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5 "Tells" that the Stock Markets Are About to Reverse

Wealthbuilder Stock Market Brief

Stock-Markets / Stock Markets 2016 Feb 17, 2016 - 05:41 PM GMT

By: Christopher_Quigley

Stock-Markets

Time for steady state economics to be introduced.
As a student of economics and monetary theory one of my greatest heroes is M. King Hubbert.
He was an American scientist born in Texas in 1903. He was a man of great integrity,
intellectual honesty and courage. He was a visionary who believed in the power of ideas
and the need to use intellectual rigor to analyze and manage change.


As a research geophysicist, working for the Shell Corporation in Houston Texas, he understood the problems posed by the reality of peak oil and the cultural catastrophe that lay before humanity unless it realized the non-recurring historical nature of the consistent growth phenomenon.

In his presentation, to the House of Representatives National Energy Conservation Policy Act Hearings in 1974, he acknowledged the problems of inflation, growth and monetization, but he understood their causes like no other. The fact that these same problems still exist today, to a greater degree 42 years later, shows the lack of effectiveness and understanding in World organizations.

I think Mr. Hubbert provided posterity a great service in spelling out some of the core problems clearly and perhaps they can help us form the framework for a debate, creating a new paradigm of human comprehension, based on intellectual integrity and excellence rather than fraud and exploitation.

The essence of Mr. Hubbert’s presentation to Congress was that there were two cultural systems at work in society which were on a major collision course with each other. He believed that unless change was introduced financial crisis would prevail. These two systems were namely our orthodox monetary theory and our culture concerning the exploitation of oil and other fossil fuels. To quote from Mr. Huppert’s testimony:

“Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely exponential growth, which has made a reasonable stable co-existence possible. But for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is almost now over. The monetary system has no such constraints, and, according to one of its fundamental rules, it must continue to grow by compound interest. This disparity between a monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase, with time, in the ratio of money to the out-put of the physical system. This manifests itself as price inflation. It appears that the stage is now set for a critical examination of this problem, and that out of such enquiries, if a catastrophic solution can be avoided, there can hardly fail to emerge what the historian of science, Thomas S. Kuhn, has called a major scientific and intellectual revolution.”

In order to prevent the world lurching from one economic crisis to the other it is time the Institutes of International Accounting and Economics introduce “protocols” to take on board the deliberations of Mr. Hubbert. Accordingly, they should champion the paradigm of steady state economics to replace the current dependency on a philosophy of exponential growth. As long as our monetary mathematics is based on the illusion of exponential growth governments, banks, business corporations and everyday households will be increasingly vulnerable to financial shock.

As we lurch towards another Leman type catastrophe thanks to a developing bear market, collapsing commodity prices, the colossal derivative exposure of German banks and the possibility of Britain’s exit from the European Union, World governments should listen again to the wisdom of M. King Hubbert. They should, as a matter of priority, promote the concept of steady state economics as passionately as they support the policies of climate change. Time is of the essence.

Solid short term uptrend in play but caution warranted.
There is a strong uptrend at work in the market at the moment. Both the Dow 30 and the Dow 20 are showing good technical reconstruction. This is understandable given the extreme oversold levels attained since the New Year sell-off.

However caution is warranted. The Industrials gave a Dow Theory re-confirmation signal the 11th. February having closed at 15,660. The previous low was 15,666, achieved on August 25th 2015.

As is the case in a bear market significant moving averages become points of resistance rather than points of support. Thus price action around the 16,728 (50 DMA) level should be watched closely and bearish engulfing candlestick price action on high volume could be an ideal shorting price point.

Chart: Dow Industrials: Daily.

Reference:
On The Nature of Growth: Hearing on the National Energy Conservation Policy Act.
M. King Hubbert 1974.

Charts courtesy of StockCharts.Com

Christopher Quiqley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2016 Copyright Christopher M. Quigley - All Rights Reserved

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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