"If you see a line forming in
front of a bank, what do you do? Get in line."
Wall Street adage
A tumultuous
week that proved once and for all that our central banks are deliberately
trying to rig our global stock markets, but with less and less effect. Some as
in China have already lost control. So too in the emerging market nations and in
the commodity market nations. They have simply been overwhelmed by the slowdown
in China collapsing demand for industrial commodities. The jury’s still out in
the USA and UK, where the central bankster remain barely in control, but a few
more days like Monday and control will become a meaningless word.
With
the public long gone from our stock markets, most of the action now comes from
high frequency trading algorithm computers. Since these are mostly all
programed to watch for the same signals, namely order flow, and to try to front
run it for fractions of a penny, for a fraction of a second, when margin call
selling hits the markets, HFT front running leaves the Fed’s Plunge Protection
Team out of the loop and so far behind the curve as to not actually be in the
game. In theory, HFT is allowed for “the liquidity” they bring to stock
markets. In practise, when trouble hits, they are all on the same side and
programed to pull bids. They have become wealth destruction machines in a two
speed casino. As more and more stocks lock up, forced margin call sellers,
often hedge funds and Exchange Traded Funds, must use the highest liquid stocks
still trading as proxies. Our developed market stock exchanges are one HFT event
away from a terminal collapse.
For
better or worse, and I would say worse, we are living in the end game of the
Great Nixonian Error of fiat money. Communist money. We are living in the
perverse age of Zero Interest Rate Policy and Negative Interest Rate Policy.
Both are about to come to their end. Whether the Fed dare raise its key
interest rate by a meaningless quarter of one percent next month in these
circumstances is open to question. What is not open to question is that sooner
or later, and my guess is sooner, that interest rates will start the long march
back towards normalised interest rates. The great 34 year bond bubble will come
to its end. In global stock markets, Monday’s chaotic action will look like the
good old days. In the developed world we will witness wealth destruction unlike
anything seen since the Second World War. With our national economies now
globally integrated and at the speed of a nano-second, it’s a time bomb ticking
down to destruction. Our central banks are simply increasingly irrelevant at
stopping the damage they have created. Thirty four years of their malinvestment
bubble is about to get unwound. The Great Nixonian Error of fiat currency will
get swept away.
None
of this is likely to come up at the current Fedster’s annual junket at Jackson
Hole Wyoming. There, they actually think it’s still central bank bubble business as usual down on the casino floor.
Though
I’m not a chartist, many professional money managers are. It’s easier to stay
grazing with the herd that way. Staying with the herd allows them to keep their
jobs when all goes wrong. And all’s now
going wrong in global stocks.
"The trend is your friend, until
it isn't."
Wall Street adage
‘Death cross’ patterns spread like a bearish virus
Published: Aug 28, 2015 4:34 p.m. ET
S&P 500 index’s chart produces first death cross in 4 years
The “death cross” pattern is spreading fast through the stock market like a bearish virus.On Friday, the S&P 500 index SPX, +0.06% became the latest victim. The broad-market barometer’s 50-day moving average fell to 2,074.42, according to FactSet, to cross below the 200-day moving average, which slipped to 2,075.39.
The S&P 500’s last death cross appeared on Aug. 12, 2011. It bottomed about six weeks later after falling a further 6.3%. The opposite bullish crossover, known as a “golden cross,” appeared 5 1/2 months later.
Many chart watchers believe a death cross indicates that a shorter-term decline has developed into a longer-term downtrend.
There were 263 stocks within the S&P 500, or about 53%, that had a 50-day moving average (MA) below their 200-day MAs through afternoon trade Friday.
Shares of the biggest S&P 500 company by market capitalization, Apple Inc. AAPL, +0.33% produced a death cross on Aug. 26.
Among other major market indexes, the Dow Jones Industrial Average DJIA, -0.07% produced a death cross on Aug. 11. The blue-chip index was down 47 points in recent trade, and had lost nearly 800 points since the pattern appeared.
On Friday, 18 Dow stocks, or 60%, had death crosses hanging over them.
Many have questioned whether a well-telegraphed moving average crossover is really a bearish signal or not. But at the end of 2008, three months before the market bottomed, all 30 Dow stocks had produced death crosses.
Among other notable indexes in which the bearish pattern has appeared recently, the NYSE Composite NYA, +0.11% produced one on Aug. 11, the Dow Jones Transportation Average DJT, +0.53% produced its death cross on May 26, the Dow Jones Utility Average DJU, -0.27% produced one on May 7 and the Wilshire 5000 W5000, +0.22% produced one on Friday.
The Russell 2000 RUT, +0.81% could produce one within a week and the S&P MidCap 400 MIV, +1.02% should produce one on Monday, while the Nasdaq Composite COMP, +0.32% could be about three weeks away from producing one.
Four Things We Learned This Week: What Goes Up Must Come Down
August 28, 2015 — 5:21 PM BST
1) China is not a one-way bet
It's been the most volatile week for equities in years. Fears of a slowdown in China have been snowballing all month, and culminated Monday in a global stocks crash not seen since 2011 – and not seen in Europe since the depths of the financial crisis. Chinese government intervention and relief rallies tussled with renewed concerns about China throughout the week, triggering wild swings. Those fluctuations were further complicated by Fed comments that cast doubt on a September rate hike.The markets jarred investors so much that many pulled their money out of equities – and almost every other asset class – altogether.
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"Markets take the stairs up and
the elevator down"
Wall Street adage
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