Sunday, March 6, 2016

Is it too early to note the importance of September 29?

Looking ahead, we have a final read of the Q4 2015 real GDP late this month; the previous two previous estimates were .7% and 1.0%, respectively.  Assuming that this number does not collapse below zero, then this gives us September 29 as the first opportunity for a formal technical recession to be called here in the America.

Of course, before then we have three releases of the Q1 2016 GDP, with a final report at the end of June, as well as preliminary estimates of Q2 GDP in July and August.

So there is much that will happen between then and now.  But the softness seen in industrial numbers and now services is very real, and it will only accelerate if the market rolls over late this week and loses the 1800 level.  If this should happen, consumer spending will decline very rapidly and quickly guarantee the next recession.

The next recession, which could be first made official on the morning of September 29th.



This, into a hotly contested election, with candidates openly calling for auditing the Fed and ending such elite insider games as the QE.

Into the Fall market "crash season".  Into a period where everyone knows the jig is up and it's time to leave.

So, while I know it's very early, I just wanted to call that out.  File it away in the back of your mind.

Here's a short-term wave count and test that the market will have this week, Thursday or Friday.

SPX 03-06 20D

And this is sort of a worst-case scenario for 2016, as well as a suggestion of where September 29th could fall in the grand scheme of things.

SPX 03-06 2016 worst-case scenario

39 comments:

Hugh Jazole said...

I now know two people, who are being laid off. They are in completely different fields.

Christian Gustafson said...

We are in the midst of a re-org across corporate IT, for the sake of organizational structure but also for the sake of technology.

One thing a lot of technical people do not understand well, is just how truly vicious and deflationary these modern techniques and technologies can be. One minute they're fascinated with how cool is a free database or a service framework, and the next they get to see what kind of real efficiencies can result from it.

I'm no server admin, but the Chef platform scared the hell out of me when I first saw it demoed in a seminar at work.

These advances will hit home in the coming years across the "IT" industry. They will be brutally deflationary.

Bill Joy warned us about this many years ago.

Hugh Jazole said...

Long before Bill Joy, a certain "crazy" guy made some bold predictions about his sort of thing. Care to guess who wrote this?

“First let us postulate that the computer scientists succeed in developing intelligent machines that can do all things better than human beings can do them. In that case presumably all work will be done by vast, highly organized systems of machines and no human effort will be necessary. Either of two cases might occur. The machines might be permitted to make all of their own decisions without human oversight, or else human control over the machines might be retained.

If the machines are permitted to make all their own decisions, we can’t make any conjectures as to the results, because it is impossible to guess how such machines might behave. We only point out that the fate of the human race would be at the mercy of the machines. It might be argued that the human race would never be foolish enough to hand over all the power to the machines. But we are suggesting neither that the human race would voluntarily turn power over to the machines nor that the machines would willfully seize power. What we do suggest is that the human race might easily permit itself to drift into a position of such dependence on the machines that it would have no practical choice but to accept all of the machines’ decisions. As society and the problems that face it become more and more complex and machines become more and more intelligent, people will let machines make more of their decision for them, simply because machine-made decisions will bring better results than man-made ones. Eventually a stage may be reached at which the decisions necessary to keep the system running will be so complex that human beings will be incapable of making them intelligently. At that stage the machines will be in effective control. People won’t be able to just turn the machines off, because they will be so dependent on them that turning them off would amount to suicide.”

Christian Gustafson said...

Hey! I guessed it correctly.

Hugh Jazole said...

Then we get to the scary part.

“Due to improved techniques the elite will have greater control over the masses; and because human work will no longer be necessary the masses will be superfluous, a useless burden on the system. If the elite is ruthless they may simply decide to exterminate the mass of humanity. If they are humane they may use propaganda or other psychological or biological techniques to reduce the birth rate until the mass of humanity becomes extinct, leaving the world to the elite. Or, if the elite consists of soft-hearted liberals, they may decide to play the role of good shepherds to the rest of the human race.

They will see to it that everyone’s physical needs are satisfied, that all children are raised under psychologically hygienic conditions, that everyone has a wholesome hobby to keep him busy, and that anyone who may become dissatisfied undergoes “treatment” to cure his “problem.” Of course, life will be so purposeless that people will have to be biologically or psychologically engineered either to remove their need for the power process or to make them “sublimate” their drive for power into some harmless hobby. These engineered human beings may be happy in such a society, but they most certainly will not be free. They will have been reduced to the status of domestic animals.”

Hugh Jazole said...

When does UVXY start to look attractive again CG? Can she get down to the 2015 low again?

Christian Gustafson said...

I want to see the lower daily BBs on both UVXY and the VIX stop diving and flatten out or even come in. UVXY's is at 25, VIX has a 14-handle.

UVXY's been cut in half since its highs. If the SPX gets through the 200 DMA to make new highs, then UVXY will get cut in half again (and again).

I don't know if you can talk about chart support on a jacked-up levered ETF like UVXY, but you can see that the $25-26 area might provide that.

Team Winning said...

cg, I thought you were referring to sept 1929....lol

Bicycle said...

Pretty damn good looking chart so far Mr. CG.

Bicycle said...

Was that it? Or does the Fed also have to mess up like the ECB before we can really tank?

Hugh Jazole said...

Definitely NOT it.

Tricky Dicky said...

HJ said: "I now know two people, who are being laid off"

I moved to Eastern Tennessee and I see something completely different from Wisconsin - lots of jobs (shortage of workers), vehicles traveling and full strip malls. Sure, the pay isn't all that great (compared to unionized taxpayer dependent gold-plated boat anchors i.e elected government officers and public employees) - but the cost of living is less and the Mountain scenery is great - plus no income tax. I adjusted my Lifestyle and am doing just fine - for all the moaning and griping that Americans do..... I got clean water on demand, a working toilet, controlled atmosphere, options, low cost recreation, an overabundance of food, and lots of free time. And a vehicle with insurance and gas! From hard work comes good health - with proper nutrition and rest - and besides what's wrong with the old fashioned retirement plan - death? Keeping old bodies alive by spending $$$$ on them with costly life extending medical procedures and care is a waste of resources. Face it, the aged don't want to die because costly medical advances have removed much of the misery of old age - and death is a natural part of life. What do so many of the old do but sit and watch TV - if science could remove their head, keep it alive, and place a TV in front of them -they would be fine. UGH! That's not life....


The Fed will remain solvent far longer than you can remain sane. Sure, the money is pure fiat and it's all being artificially propped up. Quite frankly, it's long past time for all to receive a guaranteed minimum income which must be spent monthly, before the credits expire along with incentives for remaining childless and not committing crimes. A cashless society. Plan accordingly.

Hugh Jazole said...

I agree with most of what you say here. Personally though, I have no interest whatsoever in living in the middle/eastern part of the country. Unless it's is in the middle of nowhere. Every city of any size from KC east is damn near a war zone, and I would not look for that to improve. States like GA, FL are doomed over the long haul. Things are relatively decent now, imagine if the SWTHTF. You will have those fairly isolated gangs running around shooting, robbing, raping everything in site.

Hugh Jazole said...

Not sure if it's THE top, but it's sure looking like you nailed this one CG. Looks like today might be the last ramp up, maybe Monday, at least for now.

Bicycle said...

This is looking a hell of a lot like the wave up from Sept 29 - Nov 3. On that basis we would be topping in next couple of trading days.

Cristian D'Onofrio said...

perfect landing

Tricky Dicky said...

"You will have those fairly isolated gangs running around shooting, robbing, raping everything in site."

They already exist - see the scenario being played out via the stats at http://heyjackass.com/
Illustrating Chicago Values. They stay in their own localized neighborhoods and kill each other, did you learn nothing from Katrina? The people you have to fear are those with a brain.

As SFV (economic Undertow) notes: "The QE1 assets were likely troubled, mis-rated junk off-loaded on foreign banks during the mortgage fraud bubble. A significant percentage of that stuff was likely non-performing which was why the Fed bought it in the first place. Fed buying was political favor, to keep the overseas banks quiet. I haven’t seen any sign of a write off on any Fed report, only interest distributed back to the Treasury and happy talk. This means QE2 and QE3 were needed … to cover up/launder the losses associated w/ QE1.

Meanwhile the QE1 junk would have been mostly short-term as mortgage defaults were likely concentrated in tranches sold overseas.

Of course, none of this could reach the public, if it had the Fed would have come under enormous pressure … for all practical purpose the Fed would have disappeared … the Fed is only supposed to buy risk-free Treasuries and equivalents (agency paper like Freddie Mac/Fannie Mae bonds).

This is hypothesis, it is likely no one will ever know the truth …"

Which makes it even more likely (via a dumbed down and mentally numb populace ready to accept anything but the truth) that the scenario where cash is eliminated and everything is done via a monthly preloaded debit card - with use it or lose it provisions - much more likely, IMO. The young who are burdened with Student Debt and whose lifestyle is dictated by a an electronically controlled social structure will demand it. This will also come in very handy as peak oil brings us over the Seneca Cliff and ready availability of POL products disappears.

The feral gangs of humanity concentrated in the Democratically controlled cities will exhaust themselves, and their numbers, in vicious in-fighting long before reaching your precious safe zone.

Hugh Jazole said...

Yep, the economy is in great shape.

https://twitter.com/TheLayoff


Hugh Jazole said...

Headed higher.

PaulLawn theFirst said...

The sword of retribution will start cutting down the market. A little down then back up the way down.

PaulLawn theFirst said...

Buy calls on SPXU.

Christian Gustafson said...

Now we're over the 200 DMA, over the descending trendline from the January swoon, over the 10 mo MA, well over the .618 retrace of any drop you might eyeball.

So do we stumble to new highs this Spring, or does this tip over now without warning?

And why did $USD sharply down, JPY sharply higher, why did this correspond with higher equities late today?

Bryan Franco said...

CG - downward channel still intact. Dollar not down because of 2 rate hikes instead of 4. The market has already been accounting for less rate hikes. Dollar down because not only are we not going to get any rate hikes but we are going full blown negative. It was a little forced-sounding the way Yellen answered the last question in her press conference, basically laughing off even the remote chance of NIRP.

Hugh Jazole said...

"So do we stumble to new highs this Spring, or does this tip over now without warning?" I'm going with the latter, everything is falling into place finally. Sentimant is overwhelmingly bullish, Janet is taking a break, which adds fuel to the fire, oil has sharply outperformed the market for the past few weeks, which is common in blowoff tops. I say we push higher for the next couple of days, maybe into Monday? Then that's it, at least for the short/midterm.

Bicycle said...

They can't do NIRP before the election. It will guarantee Trump and thus Janet and most of the Fed governors walked out of office in shame. Not to mention a full blown audit. Their only chance for NIRP is post Nov after a Clinton win and they would likely also need a compliant Congress. I just don't see it happening in the US, not anytime soon. The mere threat of it, is nearly going to guarantee a political environment where it can't happen.

New highs...not now. We're headed down. Later this year, there is a real threat of us bouncing off the old trend from dotcom and housing bubble tops, and heading to new highs.

Hugh Jazole said...

*Sentiment*

PaulLawn theFirst said...

1/18/2016 - Bradley F. Cowan published Pentagonal Time Cycle Theory in 2009 where he forecast late 2016 as a major stock market bottom. His based this forecast on the pentagonal subdivision of the 84-year cycle into five smaller 17-year cycles.

http://www.cycle-trader.com/marketcalls_recent.htm

T.Berry said...

the most hated bull mkt is about to get more hated. only a matter of time before new ath's return. and no it will NOT be one more new high, there will be many. bull in 8th year and showing zero signs of slowing. what you think sarah? bill? : )

long term investors need not worry. markets ALWAYS! come back

Christian Gustafson said...

Good to see you, T.Berry.

I think 2050 SPX tomorrow may be my final line in the sand for the bearish count.

That is the .786 retrace of the drop from the 2116 high to 1810. Beyond that, it gets harder to make the case for a deep W2. New highs then loom.

observer1357 said...

CG,

It looks like SPX is at the upper end of my target range. I'll have to agree with that thought of anything much above 2050 ends a bearish look for this market and a high likelihood of some new ATHs. Friday should be interesting as it is a quad witching day.

To your question of: "And why did $USD sharply down, JPY sharply higher, why did this correspond with higher equities late today?" One market factor to remember is that a lot of hedge funds have been shutting down or blowing up over the last few months. So with the additional QE announcements from the ECB over the past few months has forced those hedge funds out of short positions. It is a lot like late '98 to late '99. The hedge funds had starting betting on tech stocks crashing only to get busted out of short positions by CB manipulations. So that at least partly accounts for the reversal of the carry trade in JPY, IMHO.

Hugh Jazole said...

Oil will determine the line in the sand. Oil rising at nearly three times faster than the market, WILL put the brakes on the rally. It always has, and it always will. I'm just thrilled to finally be selling the USO shares, I picked up a couple of months back. I should have bought more, but I was already sweating with what I had.

Bicycle said...

It pays every once in a while to take a step back. A gigantic step back, all the way to the 1950's...

Serious question to ponder--can we have a full blown US recession, or depression even--without a true bear market in equities? Is there precedent?

Hugh Jazole said...

BPSPX prints a low of 3? Can someone explain this?

http://stockcharts.com/freecharts/gallery.html?$BPSPX


Christian Gustafson said...

Point & finger chart suggesting 2189 SPX.

That would likely be a touch of the rising trendline off the May 2015 (year) highs.

Hugh Jazole said...

OK. The last time we had a ghost print "mistake" on BPSPX that resembled todays, was July 2015. Right before we cratered into August. Make of it what you will.

Hugh Jazole said...

I dannae is she can take any more, Captain! I've giv'n her all she's got captain, an' I canna give her no more. I cannot change the laws of physics, Captain! A've got to have thirty minutes.

Hugh Jazole said...

They say no one rings a bell to signal a market top. Well, I'm going to ring one anyway. *ding, ding* Take a look at the action on JJC this morning.

Bicycle said...

Don't think that was any top at all. I think it was 3 of 5 waves up of a wedge, we're putting in 4 now, probably will turn at a retest of the 200. Then up to 2080-90ish for the 5th. April FOMC gets a rate increase, they start rolling out the language early, so let's call for a top on...oh... tax day, Friday, April 15.

Hugh Jazole said...

Very possibly a head fake. The VIX certainly isn't buying it.