Global Markets Slouch Towards Bethlehem

Take a look at the chart below if you think yesterday’s monster short-squeeze meant something. The Dow Industrials were up 326 points at their apex, making plenty of noise but signifying little or nothing.  Some saw the buying spree as a bet that everything will turn out all right for Europe. Yeah, sure. And Obama’s “jobs program” will turn the U.S. economy into the muscular dynamo it was in the 1950s. In actuality, Wall Street’s latest buying riot was simply one more ‘up’ in a tedious series of ups and downs that are being used by the Masters of the Universe to distribute stocks to widows and pensioners before They pull the plug. 

The usual bunch of rascals and thieves timed this dog-and-pony show so that it was nearly impossible for anyone to make more than chump change after stocks opened in New York. The big money had already been made overnight on index futures that closely tracked similarly meaningless effusions in Europe and Asia. The rally was of course the mirror image of last week’s hellish collapse (see chart below), which, like Monday’s spasm, was all but spent before traders who keep New York hours had downed their first cup of coffee.

These pointless, machine-driven panic attacks are managed so that only a small handful of traders can make money on them.  However, a bigger picture of gratuitous swings that have been occurring since early August explains why long-term bulls and bears alike have effectively been prevented from profiting.  What bear who was short when the week began could possibly have withstood the fright-mask lunge of the last two days?  And what bull could have held steady when the Dow plummeted an even more frightening 950 points last week in just three days?

Not that the markets are even supposed to function any longer as vehicles for investors and long-term traders.  What they have become, as the global financial system itself slouches towards Bethlehem, is a money-crazed circle jerk for a bunch of digital prodigies recruited by the likes of Goldman and J.P. Morgan to milk the last ounce of “free” money from what remains of the world’s precious capital. It should be obvious to all by now that this capital will not survive the machinations of Wall Street’s clever ringmasters. Most likely is that it will vanish overnight, vaporized by an all-too-real flash crash that will make the May 2010 version look like the rehearsal that it was.

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  • Tomo September 28, 2011, 9:46 pm
  • F. Beard September 28, 2011, 5:45 pm
  • richard j September 28, 2011, 4:27 pm

    Awesome; thanks for the article Rick. This has been my worst fear for some time, that the cabal has an infinite supply of credit for nothing, the ability to short sell more shares than exist, the privilege to fail to deliver forever, etc. The much talked about hedge fund trade involving selling the gold shares short to finance gold metal long seems to have worked and pushed XAU and HUI to levels that existed exactly one year ago today, despite still higher gold metal prices.

    • Robert September 28, 2011, 5:29 pm

      Richard-

      Let the stupid hedge funds sell the miners. No one ever said the big money was the smart money.

      Keep your eye on the ball, not the scoreboard.

      The number on the HUI is irrelevant. The movement of physical Gold is what matters. The dividends that miners are paying to investors is what matters.

      The hedge funds will be back. Guaranteed.

      Miners only bring to market what they produce -(about 2500 metric tons per year, or roughly 100 days of average trading volume on the COMEX)

      Ignoring the volumes on the Shanghai exchange, the London exchange, and the smaller exchanges in Australia and Moscow, one can still see that the global spot price is being levered up against nothing but now flow inventories from refineries.

      Stocks of bullion are never mobilized when prices are falling, EXCEPT by central banks, and they never sell Gold- they lease it- meaning that they expect the Gold, or an amount of currency adequate to buy the equivalent amount of gold back when the lease term expires.

      In a zero interest rate environment, Gold and Silver are competitive money, and both have a better track record of preserving purchasing power than governement issued currencies, so the best course of action is to ignore, or buy the price volatility….

  • Rich September 28, 2011, 4:11 pm

    The AMZN Kindle Fire Tablet may be one reason AAPL is now inching, if not slouching toward Sodom.
    Did you mean man bites dog story re Nigeria?…

    • Rick Ackerman September 28, 2011, 10:16 pm

      Nice to see a real player taking on AAPL — at less than half the price — rather than have the likes of MSFT try it with a desperate-to-stay-relevant device from a future long past.

      And yes, thanks, my dyslexic thought process had intended “man-bites-dog.”

  • Rich September 28, 2011, 3:30 pm

    Today may be the first Black Wednesday in markets consuming capitalism’s dying breaths…

  • gary leibowitz September 28, 2011, 3:23 pm

    The Master Planners Manipulation. Don’t buy into it. I am sure they can stem a rout by buying futures or outright stock purchases, but to think they can control the market for any length of time is absurd.

    If you look at the past 2 years market performance most will call that a dramatic heady move up. Does that mean there was a concerted effort to control the market? The profits that corporations have received are dramatic. The P/E ratio for all three major indices is still considered low.

    It’s all about profits and the forward looking projections. Can anyone say the market is overpriced based on earnings?

    Most major tops have violent swings preceding the steep drops. This time is no different.

    My personal expectations have always been for the SPX to reach 1255 as the final rally before a new protracted bear market takes over. Most of my deflationary macro views are taking shape. World debt saturation, inability of governments to stimulate the economy and free up bank lending and a lack of political will to spend, has lent credence to a spiraling deflation scenario.

    I still question the wisdom of buying into a commodity rally going forward. With the dollar either stabilizing or rising from here, along with deflationary pressures I just can’t see a happy ending. On a technical note both Silver and Copper have broken down. Is this good for Gold?

    • Chris T. September 28, 2011, 4:01 pm

      but that is part of the argument:

      has silver broken down, or has ti been broken down?
      🙂

  • mario cavolo September 28, 2011, 1:41 pm

    Ahhh gents including Rick, but then we must ponder a mysterious question. As Rick stated..these ringmasters staging “to distribute stocks to widows and pensioners before pulling the plug”.

    But wait, is that actually true? If we assert, as we have that 70% of the volume is now HFT machines, etc. then in fact, on these short squeezes, oh let me say, these idiotic sucker short squeezes :), who exactly IS doing the buying? For it is the case that we are asserting / assuming that the widowers and pensioners are in fact out of the market. I recently read that it is the ETF instruments which are now being used on such a massive scale it is them as an instrument which is contributing to the destruction of the system, blah, blah…

    No matter, I’ll stick to my thesis that it is the ability via a myriad of instruments to “short” which will be the ruin of us all… The banks themselves!! knowing the markets are trending down will take short positions to show “profits” to shareholders and for personnel bonuses, yet in the process be driving the prices of instruments lower and lower toward our collective ruin…insanity in a system giving rise to who ends up wealthy and who ends up broke in the new system when the proverbial dust settles…Cheers, Mario

    • Carol September 28, 2011, 3:50 pm

      “Ahhh gents including Rick”

      Hey Mario lets not forget the couple ladies on this forum:)

      Astute observation about the widowers and pensioners I would have to agree with you there. I don’t think what we have going on now is regular market action for price discovery by “real” buyers. No this is a gambling casino where the main gamblers are the HFT robots, the banks, the Heggies, front running the futures markets. I believe there are no more widowers or pensioners left in this casino market.

  • Chris T. September 28, 2011, 9:11 am

    Robert, one question:
    “ultra long tail hammer candle”
    what does such a formation predict?
    I hope that is not too silly a question, esp. here, but I have never studied these things, not made it much beyond HSH and flags, my bad…

    (I would have certainly signed up for one of Rick’s seminars, but as it is for those wanting to trade, the knowledge couldn’t get used — day (sometimes night) job, make stuff…)

    • Avocado September 28, 2011, 1:58 pm

      That’s what Google is for:

      http://www.fxwords.com/b/bullish-hammer-candlestick.html

      The Hammer pattern signifies a weakening in bearish sentiment. The long lower wick signifies an initial continuation of the downtrend. However, renewed buying sentiment acts as support and drives the price higher to close near its opening price.

      Andy

  • Chris T. September 28, 2011, 9:03 am

    RIck,

    I agree with Mario, great comments, esp. your mentioning us in the 50s. (the MSM approach being to harken back to the “powerhouse 80s”).

    Guess the comment that there are no more markets, just manipulations (can’t remember where that is from, GATA perhaps) is being made more obvious every day.

    John:
    “they make our Ponzi scheme come out on top we’ll all be better off. Just consider the alternatives.”

    If they could, maybe. But they always end, and never well. So there is no alternative, only the question of when, and usually the longer it takes, the worse the outcome.
    Assuming that the scheme could be kept going in perpetuum, what then? If you believe in the 0ld American virtues, as per Jefferson and currently being held forth by Ron Paul, you have to be ashamed of what we have (let ourselves) become, internally and externally.

    For the next subjugated population (Pakistan perhaps, see Paul C. Roberts recent post about the Haqqanis for more on that), the alternative could very well be the better solution.

    Robert:
    “cratering Gold lease rates”

    Just in case you, or anyone else hasn’t seen this very interesting article on ft.com (got to it via the GATA post), addresssing this, take a look:
    http://ftalphaville.ft.com/blog/2011/09/14/677021/why-gold-forward-rate-inversion-is-important/

    Certainly to your point about equitizing gold, and just another layer in the Ponzi.
    It will be very interesting when the paper gold market has completed decoupled from the physical and the tail no longer wagging the dog…

    • John Jay September 28, 2011, 2:04 pm

      Chris T,
      The old American virtues have been slowly outlawed by the Federal government since the Johnson adminstration. Now over half the country is on some sort of dole. The income tax code, securities regulations and dynasty family trusts were used to slowly take over the nation. The political system is rigged. Every politician from the far left to the far right was gunned down in the 60’s if they challenged that takeover. JFK, RFK, Malcolm X, George Wallace, MLK, all victims of lone gunmen. I think that got the message out and now we are always presented with well vetted stooges with frozen smiles who sell us out. Be that as it may, a currency collapse will likely bring what the French Revolution, the Weimar Republic, and China post Chiang Kai Shek faced, ruinous violence. So, as much as I detest what we have for a political and economic system, we have water, electricity, sewers, fire and police protection.
      Ron Paul is great, but who do you think all the people on food stamps, welfare, section 8 housing, 3% down FHA mortgages, and government employees are going to vote for? Obama got 66 million votes in the last election. At least I have a safe functioning life, and if a European/Japanese crash helps string it all out for us, I’m in favor of that. I have given up hope for a return to the old virtues, there are not enough of us left who have those to change things.

    • Chris T. September 28, 2011, 3:52 pm

      John Jay,
      yes, that is depressing.
      And even though I agree with most of that, I still think I am an optimist.
      It’s not pessimists who attempt to protect a portion of what they have, by holding on to some silver and gold, but optimists.
      This is because those hard monies are not that useful in the kind of breakdown you mention, but for the recovery afterwards.
      So, in order for the pm-holdings to make any sense, one has to believe in a better time to come after the breakdwon. A pessimist wouldn’t

      As to the list of assassinations, you should add the attempt on Reagan.
      In one of the recent debates Ron Paul pointed out how he, even in 1976, supported many the positions Reagen was campaigning for: abolishing whole departments, hard money reform, and so on.

      None of that ever happened, and Reagen for much of his campaign promises was to the conservatives what Obama has become to the very liberals, he betrayed them mostly.

      Apparently many people who knew Reagen said that the assassination attempt changed him, he was no longer the same person.
      So, even that one seems to have done what was intended, even if THEIR guy didn’t get in for another 8 years

  • Robert September 28, 2011, 5:29 am

    Madoff, Madoff, on the wall- who is Ponzi-est of them all?

    Watch those cratering Gold lease rates. That’s all I gotta say. Some day either the Bullion Banks or the Central Banks themselves will have to buy back all the bullion leased and then sold in London over the past week.

    Seems like a lot of effort is being put into making sure the monetary metals behave like equities (as opposed to the end of 2008, when the metals were selling off on rapidly RISING lease rates)

    How did everyone like that ultra long tail hammer candle in Gold and silver on the daily chart yesterday?

    • Joey September 29, 2011, 5:48 pm

      In the past I would have agreed with ‘Some day either the Bullion Banks or the Central Banks themselves will have to buy back all the bullion leased and then sold in London over the past week.

      Now I’m not so sure. You or I would have to buy it back. Why would the masters of the universe, who control the money and the government, have to buy it back and balance the books? I observe they are above the law.

  • John Jay September 28, 2011, 3:54 am

    Well, Wolfgang Schauble told Timmy G and Obama to get lost with their plan to save the Euro by leveraging a couple of trillion Euros to bail out banks over there. He called it “stupid” and “It makes no sense.” I think the Fed has been helping shore them up in Europe to this point. I hope Wolfgang pissed off Timmy and Obama enough so that they pull all the support for the banks in Europe. We need lots of flight to safety to the Dollar for my plan of “last man standing” to work out for us. It’s us against the world, and as corrupt and repulsive as I find Wall St. and DC, if they make our Ponzi scheme come out on top we’ll all be better off. Just consider the alternatives.

    • Rich September 28, 2011, 3:38 pm

      Agree JJ…

  • mario cavolo September 28, 2011, 3:34 am

    Frighteningly fabulous incisive commentary Rick.

    I knew the turn was coming as it since did, yet my EUR/USD and SPX sell positions got stopped out before it did, the ringmasters won again.

    • Robert September 28, 2011, 5:49 am

      Isn’t it frustrating Mario? watching your stops get hit, then within pennies it turns and surges?

      I couldn’t count the number of times..

    • mario cavolo September 28, 2011, 1:33 pm

      Robert, I am the greatest smartest called ’em exactly right yet unprofitable trader on the planet. I can’t count those times either. The issue is not that I lost the $300, the issue is that I lost the $300 plus I lost the gain of $600 on top of the $300. Related to the effort of an honest man trying to earn or grow money, I can think of no single other thing more so that knocks the wind out of my sails…it feels like I’ve been cheated of what was rightfully mine, and of course, that’s nonsense….Cheers my friend, Mario

    • John Jay September 28, 2011, 7:05 pm

      Hang in there Mario. I recommend you read my favorite book on trading, “Pit Bull” by Martin Schwartz. When he got stubborn on a losing trade he lost 800k before he got out of it. His wife told him, “You’ll make it back”, and he did. Very little technical analysis, a whole lot of psychological insight into trading. A great read.
      Anyway, there is not much choice left but to keep working on your trading skills. The Fed has decreed ZIRP forever, stocks paying 5% or 6% in dividends swing a lot more than that in the course of a year.
      The losses in trading are tough to take, but for me the greatest thing about it is NHI. No humans involved.
      After many years supervising people and dealing with crazy customers, that really appeals to me.
      So hang in there, I’ve read about more than one guy on the floor in Chicago that said it took them five years before they started to make any real money trading.

  • Seawolf September 28, 2011, 3:17 am

    Hey Rick have you seen that little head and shoulders formation for $INDU on Stockcharts between Aug 9 and Sept 24. It is so perfect that looks like it was painted there deliberately.