JC Penny update [JCP]

In my last post on JC Penny (JCP), I presented a model update whose bottom line was that JC Penny shares had bottomed and were now in a short covering bounce after having completed a mania. Again, I think that JC Penny could very well eventually go bankrupt once the US central bank is effectively forced to discontinue the addition of confidence into the system associated with its printing 85 billion per month.  This is a bit more complex than it sounds.  Right now, the printing is sequestered.  It is supporting leveraged gambling by the banks without actually increasing the supply of money that main street gets access to.  This is why the monetary base is now pushing 4 trillion - nearly 4x the size of 2009 - while the price of milk and bread have not quadrupled:

This money printing is essentially giving more cash and credit to those leveraged gamblers who caused the first phase of the collapse to begin in late 2008.  Do you think they learned any lesson as a result of almost collapsing the global economy?  Of course not.  As Chuck Prince schooled us, the leveraged credit game is one of play or die.  While the music is playing you have to dance.  In other words, if you don't take advantage of the corrupt system of leverage, someone else will and they will put you out of business unless you follow suit.

As Bernanke printed all of this extra money to buy trash assets from the banks, it cleaned up their balance sheets so that they could, ostensibly, loan more money and keep the debt Ponzi spiraling upward.  But they don't want to loan to people who they fear will not be able to repay and so they are gambling in asset markets instead.

We are now at the phase of this scam where the big names are already overbought.  They pay little if any dividend and it is very hard to find greater fools to buy the shares off of you at higher prices.  So the money is now rotating into the garbage stocks like DRYS and JCP.  These companies will likely go BK some day but as long as the federal reserve is giving free money to leveraged gamblers that money has to find a home.  This money is now threatening those who have shorted the trash names to nearly zero.  The result is a predictable (and predicted) government orchestrated short squeeze.

Below is the current chart.  The blue arrow to the left marks Oct 17th which is when I went bullish on JCP for no other reason than the chart pattern.  After many months of decline, my EW model missed calling the exact bottom by only 3 trading days.  I wish the charts for silver and gold were this straightforward.

The chart is now up against top resistance again but it is very unlikely that it will break out on a 1st wave up.  A pullback to at least the 38.2 fib but more likely to the 50 or 61.8 fib will probably happen before the next big, short busting wave up occurs.  Again, this has nothing to do with the underlying performance of JC Penny, inc.   It has to do with the federal reserve trying to save jobs that the economy says it doesn't want.  It has to do with face saving and with propping up the "ye olde guard".  As I said before, JCP will likely BK before the global debt Ponzi collapse is complete.  But it's shares look like they will have another bull run before reality sets in for investors (gamblers).