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
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
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

Market Oracle FREE Newsletter

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

Stocks Bear Market Focus Point: Diary of a Market Top

Stock-Markets / Stocks Bear Market Jun 04, 2012 - 01:08 AM GMT

By: Garry_Abeshouse

Stock-Markets Best Financial Markets Analysis ArticleUS share indices have been until recently sitting at highs not seen since 2007/2008, while the world was and still is experiencing an economic meltdown with no end in sight. Where did the bulls think the market would go to from these levels? What were they thinking – that we live in a world where the law of gravity can be defied and bull markets will keep on rising forever? What sort of world do they think this is? It is just this type of thinking that makes Bull traps what they are – traps for those that feed off fantasies.



There still appears to be a broadly based belief that the USA will favourably weather the current financial storms, allowing equity markets to rise like Lazarus once again. This US centric view, proclaimed with an almost religious like fervour by some, will not be enough for a market resurrection and a resurgence of the American Dream.  

And talking about the American Dream. Over the last twelve months we have seen a significant blowout in equities sparked more or less by the euphoria of one single stock – Apple.  And more recently, what better way to confirm an equity market Bull trap than a multi-billion dollar new listing gone wrong as Facebook shares dive from a high of $45 to a low of $27, just a few days after listing. Another fantasy goes bust for some investors.

But despite these attempts to misinform and mislead, the American spin-doctors will probably be half right – at least for a time. I expect the love hate relationship with a rising USD to continue for some time to come. In fact since 1982, as you can see from the 30yr T-Bond monthly chart below, risk-off investors appear to have maintained a certain taste for US T-Bonds, despite the ever decreasing yields over this time and a USD that fluctuated wildly. You can also see that since 1988, the USD has been essentially building a long term base. There is a clear uptrend on the 30yr T-Bond chart that clearly starts prior to this time and continues uninterrupted to the present day. In fact as you can readily see, the rise in 30yr T-Bonds prices has even accelerated over the last few weeks as money moves out of non-US currencies, equities and commodities.

This move into US T-bonds has also been accompanied by continued strength in better quality US Corporate and Municipal Bonds. But it is the strength of the latter, that reinforces my view that in the USA and much of the institutional investment community – that spin is still king. This spin is being used to continually reinforce their parochial view that the bottom is not far away and that those pesky Europeans are really not that important anyway.  It is far easier for the US media to comment ad nauseum on the minutiae of Romneyisms and use the Blame Game, rather than ponder on the more important issues of the day. As Noam Chomsky is probably still saying as he did way back in 1967 - Where are the responsible intellectuals when you need them? 


There are none so blind as those who will not see.

In this age of instantaneous markets, electronic multimedia and  saturation statistics, it continues to both astonish and overwhelm the mind as to why financial markets continue to display chart patterns, much as they always have done. Tops are still tops and they appear to be ignored just as often as they always were.  Head and shoulder and other top patterns now litter the charting landscape not only in the USA, but also across the world.

But one prominent Technical Analyst, ignoring the plethora of tops in his own market, places blame firmly in the hands of the world outside the USA by announcing:
“FOREIGN HEAD AND SHOULDER TOP... I wrote about the possibility that foreign stocks were forming a "head and shoulder" top a couple of weeks ago. But I believe it bears repeating. That possibility really worries me. Judge for yourself. . . .  Either way, the pattern (in the Vanguard FTSE All World ex-USA ETF) scares me. If foreign stocks are in fact tracing out a major top, there's no way U.S. stocks will escape more serious damage. They may not fall as far, but they will fall some more.”  Obviously he has not seen the breakdown from the well-formed top on the S&P 500 Equal Weighted Index I have reproduced below as well as the other tops I have not shown.

The across the board weakness in financial markets also makes a mockery of much of the way the financial media and economists have covered market events over the last twelve months.  Checking the starting dates of market turning points over the last twelve months, also illustrates beautifully how the high volume traders decide their up and coming strategies and make major trading decisions at the end and/or beginning of each calendar month, seemingly ignoring much of the froth and bubble of what may be loosely called financial reporting.

In the year 2011, there were warnings . . . . .

The first signs that financial markets had begun a process of topping out were shown when  Copper and Palladium futures peaked in February 2011. These events were quickly followed by peaks in the Industrial metals Spot Index ($GYX) and the Reuters CRB Commodity Indices in March, while Silver and the various Oil prices followed in April.

On May 1st 2011, as the Euro saw 1.492 for the last time, both the Large Cap S&P500 Equal weighted Index and the Mid Cap S&P 400 Index peaked in the “head” portion of a seven month H&SH top that fell through the neckline on August 1st 2011.

By October 4th 2011 the S&P500 Equal weighted Index had bottomed at 1584, before rising to peak again at between March 27th and April 2nd 2012 at 2129 – just a smidgen above the May 2011 peak.
Even the Junk Bonds started topping out on February 29th 2012 and have now turned sour as they break down from confirmed tops along with the equities. It will not be long before they are followed by other corporate and municipal bonds. 

And in 2012 it’s déjà vu – 2008 and 2011 all over again, where the strongest of the weak shall be king.

We now move forward to February 7th 2012 at 10:53:48 pm central European time and the moon, although hidden by ominous clouds heralding the storm that was yet to come, had just become full. From this day on, like a cascade of dominos, the most heavily traded currencies proceeded to fall from grace against the USD, one by one. From this day on, almost as if programmed, the USD Index bottomed at 78.5 and proceeded to extend a base that started in early 1988, before moving up to where it is now at 82.89.  Right from the start, the USD and US treasuries have dominated the risk-off trade, which in itself says a great deal about the depth of underlying bearishness in peoples psyche and more about which side of the market many of the high volume traders see future profits.


First cab off the bearish rank in 2012 was the Japanese yen at 1.3133 on January 31st, next on February 8th was the AUD peaking at 1.0845, then on February 24th the Euro peaked at 1.348, on April 30th the British Pound peaked at 1.6300 and on May 1st the Canadian dollar peaked at 1.017.

 

We now retreat back a little to March 20th. On the previous Thursday, Apple shares had had risen to break $600 for the first time and the big traders were sitting around their large mahogany tables at their usual morning meetings mulling over the coming day’s business. This was also the day when the Comex Nasdaq 100 eMini peaked at around 2788, even though the actual Nasdaq 100 Index continued to rise until peaking at 2794 on Wednesday March 28th 2012 .

Then true to form on the first trading day of May 2012, exactly one year after reaching the May 2011 peak, the large traders again decided that it was time out and proceeded to sell the market down.
It is now early June 2012 . . . and the rout in currencies, commodities and equities continues with many entities, already testing their 2011 lows have the 2008/2009 lows now set firmly in their sights.





















The last word

Germany must be the sacrificial lamb – but it will never happen.


When will the Europeans realise that probably the only partly realistic solution to their mess, is to extricate the Deutschmark from the Euro. This would in theory allow the stimulus effect of a depreciating new euro backed by the weaker European economies to buy them some time. I realise the Germans will never be a party to this, but at some point in the future they just may have no choice. Then again in the more likely scenario, the markets may just decide for themselves and dramatically devalue the Euro against the USD. The dark horse here of course as always is the Chinese Renminbi, which is currently more or less tied to the USD.

In the scenario I propose above, which sees the USD appreciate against most of the world’s currencies, there would be huge pressure placed upon the Chinese to allow the Renminbi to depreciate against the USD along with the other currencies in order to protect their export markets. In fact as you can see below, the bets already placed appear to favour this view.

 

For those like me conflicted by the dual names of the Chinese currency, Wikipedia comes up with a simple definition. “The yuan is the base unit of a number of modern Chinese currencies. The yuan is the primary unit of account of the Renminbi.”   Enough said.

Till next time.

Garry Abeshouse
Technical Analyst.
Sydney
Australia

garrya@bigpond.net.au

I have been practicing Technical Analysis since 1969, learning the hard way during the Australian Mining Boom. I was Head Chartist with Bain & Co, (now Deutsch Bank) in the mid 1970's and am now working freelance. I am currently writing a series of articles for the international "Your Trading Edge" magazine entitled "Market Cycles and Technical Analysis".

I specialise in medium to long term market strategies.

© Copyright Garry Abeshouse 2012

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