Friday, April 28, 2017

Here ... we ... go ...

It's all over.

No one knows it yet.

Except for me.

spx forcing the policy hand


29 comments:

Christian Gustafson said...

The Fed must cut the discount rate at the June FOMC policy meeting.

frank said...

Why is that?

Christian Gustafson said...

Hey Frank. Just posted a chart of a market that goes no-bid, forcing two monetary policy interventions -- a rate cut in June, and a formal re-introduction of QE in September.

666 on the S&P 500 needs a re-test. After that, the wider global monetary consensus starts to come unraveled.

Bicycle said...

Well, maybe if NORK starts lobbing missiles at Seoul, Japan and Hawaii in the next week, then sure.

But really the Bradley turns this month are close enough to the mid-April lows that they probably form the floor for the final 5th up into June 21, which is the next major turn date.

CBOE Fed futes say that today there is a 67% chance of a hike at June FOMC, which historically means a 100% chance it will happen (fed always raises when the cboe futes are greater than 60%), unless something really catastrophic happens between now and June. And even in that case they would probably just hold pat. At the pace the Fed is now on, they will keep hiking regularly until something breaks and you have a confirmed technical recession on a GDP basis for 2 quarters.

Any major bear market can not start until summer solstice, IMHO. That's really not that far away, tho. Sit back in your lawn chair with a nice margarita or summer shandy, sharpen your knives and punji sticks, and enjoy the last vestiges of the grand supercycle wave up from 1929.

Kevin Wilde said...

This guy gets it too
(click on link then PDF link)
http://www.exceptional-bear.com/196.html

David Does said...

I'm with you, i think this might be similar to 87 crash or the way oil crashed after 140/barrel, next 2 weeks

Vinegar Jar said...

OK CG,

Time to defend chartist epistemology. What makes you think you can quantitatively model the future in this way?

Ours is the eyes' deceit.

Best,
Vinegar Jar

Christian Gustafson said...

Hussman on 'exhaustion gaps'.

TSE said...

CG puts it all together for those who know. And... LOL!

"Exhaustion Gaps and the Fear of Missing Out"

"Up, Up and Away!"

https://www.youtube.com/watch?v=5akEgsZSfhg

But I digress...

Jim Morrison - The Doors - and The Gulf of Tonkin

"The Gulf of Tonkin incident, also known as the USS Maddox incident, drew the United States more directly into the Vietnam War. It involved two separate confrontations involving North Vietnam and the United States in the waters of the Gulf of Tonkin."

"There's something happening here
What it is ain't exactly clear"

Join me now, if you have the time, as we take a stroll down memory lane to a time nearly four-and-a-half decades ago - a time when America last had uniformed ground troops fighting a sustained and bloody battle to impose, uhmm, 'democracy' on a sovereign nation.

It is the first week of August, 1964, and U.S. warships under the command of U.S. Navy Admiral George Stephen Morrison have allegedly come under attack while patrolling Vietnam's Tonkin Gulf. This event, subsequently dubbed the 'Tonkin Gulf Incident,' will result in the immediate passing by the U.S. Congress of the obviously pre-drafted Tonkin Gulf Resolution, which will, in turn, quickly lead to America's deep immersion into the bloody Vietnam quagmire. Before it is over, well over fifty thousand American bodies - along with literally millions of Southeast Asian bodies - will litter the battlefields of Vietnam, Laos and Cambodia.

For the record, the Tonkin Gulf Incident appears to differ somewhat from other alleged provocations that have driven this country to war. This was not, as we have seen so many times before, a 'false flag' operation (which is to say, an operation that involves Uncle Sam attacking himself and then pointing an accusatory finger at someone else). It was also not, as we have also seen on more than one occasion, an attack that was quite deliberately provoked. No, what the Tonkin Gulf incident actually was, as it turns out, is an 'attack' that never took place at all. The entire incident, as has been all but officially acknowledged, was spun from whole cloth. (It is quite possible, however, that the intent was to provoke a defensive response, which could then be cast as an unprovoked attack on U.S ships. The ships in question were on an intelligence mission and were operating in a decidedly provocative manner. It is quite possible that when Vietnamese forces failed to respond as anticipated, Uncle Sam decided to just pretend as though they had.)

Nevertheless, by early February 1965, the U.S. will - without a declaration of war and with no valid reason to wage one - begin indiscriminately bombing North Vietnam. By March of that same year, the infamous "Operation Rolling Thunder" will have commenced. Over the course of the next three-and-a-half years, millions of tons of bombs, missiles, rockets, incendiary devices and chemical warfare agents will be dumped on the people of Vietnam in what can only be described as one of the worst crimes against humanity ever perpetrated on this planet.

Also in March of 1965, the first uniformed U.S. soldier will officially set foot on Vietnamese soil (although Special Forces units masquerading as 'advisers' and 'trainers' had been there for at least four years, and likely much longer). By April 1965, fully 25,000 uniformed American kids, most still teenagers barely out of high school, will be slogging through the rice paddies of Vietnam. By the end of the year, U.S. troop strength will have surged to 200,000.

TSE said...

Meanwhile, elsewhere in the world in those early months of 1965, a new 'scene' is just beginning to take shape in the city of Los Angeles. In a geographically and socially isolated community known as Laurel Canyon - a heavily wooded, rustic, serene, yet vaguely ominous slice of LA nestled in the hills that separate the Los Angeles basin from the San Fernando Valley - musicians, singers and songwriters suddenly begin to gather as though summoned there by some unseen Pied Piper. Within months, the 'hippie/flower child' movement will be given birth there, along with the new style of music that will provide the soundtrack for the tumultuous second half of the 1960s.
An uncanny number of rock music superstars will emerge from Laurel Canyon beginning in the mid-1960s and carrying through the decade of the 1970s. The first to drop an album will be The Byrds, whose biggest star will prove to be David Crosby. The band's debut effort, "Mr. Tambourine Man," will be released on the Summer Solstice of 1965. It will quickly be followed by releases from the John Phillips-led Mamas and the Papas ("If You Can Believe Your Eyes and Ears," January 1966), Love with Arthur Lee ("Love," May 1966), Frank Zappa and The Mothers of Invention ("Freak Out," June 1966), Buffalo Springfield, featuring Stephen Stills and Neil Young ("Buffalo Springfield," October 1966), and The Doors ("The Doors," January 1967).

One of the earliest on the Laurel Canyon/Sunset Strip scene is Jim Morrison, the enigmatic lead singer of The Doors. Jim will quickly become one of the most iconic, controversial, critically acclaimed, and influential figures to take up residence in Laurel Canyon. Curiously enough though, the self-proclaimed "Lizard King" has another claim to fame as well, albeit one that none of his numerous chroniclers will feel is of much relevance to his career and possible untimely death: he is the son, as it turns out, of the aforementioned Admiral George Stephen Morrison.

And so it is that, even while the father is actively conspiring to fabricate an incident that will be used to massively accelerate an illegal war, the son is positioning himself to become an icon of the 'hippie'/anti-war crowd. Nothing unusual about that, I suppose. It is, you know, a small world and all that. And it is not as if Jim Morrison's story is in any way unique.

https://www.sott.net/article/155794-Inside-The-LC-The-Strange-but-Mostly-True-Story-of-Laurel-Canyon-and-the-Birth-of-the-Hippie-Generation-Part-1

Great music.

After Jim Morrison (allegedly) died - the Doors continued to perform and play "The End"

Father - "Yes Son" - "I want to kill you" - Mother - "I want to...." Thus the Oedipus Complex -

Oedipus, in Greek mythology, the king of Thebes who unwittingly killed his father and married his mother. Homer related that Oedipus’s wife and mother hanged herself when the truth of their relationship became known, though Oedipus apparently continued to rule at Thebes until his death. In the post-Homeric tradition, most familiar from Sophocles’ Oedipus Rex (or Oedipus the King) and Oedipus at Colonus, there are notable differences in emphasis and detail.

https://www.britannica.com/topic/Oedipus-Greek-mythology

The (Rolling) Stones, from Apocalypse Now -

https://youtu.be/0d9XYfMXAjc

Stockboom said...

CG, dont you think your predictions are way over boiled towards BEAR? This is next to impossible...unless we have WW3 happening in next month or so...this scenario is not real even if we have 2008 like financial crisis happens...

Just my 2 cents...no offence..

Cheers

Bryan Franco said...

CG. This is fantastic.

Hugh Jazole said...

Read the disclaimer people!

"The content on this site is provided as general information only and should not be taken as investment advice. All site content, including, but not limited to: forum comments by the author or other posters, articles and charts, advertisements, and everything else on this site, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy."

Kevin Wilde said...

The bull/bear cycle does call for a blow off bull phase to turn to a great bear, with the average loss near 50% during such post blow-off swoons, include a recession AND financial crises. I do agree that such a bear, even if it were to start right here, would not be complete by year end (unless it was a 1987 style one - which it very well could be - though the max losses then would be near SP 1150, and not the CG predicted 666 one. The latter would take the more usual 1929 and 2000 three years to complete. Tis my two penneth

T.Berry said...

we're 70+ years away from that type of fall (they happen once ever 80 years) worst case is we fall close to s&p 2000 and that's about it bear over then back up. we're enjoying the best investment times of a lifetime (yeah, i know you don't want to hear it but this is the strongest secular bull market in history and soon to be the longest). buy dips, average in, make money.and yeah, remember, the stock market always comes back 100% of the time : )

once again stocks are at levels never seen before....all time record highs, again.

T.Berry said...

oh and don't be a fool and sell in may. next may stocks will be 10-15% higher.

buysilver said...

TBerry is in denial.

sooner said...

TBerry has been far more correct than us bears so far.....

Bicycle said...

Several here have been calling for 2400 for some months. And same for calling for 2200's actually for quite some years back...

T. Berry, bless his heart, and as much as his presence and input is welcome, is a permabull. A massive pullback is baked in... but its a matter of getting the timing right and speculating how much it will fall. That's the fun, and really, the whole point. I don't think that many here are philosophically opposed to bull markets. The universes of things that COULD happen at any given moment is far larger than most realize.

Now about that IRX... less than 100 basis points now from the FVX... and this is where the real interesting stuff lies. When will the yield inversion happen?

T.Berry said...

why not just buy the pullback bicycle? trying to short it is dangerous as this bull could start it's next leg up at any moment. we are in a bull market so as for being correct maybe i have been but its really not that hard given the economy and the markets. both are doing well.

what is considered a "massive" pullback? 10% 15%? i dont' have much cash on the sidelines as i invest monthly and will continue to for the next 8-10 years. i'm an investor, not a permabull lol

Bryan Franco said...

T. Berry, as an investor, do you look at valuation at all? If so, what are you seeing from that standpoint?

T.Berry said...

not too often bryan. plan on being in the market for the next 10-12 years and realize sometimes values are high but don't want to mess with trying to time anything. i keep it simple and price average over the long term. that a strategy that wins 100% of the time. i started getting in when s&p was 1100-1150 and have been socking money in ever since. if i was smart i would have got in when it was 700 lol. missed 50% returns :(

in 10 years stocks will be 2x or 3x higher so nothing to be worried about short term.

Hugh Jazole said...

"i keep it simple and price average over the long term. that a strategy that wins 100% of the time." IF you keep your job/maintain current income, and life doesn't throw you any other curve balls. That strategy proved to be fatal for a few people I knew during the last downturn. My pleas for them to lighten up in their 401K's went unanswered. Their entire life, they had been told to buy real estate, and stocks. After all, their money would be worth so much less down the road. Well, for several years everything EXCEPT cash/PM's plummeted in value. A few of my friends homes are STILL worth less than they paid for them. With that said, I agree the window for repeating a crash like that or worse, is closing pretty quickly. As far as valuation goes, we are close to the same PE we were in 96/97. HOW DID STOCKS PERFORM THEN!? There will be a reversion to the mean, but it looks like it will be a little while.

Bicycle said...

actually the window for a crash is very wide open. I have posted several versions of this chart

the DJIA should top around 22k. Now if we blow through that trendline, that is probably telling you that inflation is about to go totally out of control and while equities might do ok in that scenario, you probably really want PM's and land.

but there's a big bradley turn date on June 21 '17, just after June FOMC, where they will raise the target rate by 25 bps. Everyone knows that, but if the language is that they will continue this pace of raises, or even accelerate it, that is when you might finally see the yield curve invert as the Fed continues to raise straight into the face of very deflationary economic data (like GDP going negative)

GDP, for Q1'17, the 3rd estimate, gets reported on June 29 and maybe that's the one that finally drags it negative.

Everyone thought we buried Bondzilla 6 feet under. He's about to matter in a big big way.

Bicycle said...

in fact you really gotta wonder if the GDP data already shows negative and they massaged the latest release to 0.7% so they could prop Trump up thru the first 100 days, get the 1%'er tax cuts passed, eviscerate Obamacare, and then flush the toilet at the end of June with a negative GDP print.

there is a reason why they are screwing with the mortgage interest deduction by trying to double the standard deduction. they know interest rates are about to skyrocket and no one is going to finance a home anymore anyways

Hugh Jazole said...

Inflation adjusted charts do look ominous. Like I said, we WILL revert to the mean! It just doesn't look like it will be this year. S&P mean is 483, now 2388! Until the market, oil or bonds forces the Feds hand, their shenaingans will continue.

http://www.multpl.com/inflation-adjusted-s-p-500


T.Berry said...

raising interest rates is bullish and stocks will move higher. fed first raised rates in december 2015 and s&p was at 2043, fast forward 17 months and its now at 2391 and record all time highs. a 17% move three hikes later. the fed got it right this time, some may say perfect execution. yellen has definitely done a great job holding her own. shes not bernanke but not far behind.

my hat off to anyone who can time this pullback and make money. i'll stick with staying long and playing it safe.

buysilver said...

I agree, the next two weeks will tell as they may jiggle it past this phase or something gives but it's at a reflex point with French election, Little Kim and housing bubbles.

Christian Gustafson said...

France election can make this happen in an instant, since the ECB is the last CB standing at the moment, still pumping direct liquidity into the system via corporate debt purchases.

If Le Pen saves France and beats her Rothschild banker opponent, all bets are off. The Fed will be FORCED to return to the scene as direct liquidity provider -- with discount rate cuts, new QE initiatives, balance sheet expansion, the works.

They simply have no choice. The bubble will go no-bid and deflate savagely.