It appears, at least for the time being, the “Everything Bubble” remains unstoppable. David Stockman has some ideas of what might actually destroy it. Let’s take a quick look.
Among the many sharp edges of the pin are these:
- the virtual certainly of a recession within the next two years and a typical 30%-50% drop in earnings;
- the epochal Fed pivot to QT (with other major central banks to follow) and the consequent massive drainage of cash from the bond pits;
- the mad man in the Oval Office and (among other follies) his swell new Trade War, which absolutely will get out of hand globally;
- the impending “yield shock” which will thunder through the financial markets when Federal borrowing hits $1.2 trillion in the coming year–on the way to $2 trillion+ annual deficits as far as the eye can see;
- a deeply impaired underlying main street economy which is groaning under $68 trillion of public and private debt and a reverse robin hood financial regime that has left 80% of the population on welfare or struggling to make ends meet on earnings that barely keep up with inflation; and
- the swaying giant red elephant in the global economic room—meaning China’s historically unprecedented and freakish explosion of debt, manic building, monumental speculation, systematic lying and fraud and serpentine centralized command-and-control that is destined to end in a spectacular implosion.
Yet the financial system has been so corrupted by the central bank’s long-running regime of financial asset inflation and price falsification that it no longer recognizes anything that is important, fundamental and persisting. Instead, owing to the cult of an ever rising stock market, Wall Street is hopelessly enthrall to recency bias and context-free short-term deltas in the incoming monthly data.
The latter are virtually meaningless, of course, under today’s central bank driven Bubble Finance regime because the direction of economic causation has been reversed.
Mr. Stockman’s opinion, in my view, is dead on.
Having said that, we do not need a fundamental trigger to get the ball rolling. The stock market selling at its highest valuation level in history, based on Shiller’s Adjusted P/E (as discussed here many times before), is reason enough.
The trick is identifying the cyclical composition of the market and knowing exactly WHEN this cyclical market composition will lead to a market collapse. Luckily, that is exactly what we do here. If you would like to find out exactly what the stock market will do next, based on our timing and mathematical work, please Click Here.
Back to the stock market.
– State of the Market Address:
- The Dow is back above 25,000
- Shiller’s Adjusted S&P P/E ratio is now at 33.71 Slightly off highs, but still arguably at the highest level in history (if we adjust for 2000 distortions) and still above 1929 top of 29.55.
- Weekly RSI at 59 – neutral. Daily RSI is at 54 – neutral.
- Prior years corrections terminated at around 200 day moving average. Located at around 19,000 today (on weekly).
- Weekly Stochastics at 52 – neutral. Daily at 50 – neutral. .
- NYSE McClellan Oscillator is at +53 Neutral.
- Commercial VIX interest is now 30K contracts net short.
- Last week’s CTO Reports suggest that commercials (smart money) have, more or less, shifted into a bullish positioning. For now, the Dow is 2X net short, the S&P is at 3X net short, Russell 2000 is net neutral and the Nasdaq is now 2X net long.
In summary: For the time being and long-term, the market remains in a clear long-term bull trend. Yet, a number of longer-term indicators suggest the market might experience a substantial correction ahead. Plus, the “smart money” is positioning for some sort of a sell-off.
ELLIOTT WAVE UPDATE:
Since many people have asked, I will attempt to give you my interpretation of Elliott Wave and how it is playing out in the market. First, I must admit. I don’t claim to be an EW expert, but I hope my “standard” interpretation is of help.
Let’s take a look at the most likely recent count on the Wilshire 5000. Charts courtesy Daneric’s Elliott Waves
Explanation:
Long-Term: It appears the Wilshire 5000 is quickly approaching the termination point of its (5) wave up off of 2009 bottom. If true,we should see a massive sell-off later this year. Did it already complete? Click Here
Short-Term: It appears the Wilshire 5000 might have completed its intermediary wave 3 and now 4. It appears the market is now pushing higher to complete wave 5 of (5). If true, the above count should terminate the bull market. Did it already complete? Click Here
If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.
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