Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

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

Gold Sell Signal as Oversold Stock Markets Turn Bullish

Stock-Markets / Financial Markets Nov 01, 2008 - 05:09 PM GMT

By: Brian_Bloom

Stock-Markets Best Financial Markets Analysis ArticleDon’t trust the Text Books - On reflection, there may be more to what is happening on the markets than meets the eye. For one thing, the gold price – the ultimate harbinger of fear in the economy – is stubbornly refusing to rise to new heights, and its oscillator has given a sell signal.


The oscillators on the short term charts of the $SPX are severely oversold and, interestingly, the oscillator on the monthly chart is approaching the zero line.

Technically (from a contrarian perspective) if the world is “universally” bearish the equity markets may still hold some surprises on the upside. Despite what Dow Theory may or may not say, a long term oscillator above the zero line is evidence of a market that has not yet entered long term bear territory. This is not theory. This is fact. (Of course it may still go into negative territory, but as of this writing it has not)

It is clear to anyone with a pulse that the banking industry is in trouble; its equity decimated – but the charts are giving buy signals, as can be seen from the P&F below. Is this just a technical bounce or could there be more to what is actually happening than meets the eye?

The chart below is a 5% X 3 box reversal charts which filters out all the trading noise.

What it shows is strong consolidation at around the 824-908 level. If the markets break below 824, the entire system will be at risk – because a 50% fall to around 450 will be called for.

The implications of a fall to 450 can be seen from the chart below. This will result in a downside penetration of an 80 year trend line.

The 450 target would be a conservative number. Based on the vertical downside count that will manifest, we may as well slit our wrists right now.  But before you do that …..

Just look at that consolidation on the 5% X 3 box reversal chart! Ignoring the spike from 968 to 1550 and back again, there are nine blocks in the horizontal measurement at the consolidation level!

Something is happening out there which is unprecedented in my experience.

So let's get back to the insolvent banks (and the real estate industry that is clearly underwater; and the quadrillion dollar derivatives exposure which everyone now understands is a disaster waiting to happen). One thing is clear: The whole (investment) world is aware of these problems. There are no “shocks” left to be felt – other than a systemic collapse.

And yet, the markets are bouncing up. Is the entire system really about to collapse?

Here are two articles which explain the impact that the hedge funds have been having on the world markets (9000 odd of them) (Thanks Steve)

http://ragingbull.quote.com/ mboard/boards.cgi?board=JAGH& read=110912

http://www.kitco.com/ind/ GoldReport/oct272008.html

Could it be that the Fed and other Central Banks pumped money into the economy; the spare money went into the hedge funds; at the margin, the hedge funds ramped the equity and commodity markets; and then lost the money on the way down? Could we be watching a rich man's bear market – given that the Hedge Funds typically play with rich men's money? Of course, the 401k people will have been hurt along the way, but they were not speculating. They were investing – slowly and deliberately; like dripping water. Of course, there were a whole lot of baby boomers and out of workers who were playing with their charts – and that will have cost them dearly – but were there enough of them to destabilize the world economy?

9000 Hedge Funds have a lot of money under management- arguably, most of the spare cash that the Central Banks pumped into the economy. Let's make a wild assumption (unsubstantiated). Assume each fund, on average, had $250 million under management. That's $2.25 Trillion. That's around one third of the entire world's foreign exchange reserves. That is a lot of money.

Last night a friend who does business in China told me that the Chinese have raised their prices to him up to 45% in US$; and that the A$ has fallen around 30% relative to the US$.

But, if the commodity prices have tanked, and the US$ has risen, is there not now room for one of two things to happen?

  1. China can once again drop prices – should they so choose.
  2. If they choose not to, non US countries can get their manufacturing industries going again and become competitive with the Chinese. Jobs can be created outside China.

My bet is that the Chinese will choose not to cut prices. They have $1 trillion in US Dollar denominated foreign exchange reserves. They cannot afford to risk losing that by “forcing” a dollar collapse. I would bet that the tide is about to turn inside China and that life is going to become harder – but no harder than before all this started less than 30 years ago when Trick Dick Nixon opened the door to China's entry into the world markets.

And within the USA, there is Section B of HR1424 – which will clearly stimulate the US economy at domestic level (as will the collapse in the oil price). For those who are not familiar with Section B of HR1424, it contains a raft of concessions to the industries which ultimately drive the world economy – the alternative energy industries - and it seems to take away concessions from the oil and coal industries. Section B of HR1424 provides hard evidence of a shift towards a problem solving attitude on the part of our political leaders. The guys are starting to close ranks and get their act together.

The more I think about this, the more it impinges itself on my brain that the text books don't have a “canned” answer for what's happening here.

I think we may be witnessing a world economy in transition – as opposed to a world economy that is about to collapse. Based on the evidence, what seems to be about to happen is a market driven leveling of the financial playing field. The rich will get less rich, the middle class will become more relationship oriented and the entrepreneurs will roll up their sleeves. And yes, the food stamp lines will grow – but life will carry on. The sun will very likely keep rising in the mornings.

By Brian Bloom

www.beyondneanderthal.com

Beyond Neanderthal is a novel with a light hearted and entertaining fictional storyline; and with carefully researched, fact based themes. In Chapter 1 (written over a year ago) the current financial turmoil is anticipated. The rest of the 430 page novel focuses on the probable causes of this turmoil and what we might do to dig ourselves out of the quagmire we now find ourselves in. The core issue is “energy”, and the story leads the reader step-by-step on one possible path which might point a way forward.  Gold plays a pivotal role in our future – not as a currency, but as a commodity with unique physical characteristics that can be harnessed to humanity's benefit. Until the current market collapse, there would have been many who questioned the validity of the arguments in Beyond Neanderthal. Now the evidence is too stark to ignore.  This is a book that needs to be read by large numbers of people to make a difference. It can be ordered over the internet via www.beyondneanderthal.com

Copyright © 2008 Brian Bloom - 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 losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Brian Bloom 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