Let me start off and say the longer one continues to operate under the assumption that we still have free markets the less likely you are to make money, and the more likely it is you will lose money.
Folks we have virtually every central bank in the world printing money (and I think this includes the US). We have negative interest rates in many parts of the world and 0 every place else. I can say without a bit of hesitation that market intervention is now just a fact of life in modern markets. To ignore it is to ignore a very big fundamental piece of the puzzle.
Bernanke theorized several years ago that any determined government could create inflation at will by threatening to, or actually expanding the money supply. He then proved his theory in 2009 during the only brief deflationary period since the Great Depression. QE1 stopped deflation in it’s tracks. Heck for anyone willing to open a history book you know that Roosevelt was able to stop deflation in the 30’s when he effectively doubled the money supply by revaluing the price of gold.
The simple fact is that once all currencies became purely fiat, deflation became a thing of the past. As long as a government has the ability (and will) to print unlimited amounts of currency there is simply no level of debt that can’t be inflated away. The problem has never been deflation, the problem is going to be inflation (currency crisis). That is the end game to this mess that began in 2000 with the popping of the internet bubble.
I’ve maintained for 8 years now that the day the SEC banned short selling in the financials during the heart of the market crisis in 2008 that was the moment we crossed the Rubicon from which there was no coming back. That was the day free markets died in the world. That was the point in history where the protection of the banks became priority #1 and all laws governing fair market practices were set aside so the banks could make money through any means possible, fair or foul.
I’m going to also suggest that in 2011 the Fed discovered a very important tool in the age old war to control the business cycle. In 2011 when QE2 came to an end and the stock market crashed for a second time, the economy started to roll over into recession. When the Fed panicked and started QE3/Operation Twist, it not only reflated the stock market, but they discovered that by propping up stocks they also halted the economic contraction.
As a matter of fact this is the only tool the Fed has to ward off a recession. Trust me, they are going to use it.
Over the last year I’ve been warning that once the the Nasdaq retested the 2000 highs we would see stocks correct into a very sharp decline, the 7 year cycle low. My initial expectation was for the S&P to retest the breakout above 1550.
However, I’m of the opinion that the establishment (the PPT) has probably succeeded in preventing that from happening with a massive intervention on February 11 through February 14 to prevent the market from breaking through critical support at the 1800 level.
If that level had been breached it would have unleashed a market crash that would have surely taken the market back to my target zone of 1600. And more importantly it probably would have propelled an already weak global economy into recession creating a vicious spiral of lower asset prices, and degrading economic conditions.
So it was absolutely critical that the PPT defend that level or risk allowing the next recession (this time it would have been a depression) to start. I became suspicious at that time that the 7 year cycle low may have been forced to bottom prematurely. Technically it hasn’t done what a 7 YCL should do. Namely it should break the multi-year uptrend line, retrace at least back to the 38% Fibonacci level, and create a market panic (drop 20% or more). As you can see none of those things occurred.
Now one could say that the 7 YCL still isn’t finished, and that may be a possibility, but two things have me doubting that’s the case. First off the 7 year cycle is simply running out of time to finish it’s move. And secondly if we ignore the S&P chart allowing that the S&P can be controlled by the futures market and artificially propped up, and instead look at the chart of the NYSE which has no futures market and is more apt to truly express the real selling pressure occurring, we see an interesting picture. Not only did the NYSE break the multi-year trend line, it also shed 20% during the decline, and came within a whisker of tagging the 38% retracement. So in terms of the NYSE, a market much more difficult to artificially prop up, the conditions necessary to complete a 7 year cycle low were achieved.
So now let me again address this fascination with deflation. Without a doubt deflation is a lot more sexy than inflation. It conjures up images of the 1930’s bread lines and crushing economic conditions. For what ever reason people are attracted to misery. Just look at how many people have to stop and look the next time you see an accident on the highway. We are like moths to a flame when it comes to the dark side. But the reality is deflation has virtually zero chance of occurring unless central banks allow it. All one has to do is look at the last 16 years of history to see what is in store.
In 2000 the Fed remained too easy for too long. It created the tech bubble. The bubble popped. We experienced a mild deflation. The Fed responded by cutting rates to 1%, expanding the money supply and deflation was halted in its tracks. As a matter of fact instead of deflation what we got was another bubble, this time in the real estate markets, followed by a bubble in the commodity markets (especially in oil). When those bubbles popped another short deflationary period began, which Bernanke halted almost immediately with QE1, just like he predicted.
So now we have the deflationists predicting another bear market even worse than the last one, despite the fact that central banks have demonstrated without a shadow of a doubt that they can halt deflation at will. We have a clear intervention to prevent the market from breaking critical support and sending the world into the next recession. I would argue many of the confirmations are occurring to indicate that the 7 YCL is complete. (COT levels, sentiment levels, advance decline line making higher highs, multi-year cycle down trend lines being broken, etc.). And we have clear evidence that aggressive interventions are occurring in all global markets either as profiteering by the banking sector, or as the only tool central banks have to prevent economic conditions from deteriorating into a recession or depression. So I’m going to ask: Is it more likely that this time is different and despite every effort deflation is going to take hold in the world? Or are we going to see the same pattern play out that has been happening for the last 16 years. Namely central banks will keep monetary policy too easy too long, create another series of bubbles, and once those bubbles pop then and only then will we experience another brief deflation… until they crank up the presses again.
So I’m going to say that when you see an analyst trying to convince you that market manipulation isn’t happening you run far and fast in the other direction. In our modern markets market manipulation is the new normal, and failure to acknowledge it, and more importantly anticipate it, is a recipe for losing money. It is the fundamental elephant in the room that many people continue to pretend isn’t there. As a matter of fact once I accepted that we no longer had free markets and began to anticipate when these interventions were most likely to happen my percentage of winning trades improved dramatically. As markets evolve our job is to adapt as quickly to the changing conditions as possible. failure to do so will result in your portfolio becoming extinct.
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What do you expect will be the signal(s) that alert you it’s time to cash out of your forecasted market mania phase ?
A large parabolic bubble phase.
If the FED is printing money saving the market from crashing please explain how the FED’s balance sheet has not increased since Jan 2015 when QE ended.
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=3QjA
When was the last time the Fed was audited?
Gary Bingo, and then why in the hell would anyone expect the FED to provide all of the internal working documents to and outside agency for review. Not going to happen.
We have a international private corporation in the FED that runs the US and every other Central Bank………they do what the hell they want and no one including Congress will do a thing to change it!
Could be where this speech was going 25 years ago?
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjxtabZ2tHLAhVHPiYKHdC6AtIQtwIIIjAB&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DbyxeOG_pZ1o&usg=AFQjCNHK_siUHWl8tZ2RhZ_YY9xX6Olnjg&sig2=x33WDm4Rr1PFqvfIGVJPUA&bvm=bv.117218890,d.eWE
Yep. It took a huge effort by Ron Paul and others just to find out a few things after the 2008 debacle and we learned they had backstopped/ lent (forget the exact mechanism) basically $16 trillion for foreign CBs/ banks
http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/#6b7ebcb46877
Weekly Outlook: March 21 – 25
https://sasafuturestrading.wordpress.com/
There was a good article the other day on ZeroHedge called;
“The New New Deal – Markets Are Too Important To Be Left To Investors”…
a section of the article that explains the nuts & bolts of it is;
“in the same way that FDR had an existential political interest in generating inflation and preventing volatility in the US labor market, so does the US Executive branch today (regardless of what party holds the office) have an existential political interest in generating inflation and preventing volatility in the US capital markets. Transforming Wall Street into a political utility was an afterthought for FDR, a nice-to-have but not a must-have, as Wall Street was not yet a Main Street phenomenon. Today the relative importance of the labor markets and capital markets have completely switched positions. Wall Street is now decidedly a Main Street phenomenon, and every status quo politician – again, regardless of party, and let’s remember that the Fed is part of the Executive Branch – keenly desires to keep the genie of unfettered fear and greed firmly stopped up in its bottle. Georges Clemenceau, French Prime Minister before and after World War I, famously said that “war is too important to be left to the generals.” Today, the quote would be “markets are too important to be left to investors.”
Due to manipulation, the stock indices are strictly a traders market, and are no longer a long-term investors market. That has been the case since March 2000. Buy low sell high. Buy and hold is for suckers.
On another topic….Just like real estate popped and won’t get back to full-on bubble valuations again anytime soon, same is likely true for the metals bubble. We could see single-digit GDX and triple digit-Gold before the metals bear is truly over. Enjoy the bear-market rally while it lasts, but the metal sector too is a traders market, and not a long-term investors market. Oh!…one final point…Just like the PPT wants equities higher, they want Gold lower, because they want to stick it to the Schiff-tards. Funny, but 100% true. 🙂
Like Gary has been saying for the past 2 or 3 months; the PPT needs metals to go higher to drag up inflation expectations… yes, FED guru’s hate Peter Schiff, but increasing inflation expectations is alot more important than sticking it too Peter Schiff right now.
Lol single digit GDX laughs out loud. Keep covering that short Jay…
Meanwhile, many of us are up 100-150% just since December. Sure it might all be given back if we stay long, or it’s possible that was a multi-low and we’ll tack on another 200% over the next year or two, either way we have the cushion. How’s your account doing Jay?
edit: multi-year low
I disagree, the establishment wants inflation in the commodity markets especially energy. They aren’t going to take a chance of stifling that by capping gold.
The Fed could care less about the price of gold other than as a tool to keep inflation in check. Now they desperately need inflation.
Does this mean that it would be a good time to go long physical silver and gold. Grab the hard assets.
Wait for the next intermediate cycle low. After something has already rallied 90% it isn’t generally a good time to decide now is the time to jump in the pool.
Wait for the pullback. One deep enough to scare you to the point you can’t bring yourself to pull the trigger. That’s the time to buy.
Gary you are giving away our secrets to the masses.
2014 thru 2015 WAS a “trader’s market”
2009 thru 2013 WAS a “buy and holder’s market” (pretty much a throw a dart at a dartboard stock success)
2016 IS NOW a “buy and holder’s market”
Real estate here in Hawaii behaves in the SAME EXACT way just like most markets in general per se.
In other word’s bull bubble to consolidation to near……. Rinse and repeat.
(If you can’t beat em’ join em’) is my motto hence Gary’s message here…….. ?
Bluebear87,
Where do you live? I’m on the big Island.
Oahu……. Heard Kona went ballistic last decade or so! Oahu is purely steady and high as usual……. Scary times.
Gary — in light of your good assessment of markets & manipulation, are you still holding stocks after the big rally and current overbought conditions?
Absolutely. The intermediate cycle is only on week 5 and the Cot is heavily bullish.
I expect a test or marginal breakout to new highs during the second daily cycle.
I have my doubts that the world central bank interventions will remain coordinated. The Bundesbank for ex. isn’t on board with the ECB. At some point, the rats will flee the sinking ship and it will be every man for himself. Then comes war, chaos, destruction and restoration. There are cycles in human affairs too.
Anyway, probably best to own some gold, and then get on with life as best you can. Nobody gets to choose what era they’re born into.
And this link vindicates everything Gary spoke of.
http://www.telegraph.co.uk/business/2016/03/17/central-banks-are-already-doing-the-unthinkable—you-just-dont/
Gary– Your theory that the central banks are stepping in at key support levels in order to prevent cycles from completion is flawed in that it would seem that such a theory could only be plausible when looking at what is happening to US markets and then only the S&P and the DOW. The Russell and the NYSE did break through their support levels and went on to make fresh lows.
How can you ignore the fact that markets of nearly ALL other major economies ( Japan, Germany, UK, etc,), also broke down through their support levels in February (decisively, in most cases)? So, why would their central banks allow such a negative signal to occur when it is your contention that the banks are desperate to avoid such a condition (as described by you) and are supposedly intervening with what ever it takes? Your theory just doesn’t fit the bigger picture unless you believe that only the US matters. Now, I am not saying there isn’t some degree of manipulation going on but I think you are giving the PPT far to much credit for what happens in the markets. The vast majority of the world’s markets are flashing clear warnings of bear markets that are in progress .
Muffin ToP: Before you rush in to defend Gary, give him some credit for having demonstrated on multiple occasions that he is quite capable of handling tough questions and can do so without your unsolicited ‘assistance’.
don .. gary already answered your question in one of his earlier replies saying that by using the futures they can manipulate the dow/s&p .. but there are no futures on nyse so thats why they can’t manipulate that index.
RayB: I was making reference to OTHER world markets…read the complete question before you start answering for Gary.
I guess that link above is flawed as well…maybe Kings World News or Armstong can chime in and give us the real deal… / snark /
I’m confident we are not starting an extended bear market for the many reasons I’ve outlined over the last several weeks.
This is where it’s critical to acknowledge the market manipulation. If you don’t you could get suckered into shorting stocks assuming that the fundamentals are pointing toward a bear market. Then you portfolio takes a big hit when central bank printing presses abort the natural move down.
But Don.. iz what I do sometimes, haha 🙂
Home » Market Analysis » Global Economy Dying Pig-No More Rate Hikes-Rob Kirby
Global Economy Dying Pig-No More Rate Hikes-Rob Kirby
By Greg Hunter On March 20, 2016 In Market Analysis 1 Comment
rob12Greg Hunter’s USAWatchdog.com (Early Sunday Release)
Macroeconomic researcher Rob Kirby predicted the Federal Reserve’s interest rate increase late last year “would be one and done.” Kirby explains, “They had no business raising rates in the first place because the economy was not exhibiting enough strength to warrant any rate raises whatsoever, and there won’t be any more interest rate raises because the economy continues to roll over. Doctored economic data cannot make the sick pig that the global economy really is look any better. It doesn’t matter how much lipstick you put on that dying pig. It’s still a dying pig.”
Kirby says if the Fed did raise rates, you get another record fall in stocks, which is what happened in January. Kirby goes on to say, “The reality is that’s probably what should be happening right now in the stock market, but we know that the stock market is manipulated, just like we know LIBOR (London Inter Bank Offered Rate) is manipulated. Just like precious metals are manipulated, their prices are suppressed. . . . There are some revelations that are going to be coming regarding precious metals price suppression, which is going to make the deniers, that this has been occurring, look very silly. This is going to occur in the very, very near future. . . . The reaction to this news is going to be a very, very strong pop in the price of precious metals. . . . When it is an irrefutable fact that the precious metals market is suppressed in the paper arena, what do you think people are going to do? They are going to buy physical metal because they are going to know that holding physical metal is one way to avoid being manipulated. They are also going to know that real physical precious metals have been held back and they are underpriced. This should create a very, very strong round of buying of physical precious metals, which should push prices dramatically higher.”
So, with the backdrop of a sick global economy, what will the Fed do next? Kirby contends, “I think the next move by the Fed is going to be an announcement that will amount to quantitative easing (money printing) because it will take the form of liquidity injections going back into the system. For people who are fans of and enjoy the helicopter money, your prayers are going to be answered, I do believe, in short order. . . . I think you are going to see this roll over accelerate as the year progresses, even though most of Wall Street keeps trying to sell everybody the happy juice that everything is getting better every day. The reality is things aren’t getting better.”
Join Greg Hunter as he goes One-on-One with financial analyst and gold expert Rob Kirby of KirbyAnalytics.com.
(There is much more in the video interview.)
Right on spot Gary.
The deflation “meltdown” crowd are all wet, their idea now a relic like the other extremists predicting hyper inflation.
No deflation for You!
The PPT has miraculously appeared and lent a hand to the markets who “don’t know what is good for them”, and will continue to do so for the forseeable future.
Long Live the PPT!
Let’s call it the end of the Obama administration miricle bubble, after all we must preserve the legacy . Thry will keep this sucker afloat as long as he is in office .
https://s3.amazonaws.com/tradingview/snapshots/8/8LW1BGYU.png
Gilead is in an ascending triangle..
It just seems like that much manipulation would catch up with you at some point, right? Get out of control and all of your tools won’t do what you think they should. Like the butterfly affect traveling through time? The global market is such a huge entity and people (even the Fed. & PPT) are not very good at anticipating “unforeseen consequences”. Or are the bears just scaring me? Thank you!
Absolutely. The end result for the last 16 years is that they create bubbles.
Gary- what changed? All of a sudden, it is no longer the Bullion Banks capping gold, but now the Fed NEEDS inflation. I understand that oil is down, but to seriously think that oil dropping by 65% + wouldn’t drop the market into a crash, what would? If this is what the FED is so worried about…so, why the need for inflation, NOW?
That one is easy. If oil continues to crash or even stays low for an extended period the fracking industry is going to default on their loans causing another financial crisis. The Fed’s number 1 priority is to protect the banks.
They need oil to get back above $50 or the banks are going to be on the hook again.
I don’t believe the Saudi’s want to see oil at $50.00. They like $40 and $30 oil right now to put pressure on their biggest competition. Default was the risk the industry took when they financed the frackers. Non-payment on this debt is occurring now with some of the borrowers. It has begun like it or not.
OK, I get it Gary, the invisible PPT (not the invisible hand) buys mini e futures and pushes up some indexes and provides temporary confidence in the markets but, can it handle a more global shock, say with European bank failures or a serious devaluation by China which will be export deflation around the world? Maybe, they are not really that well positioned to handle that and the CB response printing will come late or at least too late to stop things for awhile? Maybe, this time we have as much bubble phase as we are going to get with so much global debt? I’ll admit it makes me nervous or I wouldn’t be asking.
We’ve had nothing that qualifies as a bubble yet so I assume the pattern of the last 16 years will continue to repeat. The next series of bubbles should still be ahead of us.
shorting gold is paying off: USX swing low as a morning refresher.
We may see USX rendering a new high, THE 3-YCH !
while gold….
Be careful here. The currency cycles have been stretching as well. What used to be an 18-25 day cycle now often runs over 30 days. The dollar may be forming a bear flag that still has one more drop to push sentiment to extremes before the ICL is complete. A bottom on the employment report is possible.
You’re whipsawing your account back and forth trying to pick a top in a baby bull.
There are easier ways to make money I think.
stocks are showing strong exhaustion right where NYSE shakes its 200dma – another proof that it is worth reviewing stock market through this index and not through SPX.
What is it about the stock market that looks exhaustive? The market has been chugging higher relentlessly, smashing through one resistance level after another (killing the shorts that keep trying to pick a top). Plus it is still early in the daily cycle. First daily cycles often make it to day 32-35 before topping. Today is only day 26.
I would hardly call -45 exhaustion …good lord.
Gary,
But when do the markets say no more to government debt. If central banks continue to do as you say, its going to seriously inflate balance sheets which should inflate bond yields….
Is a sovereign debt crisis the end game here?
I think the bears are under the assumption that there is some level of debt that can’t be serviced. That is a lie. There is no level of debt that can’t be serviced by inflating the money supply. The problem was never going to end in the debt market. The end game has always been in the currency market. In their attempt to get something for nothing governments are going to create a currency crisis not a debt crisis.
We already had the debt crisis in 09 and central banks stopped it dead in its tracks with QE1.
The next holocaust will be in the currency markets as they break one currency after another with their insane monetary policies.
Exactly, how can governments, like US, have a debt crisis when the FED buys bonds and remits payments back to the treasury? The treasury is effectively supporting the budget by borrowing at zero interest rates. What’s more, rates were declining making the FED purchases even better. This is all on the back of the US dollar, which will lead to a currency crisis.
Lets see if we have a US dollar bottom going forward into the year
Not sure if manipulation can stop it . So far they have . We’ll see .
G-money, you don’t need no stinkin’ Facebook! Why get in bed with criminal Zuck when you already have a website with presence? FB if for people just starting out and zero traffic, not established projects like yours.
I’m still waiting to pile into XBI in April, but most excited about next opportunity to add to miners late April or May, whenever we get the pullback, then just sit back for a couple years and watch the easy money roll in!
And why waste time building a presence on FB when it could easily become replaced or obsolete in a few years. Your website is timeless and totally under your control, not just a fad.
DITTO
FB will be trying to build a presence on the SMT website after gold goes above $10,000! lol
FB makes me think this is all amateur hour, pedestrian, huckster. I personally would avoid clicking on such a page because everything done on FB is monitored, packaged up, and sold to the highest bidder. And I really do not want my debt ridden relatives to have any clue about how or what I invest. Just sayin’.
Does manipulation exist?
Thank you Reuters for finally (if unintentionally) shedding one more light on the scam our “markets” have become. See below for one more smoking gun.
IMO Gary is correct about the need to take this stuff into account.
http://www.zerohedge.com/news/2016-03-21/desperate-china-begged-fed-plunge-protection-playbook-its-market-crashed
Remember all the freakouts last week regarding biotech?
Well now the sector has completed a double bottom and broken it’s short term down trend line.
Traders had a chance to buy at the very bottom on the second test of the 200 week moving average.
I don’t know if there is anything I can say to help you achieve a different mentality (lord knows I’ve tried everything I can think of), but to be successful in this business you have to learn to set your emotions aside and turn off recency bias. Most small time traders never make this leap so they are never able to buy at bottoms. They forever buy tops and sell bottoms which is the opposite of what one has to do to make money in this business.
Thank you Gary, if not you I would not touch biotech ETF, in good profit now…
LABU is on fire Gary, my ITM $6 June play is already paying off lol
I’ve been tempted to short me some Russell2000 via the TWM etf, but the G-man has kept me happily on the sidelines.
Hi Gary.
A very thought-provoking article and well-argued.
Can you tell me, is the fact the 7 year cycle failed to complete the only evidence to support the thesis that intervention happened in February or is there something in the numbers to corroborate it?
Thanks.
The 7 YCL did complete,especially in the NYSE where it’s much tougher to artificially prop up[ the market.