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Third and Final Leg of Stock Market Crash in October or Sooner – Part 3 of 3
Third and Final Leg of Stock Market Crash in October or Sooner – Part 3 of 3
This is the final part in a series of articles explaining why I expect the third and final leg of the crash that began in October 2018 to occur in October 2019, or sooner, and see the S&P 500 fall ~30% to lower lows ~2100-2200.
Until then I expect the S&P to slowly grind higher towards 3000-3150, short-term pullbacks aside.
This matters to Gold, Silver, and the Miners, because when stocks crash, the Fed will be forced to reverse policy to rate cuts, QE, and more monetary insanity on steroids, and that will catapult precious metals and miners to new highs.
There are many reasons why I expect another “Crash in the Fall” like that in 2018. I covered Liquidity, Technicals, Elliott Wave Theory, and Sentiment to support the case for a crash in October, “or sooner”, especially based on how close we are to the expected peak circa 3000 plus. What follows are just a few of the many more.
SHORT INTEREST
This is back to its lowest level since December 2017. We all know what happened next.
INTER-MARKET ANALYSIS
Having held its 200-month moving average yet again, the monthly chart for the 10Y Treasury Bond clearly shows that we have much lower to go yet in yield terms before we hit bottom.
What would it take for that to happen? A crash in stocks? Investors dump equities and race to the perceived safety of Bonds followed by a Fed reversal QE and they start buying treasuries again, driving yields even lower.
And then there is the dreaded “Hockey Stick” which predicted the 2000 and 2008 stock market crashes. This refers to the drop in both 2-Year and 10-Year Treasury Bond yields but the 2-Year yield falls faster as short-term rates are cut or expected to be cut in response to weakening economic and/or financial market conditions.
…click on the above link to read the rest of the article…
Third and Final Leg of Stock Market Crash in October or Sooner
Third and Final Leg of Stock Market Crash in October or Sooner
I shared the first part of this series of articles last week, explaining why I expect the third and final leg of the crash that began in October 2018 to occur in October 2019, or sooner, and see the S&P 500 fall ~30% to lower lows ~2100-2200.
Until then, I expect the S&P to slowly grind higher towards 3000-3150, short-term pullbacks aside.
This matters to Gold because when stocks crash, the Fed will be forced to reverse policy to rate cuts, QE, and more monetary insanity on steroids, and that will catapult precious metals and miners to new highs.
There are many reasons why I expect another “Crash in the Fall” like that in 2018. I began with Liquidity last week, now let’s cover the technical and Elliott wave case for the crash in October (“or sooner”), especially based on how close we are to the peak above circa 3000 plus.
TECHNICALS
Sven Henrich did some excellent work recently on the S&P from a technical perspective, which I am sharing here.
Drawing the upper trend line (see chart below) from the 2007 highs into the January 2018 and September 2018 highs, and the lower trend line from the 2009 lows, the one that was broken in December 2018 and has been hugged by markets for the past several weeks, they intersect at circa 3100.
The middle trend line dates back to the 1987 crash and formed following the 2000 crash, then ended up being resistance in 2014-2015 and twice in 2018. Note from that chart that it, too, intersects the other two trend lines at the same point, 3100.
Circa 3100 also represents 261.8% Fibonacci level derived from the 2007 highs and the 2009 lows.
Three historic trend lines converging at the same key Fibonacci level is a powerful signal. A quadruple convergence, as Sven puts it. And if that wasn’t sufficiently interesting, then consider “when” they converge: October 2019.
…click on the above link to read the rest of the article…
When The U.S. Stock Market Crashes, Buy Gold – David Brady
When The U.S. Stock Market Crashes, Buy Gold – David Brady
While we wait for news on the 25% tariffs on $200bln or 40% of Chinese exports to the U.S.—and with the threat of the same on the remaining ~$300bln to follow—I want to outline the endgame for the dollar and the likely beginning of the explosive rally for Gold.
Simply put: When the U.S. stock market crashes, buy Gold.
To be more specific: when the S&P 500 has fallen 20-30%, buy Gold, in my opinion, because the ‘Fed Put’ will soon be exercised at that point. The Fed will reverse policy to stimulus on steroids. The dollar rallied from April 2008 and peaked in March 2009, when stocks bottomed out—the same time the Fed announced QE, or QE1 as we now know it. Then the dollar fell. It is not unreasonable to expect the same to happen this time around. Gold bottomed out in October 2008, as stocks plummeted and then soared 280% to greater than 1900 over the next three years, as QE1 and QE2 were underway.
The coming crash in the U.S. stock market is the catalyst for the Fed’s reversal in policy, so why do I expect a crash?
Quantitative Tightening and Budget Deficits
Lee Adler pointed out several weeks ago that as the budget deficit soars, Treasury bond issuance is increasing by around $100bln per month. At the same time, the Fed is increasing its balance sheet reduction, or “QT” program, to $50bln a month in October, a run-rate of $600bln per year. That means $150bln of additional demand for U.S. Treasuries is required every month.
…click on the above link to read the rest of the article…
Manipulation of Gold & Silver by Bullion Banks
Manipulation of Gold & Silver by Bullion Banks
As a former spot currency trader for a major international bank, I have had first-hand experience of central banks directly intervening in currency markets in massive size, repeatedly. You’ll hear a lot of people say market manipulation is a conspiracy theory, despite the fact that it has been proven in court several times in various assets classes and especially in precious metals. Books have been written about Gold and Silver manipulation for decades. Central Bankers have admitted it publicly. Now it has become so obvious that it’s predictable. I know because I made 500% in less than 24 hours on Friday last on a 1-week SLV 15.50 strike put option I bought on Thursday at 2pm. I bought that put expecting the Bullion Banks to come in and hammer the metals, given the typical signals I was seeing ahead of each time they slam Gold and/or Silver lower. Moreover, I began warning people on Twitter a week ahead of time that this could happen (note the dates posted):
I’ll provide those typical signals later, but let’s take a look at what happened to Gold…
Since May 24th, Gold has been capped at its 200 day moving average despite being oversold, extreme overbearish per the DSI and Funds positioning being at levels that has consistently led to strong rallies over the past 3 years. Yet, on this occasion the price went down?
So why did the price go down? Below is the daily changes in Gold open interest (“OI”) on the COMEX up to and including Friday last.
Notice how OI rose significantly around May 10, and the price of Gold fell hard. Then OI fell consistently but the price did not rise, instead it remained capped under its 200-day MA. Then, beginning Tuesday, June 12 and for the next two days, open interest rose a total of 18k contracts.
…click on the above link to read the rest of the article…
Economics in a Time of Political Instability
Economics in a Time of Political Instability
MILAN/STANFORD – Over the last 35 years, Western democracies have seen a rapid rise in political instability, characterized by frequent shifts in governing parties and their programs and philosophies, driven at least partly by economic transformation and hardship. The question now is how to improve economic performance at a time when political instability is impeding effective policymaking.
In a recent article, one of us (David Brady) shows the correlation between rising political instability and declining economic performance, pointing out that countries with below-average economic performance have experienced the most electoral volatility. More specifically, such instability corresponds with a decline in the share of industrial or manufacturing employment in advanced countries. Though the extent of the decline varies somewhat across countries – it has been less sharp in Germany than in the United States, for example – the pattern is fairly ubiquitous.
Over the last 15 years, in particular, increasingly powerful digital technologies enabled the automation and disintermediation of “routine” white- and blue-collar jobs. With advances in robotics, materials, 3D printing, and artificial intelligence, one can reasonably expect the scope of “routine” jobs that can be automated to continue expanding.
The rise of digital technologies also boosted companies’ ability to manage complex multi-source global supply chains efficiently, and thus take advantage of global economic integration. As services became increasingly tradable, manufacturing declined steadily as a share of employment, from 40% in 1960 to about 20% today. But, in most advanced countries, the tradable sector did not generate much employment, at least not enough to offset declines in manufacturing. In the United States, for example, net employment generation in the third of the economy that produces tradable goods and services was essentially zero over the last two decades.
…click on the above link to read the rest of the article…
