Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Gold Bullhorns Quieted for a Day, at Least - 22nd Feb 19
US Auto Loans - Americans Missing Car Payments Is a Symptom of a Much Bigger Problem - 22nd Feb 19
Stock Traders Must Be Cautious Part III - 22nd Feb 19
Stock Traders Must Stay Optimistically Cautious II - 22nd Feb 19
Sheffield FlyPast Footage - "Mi Amigo" US Bomber Crash Memorial Endcliffe Park - 22nd Feb 19
Sheffield "Mi Amigo" Memorial Fly Past , BBC Crew Setting Up Stage for Breakfast TV Endcliffe Park - 21st Feb 19
Stocks Closer to Medium-Term Resistance Level - 21st Feb 19
The Stock Market’s Momentum is Extremely Strong. What’s Next for Stocks - 21st Feb 19
QE Forever: The Fed's Dramatic About-face - 21st Feb 19
Gold Technical Perspective – Why So Bullish? - 21st Feb 19
Sheffield "Mi Amigo" Memorial Fly Past at 8.45am on 22nd Feb 2019 - 20th Feb 19
Here’s The Real Reason You Stress About Money - 20th Feb 19
Five Online Marketing Predictions that will Matter in 2019 - 20th Feb 19
Has Gold Price Reached Upside Resistance Near $1340-1360? - 20th Feb 19
So Many Things are Not Confirming Stock Market Rally - 20th Feb 19
Forex Trading Management: The Importance of Being Prepared - 19th Feb 19
Gold Stocks are Following This Historical Template - 19th Feb 19
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Kress Cycle Market Deflation Pressure Increases

Stock-Markets / Deflation Jun 25, 2013 - 06:31 PM GMT

By: Clif_Droke

Stock-Markets To many observers, deflation was a thing of the past in the wake of the QE3. The Fed’s asset purchases, which drove down bond yields to record lows, were thought to have tamed the global deflationary problem once and for all. What they didn’t count on was the floodtide of deflation breaking through the dikes and barriers carefully constructed by the world’s central banks.

The increasing deflationary pressure is most visible in Europe and Asia but will soon wash up on U.S. shores in the near future. A general deflationary trend is already visible in equity markets in several major countries, a consequence of the final descent of the 120-year Kress cycle. As that cycle approaches its final bottom in late 2014 we can expect to see an increase in some of the problems we’re just starting to see right now in the global economy.



One of the most conspicuous victims of the deflationary Kress cycle is China. China has in fact led the recent malaise in global markets starting with an 11% surge in short-term interest rates in China. China’s overnight repo rate increased by an incredible 25%.

As analyst Bert Dohmen commented, “China is extremely important for all business leaders and investors….Because whatever happens to China will tremendously influence the world economy and your investments. Many large U.S. and European companies depend on China for a significant portion of their sales and profits….A crisis in China will have global repercussions.”

China’s Shanghai Composite Index has been in a bear market since peaking in mid-2009. It’s remarkable when you consider that as the rest of the world has experienced a measure of recovery for the last four years, China’s stock market has been in decline. In fact the Shanghia index is on the verge of testing its 2008 credit crisis lows, as you can see here.



One of the most fundamental pillars of market analysis is that the stock market always predicts future business conditions. What is this telling us about China’s business and economic future? The message can’t be interpreted as anything but negative for the nations of the world that depend on China’s manufacturing sector.

Then there is Russia. Not that Russia is of any great importance to the global economy by itself, but Russia has long been a benchmark for deflationary pressures. Since much of Russia’s economy is tied to oil and natural resources, any sustained decline in the price of oil will automatically exert a negative impact on the country. Remember back in 1998 when oil prices collapsed to $10/barrel? Russia’s financial sector went into collapse and its economy was in shambles. It took an oil price recovery in the last decade to allow Russia’s economy to bounce back and grow for nine straight years. Without the artificial oil price inflation, thanks in large part to the Fed and other central banks, Kress cycle deflationary forces would have long since wiped out Russia.

Here’s what the Market Vectors Russia ETF (RSX) looks like over the last four years. Note the bear market pattern visible in this chart since 2011. Any further decrease in the price (and demand for) oil won’t bode well for Russia and will only hasten the country’s economic demise.



What about the other BRIC countries? India’s stock market is currently probing a 4-year low and the country’s debt market had to be shut recently as yields increased beyond trading bands. Brazil, which was the rising star of the emerging markets not long ago, is slowing economically and has been described recently as “dysfunctional.” Not surprisingly, the natives are growing restless. As Reuters reported on June 24, “More than a million Brazilians have taken to the streets this past week in the largest mass demonstrations since the impeachment of President Fernando Collor de Mello in 1992.”

Brazil’s stock market, as reflected in the MSCI Brazil Capped Index Fund (EWZ), has broken down from a bearish triangle pattern – a pattern much similar to the one visible in the Russia ETF shown above. This could be a preview of what’s to come for other emerging markets in the not-too-distant future as we draw closer to the 120-year cycle bottom.


Gold

After jumping 17.48 percent the previous week, net non-commercial positions in gold declined 7.13 percent during the week of June 11 to 60,227 contracts. Non-commercial long positions in gold have declined 56 percent, its lowest level in 12 months, as investors continue to the exodus from global bonds and commodities.

According to Barclays, net redemptions of gold-backed ETFs have slowed, with an outflow of 15 tons in the first half of June compared to 48 tons in the first half of May. Cash-negative gold positions have also fallen to fewer than 70 tons, according to Sharps Pixley. Most of the “smart money” capitulation selling by hedge funds and institutional investors has likely been completed; the latest decline in gold therefore likely represents the final “dumb money” capitulation phase of the bear market where smaller investors unload their holdings.

2014: America's Date With Destiny

Take a journey into the future with me as we discover what the future may unfold in the fateful period leading up to - and following - the 120-year cycle bottom in late 2014.

Picking up where I left off in my previous work, The Stock Market Cycles, I expand on the Kress cycle narrative and explain how the 120-year Mega cycle influences the market, the economy and other aspects of American life and culture. My latest book, 2014: America's Date With Destiny, examines the most vital issues facing America and the global economy in the 2-3 years ahead.

The new book explains that the credit crisis of 2008 was merely the prelude in an intensifying global credit storm. If the basis for my prediction continue true to form - namely the long-term Kress cycles - the worst part of the crisis lies ahead in the year 2014. The book is now available for sale at: http://www.clifdroke.com/books/destiny.html

Order today to receive your autographed copy and a FREE 1-month trial subscription to the Gold & Silver Stock Report newsletter.

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 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