Monday, September 22, 2014
This juncture is one for the record books. Extremes in stock market optimism with the largest IPO in history, record low volume advances, weakening technicals, commodities breaking down under deflationary pressures with Gold and Silver near multi-year low;. Interest rates set to explode higher as debtors default on the mountain of unpayable debts worldwide, and the extremely stretched nature of this rally that began in March 2009, all point to a truly horrific financial crash and resulting economic depression, the likes of which we have never seen. It is truly amazing to me how long this market has held up. But the fact that it has gone on so long, and gone so far, only portends an even bigger collapse once the market tops. This time there will be no second chance, no bailouts, as it will be the entities at the very core of this decades long credit expansion that will need to be rescued this time around. The central banks, the commercial banks, and governments themselves will find themselves in deep financial straits once social mood turns down in earnest. Nature is comprised of cycles, of ebbing and flowing, expansion and contraction. The stock market is a reflection of the ebb and flow of collective human psychology, as it swings from one extreme to the other. Nature's laws apply to financial markets, too, and once the top is confirmed, the natural forces of the market will indeed assert themselves once again, and the entire house of cards credit structure will come collapsing down, correcting the excesses of the past 82 years since the 1932 Supercycle Low. This rally has gone on for far longer than most anyone anticipated, and is the most stretched rally in stock market history. The leverage in the system has reached absolutely unprecedented levels. This all being the case however, nothing has changed with respect to bear market phasing. The Grand Supercycle Bull Market in stock valuations topped in 2000, as I have reiterated many times before, and the past two reflationary periods have been nothing but credit induced, bear market rallies. This one is no different, but only of higher degree than the reflation that lasted from October 2002 until October 2007. So, it is no surprise that given this degree labeling, the rally has lasted longer and advanced further in percentage terms.
The Supercycle Decline that began in January/March 2000 is not over, and while anyone saying this is still just a bear market rally is questioned for their sanity, I still firmly maintain, This entire rally from March 2009 has been a giant, bear market rally, and will result in a decline to new bear market lows as the Grand Supercycle Bear Market enters the next phase of decline.
Thursday, September 11, 2014
I have always maintained, ever since I started this blog in the Fall of 2009, that the U.S. Dollar has been in a long-term basing process (see "Dollar doomed? Not so fast" and Very exciting Juncture in the U.S. Dollar posts) and all risk markets, including equities, commodities, bonds and even Gold and Silver, were all topping out on a long-term basis. While the topping process, most notably in equities, has taken a lot longer than I anticipated, it has still been a topping process nonetheless, and NOT a "new bull market" as many so-called "analysts" claim. While risk markets are set up to fall a long way down, with most well on their way already, there is one market that is setting up for a super bull market and that is the U.S. Dollar. The Dollar has been the most hated market for many years now, with calls for hyperinflation based on "money printing", which is in and of itself based on a misnomer. The central bank has not been printing money, it has been expanding the stock of reserves in the banking system, and thereby increasing liquidity in the financial system. The massive reflation in risk markets has been a direct result of banks leveraging up the available money in the system to speculate in asset markets, thereby bidding them up. Yet, even with all the unprecedented measures taken by central banks around the world, commodities in general have remained below their 2008 all-time highs, gold and silver topped in 2011, and bonds for the most part, with the exception of some corporate issues, topped in 2012. This has all been part of the Grand Supercycle topping process that has been underway since the 2000 Secular Bull Market Top. Even amidst the greatest FED balance sheet expansion in history, and verbal pummeling of the U.S. Dollar, it has still held above the March 2008 low of 70.70. Further, the two significant lows it has made since that time, in May 2011 and May 2014, have each been at a higher low, a bullish indication. Additionally, at the most recent low of 78.91 in May 2014, the monthly MACD found support at the zero level, and has now turned up and triggered a buy signal. Often times before starting long term uptrends, markets go through a basing process. It is my estimation that this basing process has just ended in the U.S. Dollar, and ended on May 8, 2014 at a level of 78.91 on the U.S. Dollar index. Since that time, The U.S. Dollar Index has staged a very strong rally and hit a recent high of 84.52. A pullback can occur at any time, but this rally should be just the very beginning of a long Bull Market in the U.S. Dollar that continues far higher, and far longer than anyone expects. While there are no definitive targets available, I would not be surprised to see the U.S. Dollar Index above 300 by the time the bull market in cash tops out. Bond prices across the board, including U.S. Government Bonds, should fall for many years, while the U.S. Dollar should rise strongly in value during this period, as debt is repudiated and defaulted upon, wiping out debtors and creditors alike in the midst of the most severe deflationary crash in centuries.