A positive week with the Dow Jones up 11 points (+0.04%) and the Nasdaq up 75 points (+0.96%)
At the initial glance it is easy to dismiss today’s market conditions as nothing more than the continuation of a bull market. At the very least, a consolidation. Yet, the situation is not that simple. Despite the Nasdaq/Russell sitting near their all time highs, the Dow and other indices are not following through. With the Dow & NYA remaining well below their January highs.
That is exactly what we discuss in our weekly analysis and explain why. Most importantly, we discuss what happens next, why and most importantly WHEN. If you would like to find out what the stock market will do next, in both price and time, based on our mathematical and timing work, please Click Here
There are two very important things we have to consider this week.
First, The Fed Accelerates its QE Unwind
The FOMC, in its August 1 statement, mentioned “strong” five times in describing various aspects of the economy and the labor market – the most hawkish statement in a long time. Rate hikes will continue, and the pace might pick up. And the QE unwind will accelerate to final cruising speed and proceed as planned. The Fed stopped flip-flopping in the fall of 2016 and hasn’t looked back since.
When the economy eventually slows down enough to where the Fed feels like it needs to act, it will cut rates, but it will let the QE unwind proceed on automatic pilot toward “normalization,” whatever that will mean. That’s the stated plan. And the Fed will stick to it – unless something big breaks, such as credit freezing up again in the credit-dependent US economy, at which point all bets are off.
The above is incredibly important. This is the primary driver behind today’s “Everything Bubble” and what we see in the overall economy. Should QE and associated liquidity go away, so will exuberant prices. It is as simple as that.
On top of that not everything might be going as well as the establishment wants you to believe. Have you ever wondered why your wages are not going up if we are at full employment? If not, Paul Craig Roberts has done it for you.
Americans Live In A World Of Lies
The US government and the presstitutes that serve it continue to lie to us about everything. Today the Bureau of Labor Statistics told us that the unemployment rate was 3.9%. How can this be when the BLS also reports that the labor force participation rate has declined for a decade throughout the length of the alleged economic recovery and there is no upward pressure on wages from full employment. When jobs are plentiful, people enter the labor force to take advantage of the work opportunities. This raises the labor force participation rate. When employment is full—which is what a 3.9% unempoyment rate means—wages are bid up as employers compete for scarce labor. Full employment with no wage pressure and no rise in the labor force participation rate is impossible.
The 3.9% unemployment rate is not due to employment. It results from not counting discouraged workers who have ceased to search for jobs because there are no jobs to be had. If an unemployed person is not actively searching for a job, he is not counted as being in the labor force. The way the unemployment rate is measured makes it a hoax.
We highly encourage you to read the report above in full. It is full of gold and satire.
As a result, a very simple setup we have discussed here over the last few months remains.
The stock market is selling at its highest valuation level in history if we make adjustments for 2000 distortions. On top of that the FED is tightening, the yield curve is near inversion, liquidity is going away, deficits are surging, corporate earnings are peaking and if that wasn’t enough, President Trump is launching an unprecedented trade war against, well, nearly everyone.
Our work offers a very simple and somewhat shocking answer to what happens next. Based on our timing and mathematical work, of course. So, will the stock market continue its unlikely run higher or will it finally crash in a spectacular fashion? Please CLICK HERE to find out.
