Saturday, June 13, 2009

Charts Show Volume a Fallen’...

Listen up Greenshoot tokers, it’s early morning and it’s been 4 months since the March 6th GS 666 Satan low! Plenty of time for the stimulus and fiat HIGH to wear off! I see you over there, slumping in your chair. It won’t be long before you can’t even keep your eyes open and then you’ll hit the floor with a THUD!

That’s because all drugs wear off eventually and we all know that with hard core drug addicts, like the politicians and central bankers of America, they usually won’t admit they have a problem until they do a face plant in public where everyone can see them. That face plant is coming… soon… I can see it.

Trillions in stimulus, phony “stress tests,” “Quantitative Easing (default/printing), suspension of common sense accounting with mark-to-fantasy, Money laundering through the banks; through AIG, through Chrysler, through GM, and others… lies upon lies, upon lies – and we have exactly WHAT to show for it?

Well, we have a ton more public debt, an equity market that is 40% higher than it was, a bond market that is 30% lower than it was, a dollar that is 11% lower than it was = less purchasing power, millions fewer with employment, and no new factories to speak of.

Picture by AZRainman

Oh, but we do have an Administration, who being high on the drug of the fiat power, dictates who will be CEO, who will get money from the sale of assets, and which businesses will survive and which will die. NO RULE OF LAW. It’s quite a TRIP, but like all drug induced highs, the feeling of power is an illusion, it is temporary.

Market forces will punish the addicts for their INDISCRETIONS, their LAWLESSNESS.

Picture by AZRainman

Capital in the hands of the sober will refuse to form when the rule of law is not followed – no new factories, no new jobs. Those who are thinking clearly will not finance the addict’s game with new debt – that will mean higher interest rates. And without real change the event horizon for the “events” that history shows follow these types of historic economic events is drawing near.

No, a bond and equity market face plant will be a GOOD THING. The addicts might then actually take the first step – acknowledge that THEY have a problem and that THEY are the problem. Only then will real and meaningful change be possible. It’s a sad process to watch, one that is unstoppable now in my opinion.

Of course, just like going into Iraq without an exit strategy, one must be careful about what comes after the fall. I know what I’d like to see, and I’m still CERTAIN the central bankers have a plan for what THEY want to see too. Those visions are absolutely different as my vision of the future does not include them AT ALL. Thus the PEOPLE, if they want to live FREE into the future, are going to have to ensure that the central bankers no longer rule the world. It’s going to be tough.

And how do I know this face plant is not too much farther away? Because this bear market rally is going to end like all overpriced bear market rallies do, on lower volume.

The government and their minions who are supporting the market are not as big as the market, they cannot possibly become the entire market, and like the little children they are will soon get the spanking they deserve.

How’s that for fundamental analysis? Did I mention the mathematically impossible numbers of DEBT? LOL, let’s look at the charts and focus on the volume…

Here is a daily view of the DOW over the past 6 months. Note that the volume is DIVERGING rapidly from price. Also note that I have a fresh sell signal on the daily stochastics and a lower high on the RSI despite rising price, another negative divergence:

Note, too, that the DOW has NOT made a new significant high. Also, the Transports have stubbornly refused to make a new short term high and have also failed, so far, at getting above the 200dma.

Here’s a weekly view of the DOW, you can see the declining volume very clearly. The weekly stochastic is very overbought, although the latest weekly candle does not look like a classic top candle despite the rapidly falling volume. Volume wins, however, it is what confirms price – OR NOT:

Next is the SPY daily, same basic picture:

Now let’s look at the financials in the XLF… again, falling volume, a sell signal on the stochastic and a divergent RSI:

Trumped up and manipulated bear market rally from start to finish. The drug addict may be able to stay in their chair a little longer, but the face plant is inevitable.

That’s it – all the charts I wanted to show! Falling volume diverging against rising prices – really all you need to know, it’s sending us a message.

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