Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market Unpunctured Cycle Report “Risk Off”

Stock-Markets / Stock Markets 2011 Oct 20, 2011 - 02:24 AM GMT

By: Submissions

Stock-Markets

Best Financial Markets Analysis ArticleRobert M. Williams writes: When I last wrote about the stock market it appeared that we had experienced a major break to the down side as the Dow, the S & P and the Transports all closed at new lows for the year. This took place on October 3rd with the Dow closing at 10,655 and well below the August low of 10,713. This of course was confirmed by the Transports as they closed at a new low of 4,038 on that exact same day. October 3rd was the second of two consecutive 90% down days and was highlighted by 836 stocks reaching a new 52-week low. Then on October 4th we saw even more stocks, 1,202 altogether, closing at new 52-week lows and I don’t remember so many stocks making new lows, at least over the last twenty years. This of course was a sign that sellers had finally exhausted the urge to part with stocks at any priced and I saw it at the time but failed to recognize it for what it was, i.e. an exhaustion of some sort.


Many people interpreted the rebound that followed as a definitive bottom and an indication that further quantitative easing in Europe, and eventually the US, would solve all of our problems. I wish things were as simple as that, but I can assure you they never are. The US has made a habit of postponing the medicine needed to compensate for decades of easy money policy and they’ve allowed themselves to believe that you can have a free lunch every day. This of course leads to distortions and unintended consequences, and here we have a picture of one such unintended consequence:

This is a chart of the velocity of money and it tells you how fast a dollar moves through the economy. As you can see the speed has slowed to a multi-decade low. This is particularly disconcerting when you look at this next chart of the money supply:

You can see that the Fed has been busy printing the numbers off of the plates for more than a year and a half! This divergence between supply and speed tells us that the general public has not been a beneficiary of the Fed’s printing binge. It also tells us that the more than US $3 trillion the Fed created out of thin area did not produce growth, jobs or infrastructure. All it produced is debt and that has to end up being extremely deflationary, and there in lays our problem.

Previous episodes of monetary expansion drove the stocks to all-time highs and took housing prices along with it. This caused the average American to pile on debt after debt as if it were really an asset, and he did it with Sir Alan Greenspan’s blessing I might add. The following chart shows the all-time high in the Dow, the ensuing sharp decline, and another Fed induced rally to a significantly lower high:

You can also see how the rally ran out of gas, that’s when the Fed rushed in with QE2, and that led to a finally push up to the April 29th lower high. Since then the engine seems to have stalled and now the market is anxiously awaiting QE3, but that assumption assumes the market is stupid. We have two QE’s and neither has produced growth or jobs and neither have facilitated credit for the masses necessary to produce growth and jobs, so what good will a third QE do? The short answer is no good at all unless you think saving a handful of corrupted bankrupt financial institutions is worth sending the whole country down the drain.

The question now is where do we go from here and we need to look at the following chart for some guidance:

Here you can see that the April high formed part of a head-and-shoulders top with an upward sloping neckline. The neckline was violated back in early August and this led to a break and close below the March closing low of 11,613. The decline stopped at 10,719 on August 10th and this was followed by yet another rebound.

As you can see on the right hand side of the chart, the Dow is basically trading in a range with the upside defined by the March low of 11,613 and the bottom defined by the August low of 10,713. Both have been broken on a closing bases and with the Transports confirming both breaks! Our most recent rally lasted nine days and produced a marginally higher close at 11,644 and then on Monday it turned back down with a 247-point decline. Tuesday followed with a 180-point gain as it was once again rumored that German and France approved a US $2.7 trillion bailout for the EU banks. You have to wonder how many times they can use the same rumor to prop up the market?

So far we’ve seen three attempts to move higher and three attempts to move lower and I suspect the next attempt, whether its higher or lower, will be a defining moment. Most analysts feel that the EU bailout along with an American QE3 will be enough to do the trick and push stock prices higher, but I have to ask why that would be the case. What does it solve? The answer of course is nothing. Too many people are now aware of that and then we have the Occupy Wall Street movement in over 170 cities around the world. This movement is telling the world that enough is enough, and it will turn violent. Too many people are making huge sacrifices so a very small group can control a large percentage of the world’s wealth. The many are now beginning to revolt and they will make it impossible for the few to govern. Good luck with that!

Robert M. Williams
www.unpuncturedcycle.com
theunpuncturedcycle@gmail.com

© 2011 Copyright Robert M. Williams - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules