What this chart is showing is a downward sloping expanding triangle or "wizard's sleeve". We appear to be bumping up against the "d" wave (penultimate wave in the series). That means that the herd will likely follow the course of the blue e wave toward the bottom of the channel.
This last shot of confidence was driven by Bernanke's statements back in 2009 that he could restart the economy with helicopter drops of money AND THEN pull it all back out once he'd gotten the animal spirits rekindled. Of course that assumes that the patsies (us) have unlimited ability and desire to take on more debt. But trees don't grow to the sky, not even debt based ones. People are starting to push back from debt based over consumption. They are choosing to live more simply. Besides, the more of a home you own, the more you have to pay government each year for having been prosperous.
To digress for a second, home ownership is the government's best friend because of the scam of property tax. It's an annual payment that occurs no matter if the homeowner is working or laid off, sick or healthy, eating or starving, etc. It's a ridiculous slavery payment that increasingly goes toward things like incentivizing new businesses to put their HQ in your city, etc. It's all done in the name of a better tomorrow for the people but in fact the real goal is to enable bigger, more intrusive government. Property tax is an empire building tax.
And now back to the main subject....
The reason the confidence is so important to monitor is that every con game relies on it. When confidence is lost, the con collapses. People are looking at the fed's inability to taper per plan and they are losing confidence. People are looking at all of Obama's lies about being able to keep their current doctor, heath plan and program rates and they are losing confidence. And what is taking over? An organization which can't even build a working web site? Boom, more confidence lost. The EBT system recently went on the blink and the shook confidence of all the wards of the state who have foolishly let themselves become dependent upon it. The list of confidence busters is high and growing.
The chart model prediction of herd sentiment above is telling us that Christmas will be a bust, jobs will continue to be lost, purchasing power will continue to be lost and that public unrest will go on the rise. It looks like the rest of Barry Obama's time as self appointed dictator in chief is going to be something of a nightmare.
As for stock markets, they are now up against significant resistance as well. The NASDAQ composite is looking at 3 different resistance factors right now which I think will be very difficult to overcome:
- E wave throwover of ending diagonal in progress right now
- Testing support-resistance line that goes back to 2009 from below
- Psych resistance at big round numbers (4000)
Another very important factor is Yellen. A long time ago I wrote that the way these things work is that the cowboys try to herd the cattle best as they can. They will get in there on horses and take every action imaginable and sometimes at risk to themselves. But at some point they realize that the herd has pent up anxiety that cannot be relieved by hearing soothing cooing sounds from the riders. Maybe the cattle smell the blood from the slaughterhouse that they are being led to. Nobody knows what causes it. But when the cowboys sense that they cannot do anything more to prevent it, they suddenly stop even trying and get out of the way. Alternatively, they might even try to trigger the stampede if doing so at a time of their choosing will net some benefit to the cowboys. For example, if you can stampede them into a box canyon they might run themselves out and then be easier to re-herd later. The government thinks that the people are livestock so this analogy applies very closely.
Janet Yellen is being brought in as a dovish figure for the fed - more money printing, more easing, more accommodation. While that is expected to send soothing signals to the stock and bond and debt markets of the US, sometimes these things don't work out as planned. Maybe Yellen will be given orders to be the bad guy who says that the central bank will itself BK unless it stops buying worthless treasuries. OR perhaps her dovish actions might piss off the rest of the world as our actions affect them greatly. Perhaps the world begins to use NSA indiscretions about spying on global leaders as leverage behind the scenes to control Yellen's policies in a way that they could never have done if the stronger Bernanke were still in charge. In other words, it might turn out that the market misjudged Yellen. All of these things are now unknowns and the market hates unknowns just like a con game requires confidence.
None of these things have unfolded yet but the chart is predicting a sudden turnaround in confidence and that is something to care about IMO.
No comments:
Post a Comment