Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Nirvana Has Been Broken

Stock-Markets / Stock Markets 2015 Aug 22, 2015 - 04:50 PM GMT

By: Doug_Wakefield

Stock-Markets

Is it possible to have a calm and boring market break down quickly in merely two trading days? Is it possible that THIS is the start of breaking the "stock nirvana" illusion?

Let's examine the evidence.


Wilshire 5000 Weekly Chart

All Is Calm...Until It Is Not

Anyone looking back over the trading days of July and August as of Wednesday would have seen nothing but the illusion of "control" at the 200 day moving average of the S&P 500.

S&P500 Daily Chart

Four Horses

As the markets closed today in the U.S., we can see that the four major equity market indices have now closed two days in a row under their 200 day moving averages, declining very sharply.

S&P500 Daily Chart 2

Dow Daily Chart

NASDAQ Daily Chart

Russell 2000 Daily Chart

The Global 200

Does the evidence reveal, that the US equity declines are isolated, or part of a much larger global drama?

Nirvana Has Broken

Who Me...Fear?

VIX Daily Chart

After being pushed to its lowest reading since July 2014 in early August, the VIX finally roared past every top over the last year today, with the exception of the one we saw last October.

Near term, this would argue for a bottom very soon in stocks and a top in the VIX. However, considering the fact that it has taken so long to break underneath the 200 day moving averages of the four U.S. equity indices shown above, the last two days appear to be a wake up call to global investors, that September could prove dramatically different from the illusion of "nirvana" that has been experienced these last few years.


But Where Are the Bulls?

While there have been stock bulls and gold bears for 4 years, the following are three reasons that gold should prove welcoming to those looking for a bull trend.

Anyone reading, "Gold is 'Undervalued' For First Time in 6 Years, BofAML Says, released on Zero Hedge on August 18th, will learn the following:

Hedge Fund Net Gold Position

Hedge Funds just went short for the first time ever. This is a contrarian signal, when compared with the actions of the commercial hedgers, who were recently holding their lowest short position since the gold bull started in 2001.

Comex Gold versus Commercial Hedgers Net Gold Position

Lastly, a survey of managers by Bank of America Merrill Lynch recently revealed that they believed gold was undervalued for the first time since 2009.

Gold Valuation

For over a year now, I have been asking readers to look for the big shift, where bulls become bears and bears become bulls. While we had equity markets like the Toronto Stock Exchange top last September, followed by the Dow Transports last December, it took until July this year to see the S&P Biotech Index and the NASDAQ Composite reach their all time highs.

Yet, whether we are looking at the bottoming of gold, or the topping of equities and junk bond worldwide, the move from boom to busts seems to have lunged forward this week.

Plan of Action

There are millions of investors and thousands of advisors, who are still following "buy and never sell" strategies. We have lived through two 50% declines in the S&P since 2000, and yet because of Greenspan's cutting rates to 1% by 2003, and Bernanke and Yellen following a Zero Interest Rate Policy since December 2008, we find ourselves with no chance that central banks can interest rates BELOW zero to "stimulate" the global slowdown.

QE has had trillions to sovereign debt levels, adding an enormous drag to the world economy, so more QE to remove what little top tiered collateral is left among dealers, is NOT a solution either. Less cash and blowing the financial bubbles larger was never a long-term economic solution.

Never over the last 44 years since the US dollar was removed from the gold exchange standard in August 1971, has the world been facing such enormous problems caused by the school of thought, "with enough debt and central planning, we can kick the problem down the road forever".

Preparing for the coming busts is not scaremongering; it is common sense when looking back over the largest financial experiment in history since 2008.

There are ways to grow one's money in the period ahead. But it requires changes and doing things differently for the bust than were done in the last 4 years of the boom. It also requires admitting that for most, it was just easier not to think, and leave the planning and artificial levitation schemes to central bankers, than to think for yourself and admit that the plan was not sustainable from the start.

There are also changes that will come, that are much larger than merely the investment markets. Phillipp Bagus book, The Tragedy of the Euro, published in 2010 by the Mises Institute, reminds us of how far we have come down the road of "central planning". Clearly, it encompasses far more than investing.

"The institutional setup for the European Monetary Union has been and economic disaster. The Euro is a political project; political interest have brought the European currency forward...economic arguments launched to disguise the true agenda behind the Euro have failed to convince the general population of its advantages.

The logic for interventions propelled the Eurosystem toward a political unification under a central state in Brussels. As national states are abolished, the market place of Europe becomes a new soviet union." [p129]

I have thought about Bagus comments often in the last few years. How did we ever become fooled into thinking that with enough debt and central planning, we were heading back to "normal"? What has taken place since 2008, is that our world and markets have become more and more concentrated into fewer and fewer hands. For those who make no plans or changes for the bust phase, they will only feed that concentration of power, as we look to central bankers for more "bailouts".....which this time, they have told us already, are not coming.

Being a Contrarian, Remembering History

The big shift from longs to shorts and shorts to longs took a major leap this week away from previous trends, and toward future ones. Have you made changes?

Click here to start the next six months reading the newsletters, reports, and group emails as we move from the boom to the bust phase.

On a Personal Note

Check out Living2024. It is my personal blog, not business. I wanted to have a place to write some deeper stories about where this entire drama seems to be taking us all. Check out my latest post, Optimism Didn’t Help Greeks or Chinese.  

Doug Wakefield

President
Best Minds Inc. a Registered Investment Advisor
1104 Indian Ridge
Denton, Texas 76205
http://www.bestmindsinc.com/
doug@bestmindsinc.com
Phone - (940) 591 - 3000

Best Minds, Inc is a registered investment advisor that looks to the best minds in the world of finance and economics to seek a direction for our clients. To be a true advocate to our clients, we have found it necessary to go well beyond the norms in financial planning today. We are avid readers. In our study of the markets, we research general history, financial and economic history, fundamental and technical analysis, and mass and individual psychology

Doug Wakefield 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