market has developed a Dow’s Theory bearish trend change.
The bond market is near the end of a cyclic bull market, is waved out as suggested on the Weekly Bond chart, and is loaded with failing internals as indicated at the bottom of that chart. A close below 138 would bust the Daily Hard Momentum to the downside, which would domino the Weekly and Monthly studies into full sell signals.
This breakdown will bust the balance sheets of virtually every financial entity in existence.
Benny knows this, which is why he’s trying to prop up the bond market. It won’t work.
The CRB Index has waved out a 5-wave cycle as marked, and has broken down most probably starting a bear cycle. Note the failing internals.
Near term, I can conjure up another upleg validating a potential alternative count, but it would not be sustainable.
While prices are not a valid measure of the inflation/deflation fight, the CRB action has a deflationary smell.
Like the CRB, the Crude Oil market has moved up in a 5-wave cycle as marked, topped out, and the best count suggests the start of a bear cycle. Note the failing internals at the bottom of the chart.
Like the CRB, the oil action, while not directly measuring inflation/deflation, is giving hints toward deflation.
The Rasbucknic has been in a bear cycle that is waving out as marked.
Specifically the V wave down started in late 2009, with the rally 4 of the V evolving as anticipated in recent articles.
Ultra-near term, the counter 4 rally appears to have more to go. Its shape is questionable, but that is a matter of form not substance. The Euro has an inverse picture.
This 4 rally has blended nicely with the gold correction. After the 4, the 5th of the V downward should evolve.
The gold complex has been in a bull cycle for about a decade. From a trend development viewpoint, the major 2 wave ended after the 2008 downside bash, which was followed by the 1 of the major 3.
For the last few months, the precious metals complex has been in Elliott Wave hell correcting the upleg off of the extreme 2008 low. Having been through this game more than once, I’ve learned that it is often best to sit down, shut up and let the waves develop to the point of clarity. A bit of clarity has finally come into focus – a wave count that I’ve been toying with on a minute to minute basis.
The wave buffs can examine the favored count using the Gold Miners Index, which suggests that a major A,B,C down, up, down correction has evolved, consolidating the upleg off of the 2008 low, which has had 5 waves within as marked. The internal structure is clean. The B wave action was typical as a new high was scored that failed, which was followed by the C wave down. B waves often do this.
Interestingly, the silver chart (not shown) overlays nicely in terms of wave development. The truly intriguing question is whether the gold’s wave count is a mirror of the count suggested by the Miners Index and silver. This configuration, as strange as it seems, does happen. This aspect must be watched.
Near term, while the C wave may not be complete, as of this writing, the complex has become oversold, the wave count has a look of maturity, but hard buy signals levels cannot be identified. It’s too early. Tentatively, I suspect that the 1700 level basis the gold may do the trick. In terms of atmospheric background, COT members, particularly in silver, have turned very bullish.
In sum, the favored count suggests that a correction has evolved consolidating the upleg off of the 2008 low and, while mature, has yet to suggest a hard buy signal which will validate this count. Remember, the count is always suspect until the market itself validates the count.
Meanwhile, stay with the main upcycle. Don’t get cure and trade the cycle. It’s the only way that you can mess it up.
The stock market has been in a bull cycle since August 1982, has waved up, formed a top, and has loaded in bearish Dow’s Theory divergences as illustrated in the comparative Dow/Transports chart. This action was followed by a breakdown below key lows suggesting the start of the anticipated bear cycle with a probable life expectancy of about a decade.
Near term, since early August, the market has been moving sideways in a trading range as internal numbers have continued to deteriorate.
Recently, both the Transports and Dow confirmed to the downside on a marginal basis, but neither held the breakdown.
Eye roll time. Problem: There are two alternate counts that suggest that there could be another upleg in the cards to wave out a potential count and broaden out the top.
In a situation like this, the only thing to do is to “go mechanical” and let the market bring in the jury. Fortunately there are clear levels that should confirm the direction.
To the upside, closes above Dow 11,725, Transports 4780, would suggest another upleg within a topping pattern. To the downside, closes below Dow 10,400, Transports 3940, would confirm the Dow’s Theory breakdown and would suggest the confirmation of the anticipated bear cycle.
In sum, the bond market is waved out, loaded with bear divergences suggesting major trend change downward given hard sell signals. The CRB and oil have turned bearish. The Rasbucknic counter-rally has started within a major bear cycle. The precious metals complex appears to be in a major correction that is terminal. The stock market has suggested a major bearish trend change needing downside confirmation to signal the start of a major bear cycle. A tag-on rally can’t be ruled out.
The overall picture is ugly as the world’s central bankers are running around trying to shore up the bulkheads of the debt-rotting imploding hull of the S.S. Keynesian Titanic. Gurgle. Gurgle.
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.
