There I was Sunday: Online shopping. Odd assortment of things, too: An old-style clothesline kit with pulleys and 150 feet of line, a 1″X30″ belt sander with assorted silicon carbide blades for knife-making, brass rod for fasteners. Overall, an eclectic mix but nothing out of the ordinary for a well-prepped, non-urban, survival-oriented fellow who sees the “handwriting on the wall.”
“ What’s the worry?“
The calendar, for one. We have been covering this on the subscriber side for a while, but since (as Booker T. and the MG’s would play it) time is tight.
You see, there were (by my count) 82-trading days from the stock market pause in May of 1929 to the market’s all-time high in early September of ’29. When we pencil 82 trading days into the modern calendar we land about September 26th, a week from Thursday.
So that’s point #1 today: We have to wonder is there isn’t something lurking ready to surprise by the end of the month – maybe over the weekend of the 28th and 29th?
Second point, then: Is there anything in our Aggregate Index that hints we could be at a logical topping point in that timeframe? Well, since you asked….
To understand it – and this is NOT trading advice (you’re on your own there) – we need a discussion of how someone might view the markets today.
There are only a few concepts: One being the book Trading the Regression Channel: Defining and Predicting Stock Price Trends while the other is our dog-earred copy of Elliott Wave Principle: Key to Market Behavior.
Here’s an example using our Aggregate Index chart, current as of early futures pricing this morning:
Obviously, if the trend channel is broken to the downside, ideally in two weeks, then fear could become a useful reaction. Let me walk you through my utterly simplistic way of seeing this possible future.
You begin with what looks like a recent high or low on your chart. In today’s example, it’s the low at “A” which is the blue circle. Using a graphics tool (Excel charts are peachy for this) you begin at “A” and hit the next major low that appeals to your eye. For me, that’s at “B”.
Now we turn that line into a color…green…and extend it up and to the right, making sure it’s still exactly touching the A and B points.
With this done, we copy this line and paste it so that possible Elliott stepwise moves become apparent. I also changed the color of the line to orange, so as not to confuse things.
That’s all there is to it.
If the market drops under the green line for a day or two, then a change of direction becomes possible. Pie-simple stuff.
Now all we need to do is see if the Elliott wave structure looks reasonable (yes) and whether we could already be done (yes) or if we could go higher, still. (yes).
One way to think here is that we could drop to the trend channel bottom in the next day or two, and then commence a Wave 5 rally, say late this week, that would carry into next. In fact, topping a week from Thursday would be splendid.
This is highly speculative, but that could comprise a “finished five-wave structure” from the small i, ii, iii which was the first Elliott up, then we have a larger i, ii, iii which would fit Elliott nicely for a three. All that would remain (if we get down to the bottom of the trend channel in the next few days) would be the arrival of blow-off finale from kissing the trend channel shortly and off to the final high.
Then get the butter out, because we could be toast. I won’t roll you through all the “news permutations” of secular events that “will be blamed” because whether it’s a new series of drone attacks in the Oil Kingdom, a health issue for a leading candidate for office, or a nuclear flash in Kashmir – honestly it will make little difference.
Life (and markets) seem to run on trajectories and we’ve just be biding our time, waiting again for a good time to strike. And speaking of which, the GM strike is another wild card…
What About “Triffin’s Revenge?”
Got an absolutely brilliant email from a colleague this weekend citing the difficulty of predicting market behavior when the Triffin Dilemma finally breaks. Because I’m lazy, a longish cite from Wikipedia lays it out this way:
“The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was identified in the 1960s by Belgian–American economist Robert Triffin, who pointed out that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfill world demand for these foreign exchange reserves, thus leading to a trade deficit.
The use of a national currency, such as the U.S. dollar, as global reserve currency leads to tension between its national and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account, as some goals require an outflow of dollars from the United States, while others require an overall inflow.
Specifically, the Triffin dilemma is usually cited to articulate the problems with the role of the U.S. dollar as the reserve currency under the Bretton Woods system. John Maynard Keynes had anticipated this difficulty and had advocated the use of a global reserve currency called ‘Bancor‘. Currently the IMF‘s SDRs are the closest thing to the proposed Bancor but they have not been adopted widely enough to replace the dollar as the global reserve currency.
(We drop a few bucks as a Wikipedia donation now and then and suggest you to do the same.)
This really cuts to the heart of two concepts we’ve been gnawing lately: The Global Competitive Currency Devaluation (GCCD) and the matter of value-seeking; acquiring non-financial assets such as us “regular people” can buy.
What’s the outcome when the global economy Triffinizes? One scenario is that since the US Dollars are central to the global reserve currency game, tons of those dollars could flood home. Bad money, crowding out good, means that a huge spike in prices might materialize. When more money chases the same stock of goods, prices head skyward in eBay-like fashion.
Bad as that sounds, it’s really worse. Because at almost exactly the same moment as made-up Dollarized assets return home to roost, the USGov will be required to print money like hell in order to make payments to bondholders on the national debt and to keep the social safety nets (like social security and oodles of pension crises) from collapsing. Oh, and demand for real wages are going up already as “Thousands of auto workers strike against GM: “We stood up for GM when they needed us”
Makes a marvelous case for precious metals but just because you have a few rounds won’t save your butt either. That’s because no one is equipped to handle either a return to paper (fiat in hand) money nor the exchange of goods for precious metals.
But that has to be considered as well, since somewhere in here, the global cyber-warfare should break out and people who have gone “phone-faced” will be at a loss because all of their financial assets are suddenly (pass some more butter) toast, too.
In short, making all the paper money in the world becomes potentially less important in the near future. Because once the supply chain empties out following a massively-correlated hyper-volatility event (MCHVE) as people go into hoarding mode, it will be then that Triffin’s Dilemma turns into Triffin’s Revenge.
Almost ironic from a historical perspective: The world’s foremost “expert” in runaway inflation was buried this weekend: Pomp, thin crowds and mixed feelings as Robert Mugabe is buried.”
For those with a “nose for smoke” we can already see the arrival of global hyperinflation: “Venezuela, Zimbabwe, Sudan, Argentina: World countries with highest inflation rate.” So while there’s talk of massive deflation (exemplified by negative rates by the ECB last week) the Global Financial Discontinuity continues to edge closer.
Not a cheery and chipper discussion, perhaps, but one worth thinking about: Wondering how America (and world) could survive the wholesale destruction of digital assets could shortly become more than a Monday morning academic exercise.
The pieces are already morning, though: Global Markets Slide, S&P Futures Back Under 3000 On Oil Chaos, China Slowdown. Now it’s just a matter of the end of the month…if we make it that far.
We now beam you back down to the planet’s surface….Good luck.
Speaking of the drone attacks: Trump pledges to help allies in Middle East after Saudi attacks. While president Trump has been using “hot button terms” like “locked and loaded” in response, a good piece in the NY Times this morning lays out howThe World Reckons With a New Oil Order.
As mentioned to subscribers, only a matter of time until BATF has to put limits on drone lifting weights in order to proactively limit risk of similar attacks in ‘Merica.
Unable to rattle Trump, or find anything impeachable, we notice the left is now attacking the US Supreme Court in a change of focus: New Brett Kavanaugh sexual misconduct allegations spark calls for impeachment.
In our Thar she blows department: Beachgoers Warned As Hurricane Humberto Forms Off Florida Coast.
In tech, Apple takes fight against 13-billion-euro EU tax order to court. The megalomaniacs of the EU think they can fine an international company for a percentage of worldwide revenues for an infractions. What they can’t bring themselves to admit is that near as we can figure, Apple was just working applicable laws in their use of Irsh tax laws. A more honest form of government would change laws but not the European Union. They’re little more than digital highwaymen, as we see it.
Oh, and it makes Russia reforming its satellite states into Buffer Zone II achievable as Russia, Belarus to Form Economic ‘Confederacy’ by 2022 – Kommersant.” Dandy.
And just out, the NY Fed’s Empire State Manufacturing numbers:
“The headline general business conditions index edged down three points to 2.0. New orders were marginally higher than last month, and shipments grew modestly. Delivery times were steady, and inventories increased. Employment levels expanded, while the average workweek held steady.”
Off to work on Peoplenomics and practice my caffeine and carb loading skills…
Write when you get rich,