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The market is now in position to crash. This is not something that will
arrive as “a bolt out of the blue” – it has been setting up to do this for a
long time. On the 6-month chart for the Dow Jones Industrials below we can
see that on Friday it broke down from a Head-and-Shoulders top that had been
forming since February, and the longer-term 5-year chart for the S&P500
index lower down the page makes clear that a giant top started to form with
the January 2018 peak, which means that it has been setting up for a
bearmarket for fully 16 months now.
A few weeks back we had spotted the H&S top forming but we weren’t sure
whether a symmetrical Right Shoulder to complete the pattern would develop,
which would have it holding up for perhaps another month, but by last week it
had become clear that it would likely settle for a shorter stunted Right
Shoulder, which is why we decided to “put our best foot forward” and go for
bothinverse ETFs,
andselected Puts.
In the event this is what happened and the breakdown on Friday beneath “last
ditch” support means that it is likely to crash next week.
What very often happens when markets crash is that key support is breached
on a Friday, after which traders have the weekend to brood about it and many
decide to hit the sell button the following Monday, and a near tsunami of
sell orders hits the market at once forcing a steep self-feeding decline.
That is what looks set to happen this Monday.
Last week Wall St and the MSM were singing the praises of strong earnings to
be reported in coming weeks, and suggesting that this would buoy the market,
but unfortunately the market looks a lot further ahead than that, typically
up to 9 months ahead, and it has discerned nasty storm clouds on the horizon,
presaged by the inverted yield curve and partly resulting from fallout from
the trade war. The Neocons, being adversarial by nature, view both Russia and
now China as enemies, because they stand in the way of global hegemony, and
since they cannot defeat them militarily are attacking them economically.
Unfortunately however, trade is a two way street and the attempt to inflict
damage on your trading partners is going to drag you and everyone else down
too. This is why what is going on now is very similar to what went down in
the 1930’s with protectionism, trade wars and then depression leading to a
major war, and we have the perfect flashpoint for a major war in the form of
Iran, which China and Russia cannot afford to see taken down, because if it
is, the balance of power will shift and they will be next. The Neocons (and
Israel) have a sense of urgency about attacking Iran, because they know they
have a limited time window to do it. This is because China is set to grow much
faster than the US, and the other major powers are moving to de-dollarize,
knowing that if they succeed the dollar will crash, and the debt-wracked US
economy will implode, which will make it impossible to fund the US
military-industrial complex at current levels and the vast global US military
machine whose mission is to impose the US’ will on the rest of the world.
Here is a picture showing the key on the keyboard that is likely to see
the most use by investors shortly…
The impending crash will be much more severe and have much more serious
consequences than any hitherto, because of the catastrophic debt overhang
that has built up. In this situation gold will become the best investment
because it has an intrinsic value that cannot be eliminated. We had surmised
before Friday that gold would probably be taken down near-term during the
crash phase because of a dash into cash driving a temporary spike in the dollar,
but on Friday at least that didn’t happen and instead the Precious Metals
sector showed strength, suggesting that the dollar may already be in trouble
for the reasons mentioned above. This may just have been a “pop” on the part
of the PM sector, which could yet turn and drop with the market. We will have
to wait and see what happens next week – if the broad market drops hard and
the PM sector advances it will mean that it has already acquired safe haven
status, and in general it will be safe to buy the sector with stops beneath
recent lows.
To conclude, a devastating crash looks imminent and full defensive mode is
the order of the day.
End of update.
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