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
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelertoing 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 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

The Next Shoe To Drop for the Financials

Stock-Markets / Credit Crisis 2008 Jun 02, 2008 - 11:44 AM GMT

By: Captain_Hook


The next shoe to drop for the financials, and the larger credit crisis, will be the market's acceptance that mortgage related write-downs are nowhere near complete or close to where they are going, where presently in extreme bubble locales like California , much of the market has been halved, at a minimum. Of course this condition is not isolated to just California , and the real estate market. Soon, bond ensures, Ambac the poster child in this regard, will need to come clean with respect to what condition our condition really is, and ‘phase II' of the credit crisis will swing into gear. And based on the technical condition of Ambac shares , this shouldn't take long at all.

The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Friday, May 16 th , 2008.

Be warned then, and make no mistake about it; this will trigger an acceleration of the economic slowdown that is now going global . What's more, make sure you understand the global nature of this downturn will temporarily affect the demand for commodities, especially those presently caught-up in manic bubble pricing episodes, better known as manias. Currently, the most prominent example of this is crude oil, where although prices could be heading higher short-term to long, the next significant pricing event should be a correction of present bubble pricing. The fact these fools are re-entering the commodities game right now is a clear signal trouble lies ahead, at least short-term.

Make no mistake about, and don't listen to those who don't do their homework, China has now built up a considerable overcapacity in it's economy, and once the Beijing Olympics are over, it's economy should begin to unravel at an accelerating pace. Once this becomes more widely understood, commodities will come under pressure. This is what its stock market is telegraphing in its halving over the past six-months. As mentioned previously, the Chinese stock market chart resembles that of the South Sea Trading Company , which retraced all of a manic bubble put on in just a few years both up and down. If the Shanghai Composite replays this pattern today, such an outcome will confirm we are in the midst of a Grand Super Cycle Top in stocks, at a minimum, and should be very careful – careful to save some of your wealth in physical gold and silver.

Can we be sure such conclusions are on the ‘right track' when all you hear from mainstream media is everything is coming up roses again these days. Goldilocks is back, has tested the porridge, and concluded it's ‘just right'. Why else would the stock market be going up, because it's discounting bad things in the future? Of course the full story is not out yet, where the credibility of those in charge is properly questioned. And while central planners continue to take whatever measures necessary to keep a contrived economy (financials) afloat, which prevents this from happening, if observations presented below are correct, their days are numbered.

To begin this exercise, let's take a look at the LIBOR Index , which as alluded to above, has likely been ‘played with' by participants, and is about to undergo some changes in an attempt to maintain credibility. Here, all the shenanigans has worked to produce a head and shoulders pattern (H&S's) in the trade, where an unsuspecting man might conclude the neck-line is about to be penetrated to the downside in painting the picture ‘all is well' within the world of global finance. (See Figure 1)

Figure 1

Of course if you are not the trusting kind, and have done some homework on the subject (like the above), one would know that the above chart is just another example of ‘paint by numbers' prescribed by the banking community, meaning it's false in nature, and that if there were ever a chart that should suffer failed pattern recognition (i.e. a failed H&S's), this is it. So, don't be surprised if a neck-line break fails when tested, where positive divergences within the indicators would suggest this is the more probable outcome from a technical (natural) perspective.

Bolstering this view in no uncertain terms are observations found in this next chart, which does an excellent job of showing the positive correlation between the yield curve, CBOE Volatility Index (VIX), Japanese Yen, and gold. Here, the idea is when yield profiles begin to steepen, showing stress in the financial system is rising, invariably this leads to increasing volatility in equities (reflected in the VIX), which in turn causes speculators to reduce leverage (as reflected in an unwinding of the Yen Carry Trade), along with seeking wealth preservation in gold. As you can see in the chart below in this regard, yesterday gold and the Yen diverged from the other two because we may be close to a lasting turn point. (See Figure 2)

Figure 2

Further to this, one should take note of the fact that the VIX is approaching lows that were matched by considerably higher stock prices last October (the highs), which is a glaring divergence suggestive complacency reigns at present. And in relation to the LIBOR Index, while US yield spreads are ‘less contrived', at the same time US debt markets are heavily monitized / managed, so don't be surprised if a lasting turn lower in equities is postponed, tested, and retested in June. On this basis then, with US stocks approaching our stated test targets laid out a few weeks back, we are now going officially bearish across the board again.

Again however, don't be surprised if in instead of the 155-day exponential moving average (EMA) acting as the pivot for yields this time around, the curve extends down to the 200-day moving average (MA) next month. Here, we would be amiss in forgetting hedge funds will be gaming the buy stocks and dollar ($) / sell commodities and gold trade until quarter end in June, where even if they can't keep the latter down, they will take advantage of the extra liquidity buoyant equities provide to jam the former higher anyway. This would cause that testing alluded to above to take place next month. The count in Figure 2 is reflective of this view.

This of course, has been our view all along.

In terms of precious metals, silver is under-performing gold at the moment suggestive credit conditions are anticipated to deteriorate soon, along with a weaker stock market / equity complex. So, in addition to expecting increasing volatility in stocks, the metals will not be the exception in all likelihood, especially if the $ rallies more than consensus. This is bound to happen given conditions in Europe are deteriorating rapidly, where the first whiff of dovish talk out of officials should put a good bid under the $ as a consequence.

Here, it's important to not think in egocentric terms, nor be naïve. Central planners know all this, and are planning to use dovish talk and rate cuts by EU officials in attempt to manage gold when the timing is right. I don't think it will work on an extended basis because this will mean an accelerating debasement of the Euro; but the initial shock of a change in policy will surely hit precious metals when it comes. As you know, our ultimate correction target for gold is between $750 and $800. Buy all you can afford in this range.

To be forewarned is to be prepared, so prepare for increasing volatility moving forward.

Good investing.

By Captain Hook

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 Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by 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

© 2005-2019 - 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