Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investor Sentiment Signaling The Great Depression II

Stock-Markets / Economic Depression Oct 27, 2008 - 12:02 PM GMT

By: Captain_Hook

Stock-Markets Best Financial Markets Analysis ArticleThat's what investors simply will not do today because they are the same spoiled brats that make up the bureaucracy. Stubborn – stubborn – stubborn – that's what both investors and bureaucrats are today, with no sense of proportion or morality, and unwilling to give up the ghost in speculation games. The moral hazard that has been instilled into the public and bureaucracy alike over the past twenty years has finally caught up to reality, where as discussed in ‘ The Missing Ingredient ' the other day, investors are convinced the bureaucracy will engineer another stick save for the stock market right in front of the election, and for this reason speculators are hesitant to short the market. And it's not as if the bureaucracy isn't throwing the book at the problem attempting to arrest the meltdown – they are. But alas, without the suckers (put buyers) to squeeze stocks higher, prices continue to plunge like never before in history .


The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Friday, October 10th , 2008. 

Add into the mix investors are still margined to the hilt , and guess what, we have a recipe for a system wide meltdown, never mind just the stock market. That is to say, if the stock market were to collapse over the next year or so to the same extent it did in 1929, which saw the Dow down some 90% in the end due to margin debt contraction, then what we are likely looking at moving forward is the Great Depression II . And it's not as if we don't have any modern day examples of what happens after a credit bust, where this has certainly been the experience in Japan, in an economic malaise for the past two-decades now. Of course if the US goes down, which is happening , things will get much worse for everybody no matter what measures are taken. A derivatives neutron bomb has gone off now that will meltdown the financial markets in record time, where it appears the future may be now in this regard. 

Of course it wouldn't matter if was derivatives led meltdown or not. (i.e. don't let this guy fool you .) The main criterion that will usher in the Great Depression II is that the larger credit cycle has peaked, which in turn will trigger all the standard emotional responses from the public and bureaucracy alike. You see the credit cycle was extended by the creation of quadrillions in notional value of derivatives that supported the ILLUSION value was present in the financial markets when there was far less. So, despite the size of the numbers involved in our financial system, because it's all an illusion, as you can see in the case of the stock market, a great deal of fictional wealth can get wiped out very quickly. In this respect I do think Roubini is right about one thing, Monday could be a very interesting day in the stock market – a very interesting day indeed.

Turning to the charts to support this view, of note is the fact the Dow / Gold Ratio has sliced right through large round number support at 10 with ease, meaning unless the fall is arrested soon, it could continue sliding in fractal fashion as stocks plunge / gold explodes higher. Further to this it should be pointed out that mirror image structural patterning expectations associated falling stock markets should be abandoned at this point given the degree of irregularity already witnessed in this regard, which supports the view the Dow / Gold Ratio could collapse rapidly. Add to this escalating derivatives related counter-party risk considerations, which was touched on the other day, potentially causing panic buying of gold (and silver) by US banks and hedge funds, and it's not difficult picturing exacerbation in the move.

Need more proof things could get worse from here? Well, in addition to checking out the fact the Rydex Ratio (see Figure 3 ) is nowhere near a top, one might want to check out this attached Daily VIX chart. Here, one should notice that in addition to more room existing on indicators before peaks should be expected, that the ADX (DI+) reading has now broken out. So what? It's only this implies life as you know it has now changed forever as a result, where volatility will rule in many respects, and few will be able to insulate themselves from growing turmoil. Thus, don't be surprised if the CBOE Volatility Index (VIX) continues up over 100, bank / market holidays ensue, and a bunch of people waking up very quickly. (See Figure 1)

Figure 1

How can I be so sure such a pessimistic appraisal could become a reality? Again, it's investor sentiment that tells the story, where measure after measure continues to signal complacency. In this respect I offer the below snapshot of the Nasdaq / Dow Ratio, where it should be recognized a structural break of indicated support will kick in the afterburners on the larger sell-off in the stock market as crazed speculators finally give up the ghost on both the presidential cycle and unfounded optimism associated with the economy next year. Growth sensitive tech stocks outperform in a strong economy, where again, a crashing stock market should remove any confusion within investors minds regarding the reality of prospects moving forward. (See Figure 2)

Figure 2

And in solving the mystery of why silver can under-perform gold with a relatively profound short position against it, now we know why, with the prospects for the economy imploding dramatically increasing by the day. Gold outperforms during times of economic uncertainty, and as you can see in the long-term monthly plot below, it's been a rocket against silver over the past few months, and is poised for further fractal like gains. Again, in terms of what this would signal, think in terms of further fractal like losses in stocks, where at this point the best conceptual framework to characterize events likely lies within understanding globalization, fiat currency regimes, and present day bureaucracy's are collapsing in a Grand Super Cycle Degree event, at a minimum. (See Figure 3)

Figure 3

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our continually improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts ,   to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented ‘key' information concerning the markets we cover.

And if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line . We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

http://www.treasurechestsinfo.com/

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2008 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2022 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