It’s funny to watch the Wall Street mouthpiece’s in the media blow a gasket trying to convince Mom and Pop investor that everything is fine in the market’s and that this is just a normal market correction or a knee jerk reaction to some contrived market glitch that really should have no bearing on the U.S. Market.
I have to laugh out loud sometimes when I hear their propaganda; ok let’s face it, their lies about the health of the economy.
I mean, come on. CNBC is owned by Wall Street. If you believe anything those jokers say, you deserve what you get. Even Jim Cramer admits to pumping the public on CNBC so the fund managers can pump and sell a particular security as it rises on the hype. Don’t believe it? Just watch this Jim Cramer, YouTube interview to see for yourself. https://www.youtube.com/watch?v=gMShFx5rThI
Anybody with half a brain knows something is wrong with this economy. They might not be versed in the markets or economics in general, but they know something’s not right. That’s why the market crashed on Black Monday two weeks ago, with the largest drop in DOW history in a single day of 1,100 points.
That was a display of blatant panic in the markets, which shows how nervous investors are. So the PPT (Plunge Protection Team) stepped in and threw the circuit breaker to close the markets temporarily and calm the masses while at the same time buying heavily into the markets to raise them back up.
Would you call that natural market behavior? Of course not, that’s government manipulation and intervention, thus negating the definition of a free market system. Did it work? Look and see where we are today?
Folks, when the markets need to correct, they are going to correct and there’s nothing the PPT or anyone else can do about it. The natural forces of the market eventually win. I mean look at China. The Chinese government has closed the market, threatened to arrest anyone selling into the market, bought into the market to try to prop it up and even closed some brokerage houses and yet the market continues to implode. We are going to see a slow motion crash of the stock market and eventually the bond market over the next few months.
I just hope you’re paying attention, because if you’re invested in the market and frozen with indecision, you are going to lose BIG! You need to be the Captain of your own ship. Your stock broker or fund manager doesn’t make any money when you convert to cash or physical precious metals. Do you think they are going to advise you to do that? LOL !
For those of you who are all gleefully excited about the recent retrace back up in the stock market, I would like to point out how crashes occur by looking at the chart below of the 2000 and 2008 crash.
Look at the beginning of each crash cycle and then look at the retraces back up in both instances. Human nature is to believe that the crash was just a normal correction. Some advisors even recommend buying into the crash as a good entry point for the inevitable upswing back to a bull market.
I’m sorry to be the bearer of bad news, but this is how crashes work. Stocks fall and then retrace back up gaining everyone’s confidence and then crash some more until everybody rides the roller coaster down into oblivion.
This chart is just as obvious as any indicator as to what to expect going forward. I hope you can see it, because if not, there’s nothing more I can say.
The payroll report this morning showed a rise of 173k, a pretty big miss, since they expected 217k. The unemployment rate dropped to just 5.1%, just below the 5.2% expected. That was enough to increase the probability of a rate hike in September to 34% and 62% for December.
As a result, the stock market fell on the news and the Dollar rose giving the cartel an excuse to hit gold and silver this morning.
I wouldn’t put much stock into this small downside move. Next week should be interesting after China cranks back up from their holiday week. There is such a huge divergence between the futures (Paper market) and physical market that something’s going to break soon.
Stock Market Indices (SPY) (QQQ)
China’s stock exchange has been closed this week for their national holiday. As a result, volatility has been slightly less this week, but don’t be fooled.
There are multiple technical indicators that show that this is not just a simple correction. Look at the chart above. The first indication of a turn down is when the 50 DMA crosses over the 100 DMA (1st red circle), the second indicator is when the 50 DMA crosses over the 200 DMA for a ‘Death Cross’. (2nd circle)
Also, remember my explanation of Elliot Waves? (See tutorials.) We have the beginning of a corrective wave. Each corrective wave usually has 3 legs, 1, 2 and 3. We are on 3 now; however, I think these are mini-waves rather than major waves, meaning that more downside is to come.
The other indication of a cycle change is the breach of the lower support trend line of the ascending wedge pattern below.
Energy Stocks (XLE) (UNG) (USO) (LNG)
I was too focused on the stock market last week, so I missed the short term upswing in Oil as it broke out of the descending triangle pattern. (See below.) I didn’t think it would go past the $44 level, but it made it all the way up to $49, before retracing back down. Typically we should see a retrace back down to retest the breakout level. I’ll watch this closely for the next set-up. This retrace down may turn into a bull flag pattern, but the fundamentals indicate more downside to come. I’ll watch this one closely.
Financial Stocks: (XLF) (IYF)
I’m staying away from financial stocks at this time, until after the S&P correction. Once this economy implodes, financial stocks are going to lead the way. I will place short positions at that time.
Biotech: (BIB) (KITE) (IBB)
Biotech’s have been in an uptrend along with the stock market, however, just as a rising tide raises all ships, a receding tide will lower them as well. I think we will see a correction in the biotech sector along with the impending stock market correction.
Commodities: (FCX) (JJG) (DBA)
Commodities will move higher when we have inflation, however, I think we will start with deflation as the global economies crash and inflation will begin once the central banks begin printing more money to try to stem the crash in the markets. I will just watch these until I see a signal of a move up in price and a break of the downtrend line.
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