Commodity prices tumble as deflationary scenario once again rises

Commodity prices such as oil copper and gold are in a steep downtrend. What do you think this means? To me, it means that the Federal Reserve is failing in its attempt to stop deflation. See SURPRISE INFLATION above.  The fed has put interest rates down to almost zero, flooded the market with money and has addressed the economy with hubris. As Galileo said, when confronted with the Vatican’s edict that the earth was stationary, he said “and still it moves.” Deny as they may, the deflationary scenario continues to stare the Fed and the markets in the face. The Dow Jones transports and utilities are already in a downtrend. That’s a Dow Theory sell signal. Europe and obviously China have their markets in a downtrend. This week, the Dow broke below it sideways market trend that it has been in since the beginning of the year. I have now changed the current Intermediate Trend of the Dow DOWN below! The Russell 2000 is also a downtrend. Stocks making twenty-five day loans is increasing rapidly. With commodity prices falling and the dollar’s increasing strength and disappointing earnings, the Bulls are going to have a tough time holding on to their mythical hubris. Yogi Berra is famous for saying, “it ain’t over till it’s over!” Well it’s not over. It is still a Bull Market. However, we are beginning to get glimmers of technical weakness. Watch out below!

Check out this report from Diane Swonk at Mesirow Financial  http://www.mesirowfinancial.com/economics/swonk/themes/themes_0715.pdf

Just because Greece capitulated, it’s not safe to go back in the water!

The Prime Minister Tsipras of Greece finally had to capitulate to Germany because, at this time, there is no alternative to the euro. However, scars are deep after this battle and divisions within the euro zone are probably now deeper than they were prior to the crisis. The Germans stood their ground and played hardball.  Germans bullying its neighbors will have continuing repercussions that I believe are negative for Europe and the euro zone.

In the meantime, is anybody noticed that the bond prices of the ten year and the thirty year treasuries are forming a head and shoulders top. Bond prices are going down, and yields are going up in spite of the Feds policy to keep yields low. Feds can try and control markets; however, the markets are bigger than anybody including the Fed. Investors are concerned about both the stock market and bond market.

World markets are starting to weaken (CHINA, EUROPE, JAPAN). The Dow Transports and Utilities have broken into new low ground. This is a Dow Theory sell signal! As I’ve been saying for months, “Watch out below!” Is the closing of the New York Stock Exchange a technical issue or is it terrorism? Either way investors will lose confidence. In real estate, its location, location  location! In the stock market its liquidity, liquidity, liquidity!

I continue to be worried about the consumer based US economy on the long run. Upward mobility has halted. Let me give you insight by relating a little personal story of mine. My father came to this country in 1929 seeking upward mobility. Today, there are fourth-generation Birkelbach families, who were living in Ventura California, that cannot afford to buy a house. A small house in Ventura California costs about $750,000. All fourth-generation families are college-educated, intelligent and hard-working, which should entitle them to at least a piece of the pie. Not so, not anymore! All the wealth and growth of income is going to the top 1%. I continue to insist, this is unsustainable! All boats will sink, including the top 1%’s boats. One of the problems that China is having, and the reason it’s markets  are reacting in such a devastating manner is because high productivity technology is replacing the need for labor. China’s economy was growing at 8% a year, because their middle-class was expanding. As in the United States, their middle-class is under extreme pressure as wages are being reduced, and well-paying jobs are getting harder to find. We are killing the chicken that lays the golden egg. This is not the time or place for me to give you my personal views of a solution, it is my place however, to tell you that in my opinion the stock market is extremely dangerous at this level and I am looking for drops in the US markets of at least 50%. Trend wise, the Dow and S&P and NASDAQ are still in Bull Market trends. So I’m a little early. Better to be early than late. Need more convincing? Look at my Lone Bear Letters, above. ALSO LOOK AT ‘THE DEATH OF THE STOCK BROKER’,’ BOND /CURRENCY CHRIS,’ SURPRISE DEFLATION,’ AND ‘INCOME INEQUALITY’!

KEEP AN EYE ON THE CHART BELOW FOR BREAK OUT POINTS BELOW RESISTANCE OR ABOVE SUPPORT AREAS. Particularly  watch for a breakout below  THEN 17,147/17,000, NASDAQ 4605/4545, S&P 500   1991/1973. That would change the Intermediate trend to DOWN

New York Stock Exchange suspends trading.

United Airlines suspends flights

China down 35% in 30 days, down 6% today

Nikkei down 3% today

Greece’s future uncertain!

Quite a day in the world today? World markets are starting to weaken (CHINA, EUROPE, JAPAN). The Dow Transports and Utilities have broken into new low ground. This is a Dow Theory sell signal! As I’ve been saying for months, “Watch out below!” Is the closing of the New York Stock Exchange a technical issue or is it terrorism? Either way investors will lose confidence. In real estate, its location, location  location! In the stock market its liquidity, liquidity, liquidity!

I continue to be worried about the consumer based US economy on the long run. Upward mobility has halted. Let me give you insight by relating a little personal story of mine. My father came to this country in 1929 seeking upward mobility. Today, there are fourth-generation Birkelbach families, who were living in Ventura California, that cannot afford to buy a house. A small house in Ventura California costs about $750,000. All fourth-generation families are college-educated, intelligent and hard-working, which should entitle them to at least a piece of the pie. Not so, not anymore! All the wealth and growth of income is going to the top 1%. I continue to insist, this is unsustainable! All boats will sink, including the top 1%’s boats. One of the problems that China is having, and the reason it’s markets  are reacting in such a devastating manner is because high productivity technology is replacing the need for labor. China’s economy was growing at 8% a year, because their middle-class was expanding. As in the United States, their middle-class is under extreme pressure as wages are being reduced, and well-paying jobs are getting harder to find. We are killing the chicken that lays the golden egg. This is not the time or place for me to give you my personal views of a solution, it is my place however, to tell you that in my opinion the stock market is extremely dangerous at this level and I am looking for drops in the US markets of at least 50%. Trend wise, the Dow and S&P and NASDAQ are still in Bull Market trends. So I’m a little early. Better to be early than late. Need more convincing? Look at my Lone Bear Letters, above. ALSO LOOK AT ‘THE DEATH OF THE STOCK BROKER’,’ BOND /CURRENCY CHRIS,’ SURPRISE DEFLATION,’ AND ‘INCOME INEQUALITY’!

ISL July 2,2015

DOW BREAKS BELOW 18,300-17,700 TRADING RANGE FORMING HEAD AND SHOULDERS TOP.

NO MATTER WHAT HAPPENS IN GREESE, THE DOW INTERMEDIATE TREND IS NOW DOWN

MARKETS STRUGGLE WORLDWIDE WITH CLOSURE OF GREEK BANK

Since February, the Dow industrial Averages was trading between a narrow trading range of  18,300 and 17,700. Does the breaking of this SIDEWAYS TREND mean that the Dow is no longer a bull market? Is this what stock market chartists call DISTRIBUTION??? Although the NASDAQ has made new highs, the Dow Transports and Dow Utilities are definitely in a downtrend. According to the Dow Theory, this is a sell signal. If you want to know what’s really going  on in the US markets, take a look at the US Treasuries. Today at 2.48% the 10 year yield is up 3.55% for the day and up over 20% this year. I would think, that’s where the smart money is going, even though the yields are low. For many, it’s better to receive a small yield, than be in a dangerous stock market.

ISL JUNE 22

All that I said below is being negated by a supposed new deal with Greece.        (DAX up 3.8% Ya Ya!) If a deal is made, it is just postponing the enviable, in my opinion, which is a Greek default. The Bull market has run out of gas and is now being pushed, by hand, up a very steep hill. It reminds me of the Greek myth ‘SISYPHUS” that was charged with roiling a bolder up a hill. The higher he got, the bigger the boulder became. THE 10 YR T-bond yield is up 10 basis points. That tells the real story. Watch out below!

ISL  June 19 2015

BULL MARKET OVER FOR DAX, FTSE,CHINA, DOW TRANSPORTS/Utility AND BOND MARKET! AT THE SAME TIME THE NASDAQ MAKES NEW HIGHS. WHO IS OUT OF SYNC?

The Chinese markets are down 12% this week. The DAX is down from  a high of 12,375 to 11,062. The FTSE is down from a high of 7,104 to 6,728.The Dow Transports are down from a high of 9,217 to 8,479.The Dow Utilities are down from a high of 652 to 575. The 10 year yields have risen some 20%. All this while the  NASDAQ hits new highs. Somebody is out of sync?

Robert Prechter of the famed Elliott Wave Forecasting has just said that he believes the stock market is in a high risk of a sharp collapse. As an example he looks at the Dow on February 27 when the Dow hitting new high, there were 172 New York Stock Exchange listed stocks that achieved a new high and 31 stocks that hit new lows. However, when the Dow rose to his latest record high on May 19, the number of new highs had fallen to 118, while new lows rose to 38. In addition, he points out something that I did in our last letter, which is that the Dow Jones Transportation index and the Dow Jones Utility index are in downtrends. This is a traditional Dow Theory, sell signal. Prechter also said that the market is operating in a 6.25 years to 7 year cycle that has been operating since 1980 which calls for a market decline. The Elliott wave is based on a Fibonacci summation series known as the divine, or golden ratio which is been found to exist throughout nature including outer space. (See my book above entitled the Investment Strategy Handbook for Volatile Markets.)

I believe that the Bull Markets of the above-mentioned indexes HAVE ENDED. IN MY OPINION THE INTERMEDIATE TREND OF THESE INDEXES IS NOW DOWN. However, the Dow industrials, the NASDAQ and the Standard & Poor’s 500 continue in a narrow trading range in what technical chart readers may call Distribution. One of the main topics of contention is, when will the Federal Reserve increase interest rates and will Greece meet its financial obligations? According to Diane Swank of Mesrow Financial, she believes short-term rates are headed up and in September. This is much earlier than the market investors are contemplating. As far as the Greece situation is concerned, we have been consistently negative and believe that all alternatives are just kicking the can down the road to Greece’s inevitable default. How long will the major indexes hold up in their current Bull Market? There’s an old saying, “it isn’t an over, until it’s over.”

Maybe, you haven’t heard the news yet, but the bond market is crashing. Yields on the 10 year bond are up .55 basis points. That corresponds to approximately a 20% increase in yields for the 10 year bond. Maybe the Federal Reserve isn’t ready to increase interest rates, but investors sure are.

The fabric of the economy continues to be ripped apart by events that hurt the Middle Class and the poor. Pew Research have 30 States cutting budgets in health care, senior care, city government and universities, At the same time wages are dropping and upward mobility is suffering. Add to this, is a recent decision by the Supreme Court to not protect individuals who have second mortgages in bankruptcy. Meanwhile Jamie Dimon becomes a billionaire.   HOW MUCH MORE PUNISHMENT CAN OUR CONSUMER ORIENTED ECONOMY TAKE? Watch out below!

KEEP AN EYE ON THE CHART BELOW FOR BREAK OUT POINTS BELOW RESISTANCE OR ABOVE SUPPORT AREAS. Particularly  watch for a breakout below  THEN 17,147/17,000, NASDAQ 4605/4545, S&P 500   1991/1973. That would change the Intermediate trend to DOWN