The markets are collapsing and the bad news hasn’t even been announced yet

Today, 8/25/15, markets unsuccessfully tried to rally. The Dow had 661 points between its high and low. Investors are nervous and blaming the decline in the weakness Chinese market. However, in my opinion, that’s not why the markets are going down. Wait till the bad news does come out. That’s when you’ll really see the market drop. As of now, corporate earnings (except for oil related issues) are doing very well. Today, research reports came out recommending the Bank of America and J.P. Morgan. The banks are not the solution to the problem; they are part of problem . So, in my opinion, investors still don’t get it yet. They believe that this is just another correction. I don’t think so!

Read the book; This Time It’s Different, Eight Centuries of Economic Folly. The problem as I see it is an unsustainable economy with half the population unable to afford basic human needs. If upward mobility is over, because consumers cannot sustain a viable economy, then prices will go down. If it is a deflationary economy, then real estate prices and oil prices go down. If real estate prices and oil prices go down, then the debt backed by his entities will be in trouble. If bonds and mortgages are in trouble, then the derivatives that speculate on these entities will be in trouble. If derivatives are in trouble, then the banks are in trouble. If the banks are in trouble, then the Federal Reserve will be helpless, as they have no plan to deal with deflation. With QE 123, purchases of bonds, they will hold trillions of dollars of worthless paper. If the Feds are in trouble and the banks are in trouble, then the US economy is in trouble. If the US economy is in trouble, the world and its stock markets have a problem. Dow support at 15,336, 13,377,10,000/6,666

All this wont happen at once. ‘The Panics’ are just beginning!

Today, 8/24/2015 the Dow opened up 1000 points down. An obvious rally was expected. However, the Dow could not rise above -250 points down. So it closed down -588 for the day at 15 870. Incidentally the low for the day was exactly at our support level mentioned in our Lone Bear Letter at 15 370. and the close was close to our othher support area at 15,855! How’s that, for being exact. The NASDAQ closed down 179 at 4,528. Our support level mentioned in her Lone Bear Letter is 4,545. The S&P 500 closed at 1,893, down 77 for the day.Support is at 1,820 All 3 averages were down across 3 3/4% for the day. Apple broke all support and had a low of 92 closing at 103 down 2.6%. This market leader is showing just how weak the market is. As support area have been reached, a shot term rally is expected. I would expect a false rally to occur. Use it for selling and buying US treasuries. If not , Watch out for much lower below.

Thanks to all my readers for your comments. Thanks to Noell for responding, “capitalism only works when there is free and equal access to opportunity. When you have the winners restrict the opportunity through lobbying, it becomes near impossible to enter the marketplace with your goods, services or labor. It’s not that the bottom 49% of Americans are not participating in capitalistic growth, it’s just that they can’t participate.” Yes Noel I agree, upward economic mobility is no longer available the bottom 50%, except under unusual circumstances. Thanks to Diane for saying, “Why does China matter? It is now the 2nd largest economy after the US. It’s middle-class is getting hit. This means weakness abroad, particularly among emerging nations which rely on China to buy their exports. It also means weakness for multinationals that belived China would grow, not shrink. Social unrest in China is a particular concern.” I agree. China is faced with the same problem that we have, in that technological changes are increasing productivity without the use of labor. Thanks to Susan and Bill who like many of you said, “Carl, I hope you’re wrong too,” I responded by saying,”Yes, I hope I’m wrong too. However, I think this is more than just a normal correction. I am particularly worried about the banks that hold of bonds and derivatives for companies and countries that depend upon the price of oil, for payment. Our Fed and the European central banks and trying to stimulate our economies and the inflation rate by low interest rates and quantitative easing bond buying. And yet, deflation form lower oil prices, could tip the scale to a general economic deflationary scenario.” Thanks to Marty who said, Every bear has his day, but if this correction is different and permanent that would be something new and dangerous.” I would refer Marty and all of you to the book This Time Is Different, Eight Centuries of Economic Folly by Carmen M Reinhart.

The Fed is not prepared deflation. Today oil prices were down to $38.35 a barell. Lower commodity prices are down worldwide by 20%. Smart investors are galloping into US Treasuries. The 10 year yield is now 2% down 2.8% for the day and the five-year yield is 1.36% down 5.5% for the day. Not an attractive rate, but it is better than seeing your capital shrink by 50% or more. We should see a rally in the next couple days, as some support areas held today. However, I don’t believe the support areas will hold and I look for much lower levels. this is just the tip of the iceberg! Europe is on vacation. Wait till they get back in September. October is usually the worst month for the market. Use rallies for selling and buying US treasuries. It can get a lot worse!

I would expect a false rally to occur either Tuesday or Wednesday. Use it for selling and buying US treasuries.

Today, the Dow opened up 1000 points down. An obvious rally was expected. However, the Dow could not rise above -250 points down. So it closed down -588 for the day at 15 870. Incidentally the low for the day was exactly at our support level mentioned in our Lone Bear Letter at 15 370. and the close was close to our othher support area at 15,855! How’s that, for being exact. The NASDAQ closed down 179 at 4,528. Our support level mentioned in her Lone Bear Letter is 4,545. The S&P 500 closed at 1,893, down 77 for the day.Support is at 1,820 All 3 averages were down across 3 3/4% for the day. Apple broke all support and had a low of 92 closing at 103 down 2.6%. This market leader is showing just how weak the market is. As support area have been reached, a shot term rally is expected. If not , Watch our much lower below.

Thanks to all my readers for your comments. Thanks to Noell for responding, “capitalism only works when there is free and equal access to opportunity. When you have the winners restrict the opportunity through lobbying, it becomes near impossible to enter the marketplace with your goods, services or labor. It’s not that the bottom 49% of Americans are not participating in capitalistic growth, it’s just that they can’t participate.” Yes Noel I agree, upward economic mobility is no longer available the bottom 50%, except under unusual circumstances. Thanks to Diane for saying, “Why does China matter? It is now the 2nd largest economy after the US. It’s middle-class is getting hit. This means weakness abroad, particularly among emerging nations which rely on China to buy their exports. It also means weakness for multinationals that belived China would grow, not shrink. Social unrest in China is a particular concern.” I agree. China is faced with the same problem that we have, in that technological changes are increasing productivity without the use of labor. Thanks to Susan and Bill who like many of you said, “Carl, I hope you’re wrong too,” I responded by saying,”Yes, I hope I’m wrong too. However, I think this is more than just a normal correction. I am particularly worried about the banks that hold of bonds and derivatives for companies and countries that depend upon the price of oil, for payment. Our Fed and the European central banks and trying to stimulate our economies and the inflation rate by low interest rates and quantitative easing bond buying. And yet, deflation form lower oil prices, could tip the scale to a general economic deflationary scenario.” Thanks to Marty who said, Every bear has his day, but if this correction is different and permanent that would be something new and dangerous.” I would refer Marty and all of you to the book This Time Is Different, Eight Centuries of Economic Folly by Carmen M Reinhart.

The Fed is not prepared deflation. Today oil prices were down to $38.35 a barell. Lower commodity prices are down worldwide by 20%. Smart investors are galloping into US Treasuries. The 10 year yield is now 2% down 2.8% for the day and the five-year yield is 1.36% down 5.5% for the day. Not an attractive rate, but it is better than seeing your capital shrink by 50% or more. We should see a rally in the next couple days, as some support areas held today. However, I don’t believe the support areas will hold and I look for much lower levels. this is just the tip of the iceberg! Europe is on vacation. Wait till they get back in September. October is usually the worst month for the market. Use rallies for selling and buying US treasuries. It can get a lot worse!

LONE BEAR #7/This is just the beginning! 8/19/2015

This is the 7^th Lone Bear Market Letter I have written. Have I got your attention yet? Are you self-satisfied with your investments in the stock market? After all, what else could you do, but invest in the stock market, as interest rates are so low. Just like Pavlov’s dog you have been trained to stay in the stock market. On the long run the market goes up? Right? However, as economist John Maynard Keynes said. “On the long run, we are all dead!” I don’t expect this to be a normal correction. For reasons stated below, this could be another 1929 depression scenario. Sorry, I hope I’m wrong

Capitalism doesn’t work for everybody. I have never been sure what will start the fall. It could be that lower oil prices will bankrupt countries like Brazil, Russia and Mexico causing a cascade of bank failures? I am concerned about social unrest in places like Ferguson Missouri and the possibilities of terrorism. Or, it could be that the Fed is unprepared to deal with a deflationary scenario. (See Surprise Deflation above on my blog). It could be a crisis in China, because of their overwhelming debt (200% of GDP) and falsely stimulated economy. Or, It could come from something unexpected like North Korea attacking South Korea. However, in my opinion, I have stated that the big problem for me, continues to be weak economic conditions that permeate our economy because of the bottom 49% of Americans are not participating in our capitalistic growth. Productivity has increased because of technology, leaving the common worker behind.   The bottom 49% of Americans continues to suffer, with all the increase in income going to the top 1%. According to the book, CAPITAL IN THE TWENTY-FIRST CENTURY by Thomas Piketty, and Karl Marx’s Das Kapital, capitalism is in trouble when capital and labor are out of balance.. During the 1960’s, the Johnson administration, besides giving us civil rights, brought poverty down from 23% to 11%, with Medicare and the ‘war on poverty’ leading the way. Today 16% of American children and 14% of Americans live in poverty. That’s 47 million people with an income level of $19,000 per person or $24,000 per year per family. Capitalism and free markets have given the United States greatest lifestyles in the world. However, with capitalism there are winners and losers and when there are too many losers, without a safety net, the system has a potential for folding. How many bars of soap, how many houses and how many cars can a multi billionaire own? We have a consumer oriented economy, where capital and labor now seems to be out of balance. The advantage of our capitalistic system is when these imbalances occur, there  is dramatic shifts in the economy which can  cause a stock market crash, which will eventually lead to solutions. As Churchill’s famous of saying, ‘the Americans finally decide to do the right thing, after they tried everything else’.

It would be nice if Congress could address the problem first, but they don’t seem ready to act. As a matter fact, forces in the Republican Party are leaning towards radical negative changes, such as the exportation of undocumented 11 million workers and 4 million US-born children born of undocumented workers. It is estimated that this would cost the economy approximately $1 trillion. All the issues that were talked about in the Republican debate were non economic. At the center of discussion was the appeal of Obama care, undocumented immigrants, abortion rights, birth control, and voter registration and government interference. With the weakening of Dodd Frank, the potential for bank failures being disastrous to our economy has increased, as banks have become much larger than too big to fail and are more highly concentrated than they were 2008. What should have been discussed is the unregulated effect of Citizens United on our political system, the reinstatement of Glass Steagall Act, the limitations of derivative ownership by banks, OR, to break up the banks so that ‘too big to fail’ is no longer a problem. In addition, the solution I see is spending by the federal government for capital improvements for our roads and infrastructure, education and retraining and a new war on poverty. None, of this under current political conditions is a possibility. If a market crash occurs, the 2016 elections are up for grabs and anything can happen, including a Donald Trump presidency and a Republican dominated Congress. The ‘laissez fair’ administration of Hover would be back in control; which I assume will have similar outcomes to 1929. A recent article in the New York Times indicated that federal courts have said that the 2008 bailout of banks and AIG was not legal. If bailouts are not allowed, if another crash occurs, what is the alternative? A 1929 type shake up?

Today 8/21/2015 Stocks are taking a tumble today because of lower oil prices, a consumer price index report that it rose a slightly less than expected 0.1% in July and problems between North and South Korea. The Fed has no scenario to save the economy from deflation. Crude oil was trading down at $40.14. This is the lowest price in 6 ½ years and a break below 40 dollars would indicate my deflation worries are justified. The Fed is in a quandary. On one hand it knows that eventually it has to raise interest rates. On the other hand, with a low inflation rate, it is concerned about a deflationary economy.  With interest rates near 0, how will the Fed stimulate the economy?

Rallies are expected. However, the Dow below 15,885 has as a downside projection of 13,377!

At the time of this writing the Dow today 8/21/15, is at 16,459 down 531!!!!!. I show support at 15,885. However, if that is broken on the downside, the Dow will have a head and shoulders top, with a downside projection of 13,377. If the downside scenario is as bad as I think, the ultimate test for the Dow will occur at approximately 10,000. The NASDAQ and Standard & Poor’s are the only major averages holding their own. However if the NASDAQ, now 4,706, breaks below 4,545, we don’t have support until 2,500. If the S&P 500, now 1,970 breaks below 1,820, we see downward support at about 1,177 New highs are diminishing and new lows are increasing. Technically, in my opinion, this market is ready for a big drop. The market’s leader Apple is down 7% today at 106. Its downside projection is 64. As a side note, the DAX at 10,124 has already broken below it’s head and shoulder neck line and has a projection of about 5000. The Shanghai index also has broken below an important low at 3,507 and has a downside projection of 2000. Of particular concern is the Russian market, which could indicate an unstable Russia, which will not be good for anybody.

Morning Update 8/24/2015

Asian markets crash! Shanghai down 8.5%. Euro 100 down 4.7%. Dow opening at 15,370, below our major support at 15,885. NASDAQ  opened at 4,293, below our  4,545 major support. S&P 500  opened at 1,867, support at 18,200. Oil at 38.97 a barrel, endangering bonds of oil producing countries. 10 year treasury yield down 4.1% at 1.97%, indicating traders are dumping stocks and going into the safe US treasuries.

I would expect a false rally to occur either today or tomorrow. Use it for selling and buying US treasuries.

LONE BEAR #7/This is just the beginning!

This is the 7^th Lone Bear Market Letter I have written. Have I got your attention yet? Are you self-satisfied with your investments in the stock market? After all, what else could you do, but invest in the stock market, as interest rates are so low. Just like Pavlov’s dog you have been trained to stay in the stock market. On the long run the market goes up? Right? However, as economist John Maynard Keynes said. “On the long run, we are all dead!” I don’t expect this to be a normal correction. For reasons stated below, this could be another 1929 depression scenario. Sorry, I hope I’m wrong

Capitalism doesn’t work for everybody. I have never been sure what will start the fall. It could be that lower oil prices will bankrupt countries like Brazil, Russia and Mexico causing a cascade of bank failures? I am concerned about social unrest in places like Ferguson Missouri and the possibilities of terrorism. Or, it could be that the Fed is unprepared to deal with a deflationary scenario. (See Surprise Deflation above on my blog). It could be a crisis in China, because of their overwhelming debt (200% of GDP) and falsely stimulated economy. Or, It could come from something unexpected like North Korea attacking South Korea. However, in my opinion, I have stated that the big problem for me, continues to be weak economic conditions that permeate our economy because of the bottom 49% of Americans are not participating in our capitalistic growth. Productivity has increased because of technology, leaving the common worker behind.   The bottom 49% of Americans continues to suffer, with all the increase in income going to the top 1%. According to the book, CAPITAL IN THE TWENTY-FIRST CENTURY by Thomas Piketty, and Karl Marx’s Das Kapital, capitalism is in trouble when capital and labor are out of balance.. During the 1960’s, the Johnson administration, besides giving us civil rights, brought poverty down from 23% to 11%, with Medicare and the ‘war on poverty’ leading the way. Today 16% of American children and 14% of Americans live in poverty. That’s 47 million people with an income level of $19,000 per person or $24,000 per year per family. Capitalism and free markets have given the United States greatest lifestyles in the world. However, with capitalism there are winners and losers and when there are too many losers, without a safety net, the system has a potential for folding. How many bars of soap, how many houses and how many cars can a multi billionaire own? We have a consumer oriented economy, where capital and labor now seems to be out of balance. The advantage of our capitalistic system is when these imbalances occur, there  is dramatic shifts in the economy which can  cause a stock market crash, which will eventually lead to solutions. As Churchill’s famous of saying, ‘the Americans finally decide to do the right thing, after they tried everything else’.

It would be nice if Congress could address the problem first, but they don’t seem ready to act. As a matter fact, forces in the Republican Party are leaning towards radical negative changes, such as the exportation of undocumented 11 million workers and 4 million US-born children born of undocumented workers. It is estimated that this would cost the economy approximately $1 trillion. All the issues that were talked about in the Republican debate were non economic. At the center of discussion was the appeal of Obama care, undocumented immigrants, abortion rights, birth control, and voter registration and government interference. With the weakening of Dodd Frank, the potential for bank failures being disastrous to our economy has increased, as banks have become much larger than too big to fail and are more highly concentrated than they were 2008. What should have been discussed is the unregulated effect of Citizens United on our political system, the reinstatement of Glass Steagall Act, the limitations of derivative ownership by banks, OR, to break up the banks so that ‘too big to fail’ is no longer a problem. In addition, the solution I see is spending by the federal government for capital improvements for our roads and infrastructure, education and retraining and a new war on poverty. None, of this under current political conditions is a possibility. If a market crash occurs, the 2016 elections are up for grabs and anything can happen, including a Donald Trump presidency and a Republican dominated Congress. The ‘laissez fair’ administration of Hover would be back in control; which I assume will have similar outcomes to 1929. A recent article in the New York Times indicated that federal courts have said that the 2008 bailout of banks and AIG was not legal. If bailouts are not allowed, if another crash occurs, what is the alternative? A 1929 type shake up?

Today 8/21/2015 Stocks are taking a tumble today because of lower oil prices, a consumer price index report that it rose a slightly less than expected 0.1% in July and problems between North and South Korea. The Fed has no scenario to save the economy from deflation. Crude oil was trading down at $40.14. This is the lowest price in 6 ½ years and a break below 40 dollars would indicate my deflation worries are justified. The Fed is in a quandary. On one hand it knows that eventually it has to raise interest rates. On the other hand, with a low inflation rate, it is concerned about a deflationary economy.  With interest rates near 0, how will the Fed stimulate the economy?

Rallies are expected. However, the Dow below 15,885 has as a downside projection of 13,377!

At the time of this writing the Dow today 8/21/15, is at 16,459 down 531!!!!!. I show support at 15,885. However, if that is broken on the downside, the Dow will have a head and shoulders top, with a downside projection of 13,377. If the downside scenario is as bad as I think, the ultimate test for the Dow will occur at approximately 10,000. The NASDAQ and Standard & Poor’s are the only major averages holding their own. However if the NASDAQ, now 4,706, breaks below 4,545, we don’t have support until 2,500. If the S&P 500, now 1,970 breaks below 1,820, we see downward support at about 1,177 New highs are diminishing and new lows are increasing. Technically, in my opinion, this market is ready for a big drop. The market’s leader Apple is down 7% today at 106. Its downside projection is 64. As a side note, the DAX at 10,124 has already broken below it’s head and shoulder neck line and has a projection of about 5000. The Shanghai index also has broken below an important low at 3,507 and has a downside projection of 2000. Of particular concern is the Russian market, which could indicate an unstable Russia, which will not be good for anybody.

Watch out below!

Stocks are taking a tumble today because of lower oil prices and a consumer price index report that it rose a slightly less than expected 0.1% in July. The likelihood that the fed will raise rates starting in September in my opinion has increased to 90%. Crude oil was trading down a $1.93, or 4.5% at $40.69. This is the lowest price in 6 ½ years and a break below thirty dollars would indicate my deflation worries are justified. The fed is in a quandary. On one hand it knows that eventually has to raise interest rates. On the other hand, with low a inflation rate, it is concerned about a deflationary economy. See our ’surprise deflation’ article above. The Dow’s low today is 17,282, which is a new recent low. The NASDAQ and Standard & Poor’s are the only major averages holding their own. The FTSE is down almost 2% today and closing on its low for the day down 1.9% at 6403. The DAX is similarly in new low ground down 2.14% for the day closing of the low of 10,682. The Chinese market is also closed at a new recent low down 1.3% for the day at 23,167. Also in a new recent low is the Russell 2000 down 1% for the day at 1205. Leadership is also starting to fade as Apple is only a couple of points away from making a new low and 115. New highs are diminishing and new lows are increasing. Technically, in my opinion, this market is ready for a big drop.

The bottom 49% of Americans continues to suffer, with all the increase in income going to the top 1%. According to the book, CAPITAL IN THE TWENTY-FIRST CENTURY, and Karl Marx’s Das Kapital, capitalism is headed for a big challenge. During the 1960s the Johnson administration brought poverty down 23% to 13%, with Medicare and the war on poverty leading the way. Today 16% of American children and 14% of Americans live in poverty. That’s 47 million people. That’s an income level of $19,000 per person or $24,000 per year per family. Capitalism and free market has given the United States greatest lifestyles in the world. However, with capitalism are winners and losers and that there are too many losers, without a safety net the system has a potential for folding. How many bars of soap, how many houses and how many cars can a multibillionaire own. We have a consumer oriented economy, where capital and labor now seem out of balance. The advantage of our capitalistic system is when these imbalances occur, dramatic shifts in the economy can’s cause a stock market crash, which will eventually lead to solutions. As Churchill’s famous of saying, ‘the Americans finally decide to do the right thing after they tried everything else’. It would be nice if Congress could address the problem first, but they don’t  seem ready to act. As a matter fact, forces in the Republican Party are leaning towards radical negative changes, such as the exportation of undocumented 11 million workers and 4 million US-born children, born of undocumented workers. It is estimated that this would cost the economy approximately $1 trillion. All the issues that were talked about in the Republican debate were noneconomic. At the center of discussion was the appeal of Obama care, undocumented immigrants, abortion rights, birth control,  voter registration and government regulation. The weakening of Dodd Frank, has the potential for being disastrous to our economy, as banks have become much larger than too big to fail and are more highly concentrated than they were 2008. What should have been discussed is the unregulated effect of Citizens United on our political system, the reinstatement of Glass Stegall Act, the limitations of derivative ownership by banks, to break the banks so that’ too big to fail’ is no longer a problem, capital improvements are made to our roads and infrastructure and a new war on poverty becomes initiated.

A recent article in the New York Times indicated that federal courts have said that the 2008 bailout of banks and AIG was not legal. If bailouts are not allowed, if another crash occurs, what is the alternative? 1929 type shake up?

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

The Chinese Surprisingly Devalue its currency.

Surprise! That miraculous Chinese economy is in trouble. For that matter so is ours, but it is just less apparent. A Strengthening dollar won’t help. The only two markets that are still in an uptrend are the S&P 500 and the NASDAQ. All other markets in the US and worldwide have rounded tops and are definitely in a downturn. I am very much concerned that this economic crisis that is about to unfold, may be worse than 2008. The courts  have questioned whether bailouts of the banks are legal. Also a taxpayer burden bailout seems out of the question with the Republican dominated Congress. All on the surface seems rosy bright. Car sales, home prices, corporate profits are all up. However, they are all based on the consumer middle-class resurgence. Capitalism is great, but not for everybody. And when over 47% of the population is suffering, it will be difficult for the upper 50% to continue its hubris. Watch out below!

The Bull Market is over

The following markets are now in a downtrend: Dow industrials, Dow transports, that utilities, Russell 2000, European markets, China, oil, precious metals and the bond market. I believe it’s just a matter of time before the NASDAQ and S&P index join this group. Oh I might add one more thing, Apple, the NASDAQ leader, just broken to new low ground for the year!

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

The Bull Market is over

The following markets are now in a downtrend: Dow industrials, Dow transports, that utilities, Russell 2000, European markets, China, oil, precious metals and the bond market. I believe it’s just a matter of time before the NASDAQ and S&P index join this group. Oh I might add one more thing, Apple, the NASDAQ leader, just broken to new low ground for the year!

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

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

A DAY FOR THE BULLS

Oil is up 20% in four days. So, is the problem caused by low oil price mentioned in the Line Bear Letter over? Also, the Greek stock market surged 12% today. Are our problems over? Let the market tell us. Let’s see if the markets Dow, NASDAQ and S&P can get above their December high of 18,068, 4,814 and 2,092?

WHAT DOES THE MARKET WANT TO DO? It is time for the market to tell us what to do. See the chart below:  For instance, if the Dow breaks above 17,400  and then makes new highs above 18,086, it would appear that my Lone Bear scenario is either wrong or delayed. However, if the Dow breaks below 17,147 and then breaks below the December low of 17,069 my Bearish scenario would be on track for the Lone Bear Letter! It is the same with reading the NASDAQ and S&P.

THE DAY THE MUSIC DIED! By the way it was the 56th anniversary today ( Feb 3, 1959) of the airplane crash in Clear Lake IA that killed Buddy Holiday, The Big Bopper and Ritchie Valens.

NOT EVEN NATE SILVER KNOWS
Nate Silver, the great prognosticator of elections has thrown in the towel in trying to predict either the economy or the stock market. As I said in the Lone Bear Lette, metrics and analytics can’t do it. It stills takes the human mind to sift through all the written material and to be able to judge human psychology in order to predict the economy or the stock market. Then why did I predict a Bear Market? Sometimes in the human brain things come together like a combination lock and there was a loud click. That’s what happened for the Lone Bull Letter in 1981 when interest rates were 21% and everybody was bearish and I predicted the market would go from 1000 to above 10,000. I have a talent, for being able to read very quickly and to sensitize what I read. It’s just a human feeling when those tumblers fall into place and the lock opens. If you read Isaac Asimov’s Robot Series or his Foundation Series you know how difficult it was for Harry Sheldon, Nate Silver and Carl Birkelbach to predict the future.

                                    Dow                 NASDAQ                   S&P

Current                     17,666                4,727                      2,050

December High          18,086                 4,814                      2,092

January High              17,400                 4,700                      2,013

January Low               17,147                 4,605                      1,991

December Low            17,069                 4,545                      1,973