Monday, August 15, 2011

The Endless Babbling Out Of Humpty Dumpty Wall Street On What Is Causing Financial Market Volatility And An Update On The Volume Cycle Count Algorithm

Here we go again with the supposed financial experts attempting their after the fact analysis of what happened over the last few weeks.   It’s deja vu all over again.  And, by the way, this was(is) a collapse.  We had a handful of down days that were as bad as any ever seen including  the 2008/2009 implosion.   And it was far worse than the “flash crash” of April/May 2010.  There is compelling evidence this is far from over.   And just as 2008 started with Wall Street wildly bullish, so too did 2011 start the same way.  And we highlighted both instances with posts early in 2008 and 2011.   Is anyone really listening to Wall Street anymore?  Seriously? 

Any time there is a post-event analysis by politicians and banksters, the world is often relying on dubious and faulty conclusions  being fit into dubious causational theories.  These theories are almost always tied to activities that correlated with an actual event.  Or as we wrote some years ago, does the Fed cause Christmas?  (The same fundamental analysis used by politician Al Gore to convince us humanity is the source of all planets and moons in our solar system experiencing the same warming we are seeing here on earth.)  We see this nonsense with endless post-event analyses of supposed financial experts and politicians.  

Trying to assign correlation with causation as is most often done in cases like this, is complete and utter nonsense.  In an environment where the global financial system and economies are more interconnected than ever, and where neoliberalism relies on growth in emerging markets to sustain its corporate profit bubble, why have countless international markets not made new highs since April/May 2010?  Over the last year we have shown some international markets rolling over since the April/May 2010 peak.  Many never made new highs after that date.   We wrote early on in this divergence that money was likely being repatriated to the U.S. and that was why the American equity indices were divergent in making new highs.  And, then later we wrote that once the capital flow data became available, that is exactly what was happening.   So, once that money was repatriated, without substantial new fundamental demand in U.S. equities or new Federal Reserve programs to drive financially-speculative assets higher, eventually U.S. markets were going to follow international markets. 

Without going back and looking at the exact day, I believe we called the April/May 2010 date to be a turning point for equity markets about a year in advance of that date.   By the way, the banking index in the U.S. never recovered and exceeded that market top either.   That was an ominous signal in itself and again something we pointed out more than once.  The signs were there and the nonsensical correlations of debt downgrades, concern about the future economy or European debt crises have little to any relevance.  Markets are not the economy as we have written countless times over the years.  If they were, we never would have had a substantial rally off of the 2009 lows because the economy never recovered.

There is some level of reality of why markets just crashed that you will never read in the financial press – because it was just that time.   No one understands the factors that drive time elements; although I may attempt to use esoteric factors to gain some advantage in determining what they are.  

Remember, one of our long term theses is that we are in a cycle of volatility.  And as we remarked before the 2008 crash, Wall Street’s self-assigned financial brilliance was pure delusion.  We wrote that Wall Street cannot tame markets.  And that the temporary appearance of low volatility achieved through quantitative finance was purely an illusion.  And we actually showed how compression and volatility was building underneath the calm exterior of markets.  And that calm would eventually unwind and be replaced with volatility.  Today’s environment is no different.   

Some weeks ago we showed the unmanipulated advance-decline data when the market was within a few points of the market peak.  And its behavior had clearly changed and showed solid measurable proof that the underlying market demand had a mini collapse while the market was trying to make new highs.  Some weeks later, price followed the data south into this crash. 

Below is the volume cycle count algorithm we have shown numerous times.  This is a weekly occurrence.  We showed its confirmation of a rally off the 2009 lows, we showed it collapsing in early 2011 on the daily graphic and a few times other times in between.  It has predicted both the 2008 crash and this crash by heading south well in advance of price action. 

By the way, the volume cycle count algorithm reached its most extreme upward reading in April/May of 2010 of any time in the last handful of decades or as far back as the data is available that I need to calculate it.  I guess on some level this would make perfect sense because never have we seen such a level of extreme market leverage and manipulation through the use of free Federal Reserve money, government bailouts of financial crimes and criminals, derivatives, dark pools, quantitative finance, computer trading, rigged trading results at Wall Street firms, etc.   Never in the history of humankind have we ever seen such massive financial speculation and fraud that serves absolutely no purpose to enriching democracy, human development or our lives. 

We have never in the history of humankind seen anything like the financial Frankenstein that exists today.  This is a completely new monster and no one has any experience dealing with it.  It’s like a coming tsunami that no one has ever experienced, and therefore, no one believes possible.  Except this is a financial tsunami.  And just like in Phuket, that means no one will be prepared to deal with its devastation.   Instead of planning to avert a crisis by limiting the financial system’s rigging of our economy, our government and our society, or dealing with the crisis when it showed its head in 1989 or 1994 or 1998 or 2000 or 2001 or 2008 or 2009 or 2010, politicians and financial clowns with nary a concern about what is best for society or democracy simply let the rot grow unchecked instead of heeding the warnings this unstable monster clearly signaled countless times 

Regardless of all of the rationalized pablum spewed by politicians and financial clowns, we have no idea how this market will act under extreme stress.   We have no idea of the devastation it will eventually cause.    No one person or firm or computer can factor in every possible input, every possible turn of events and every possible outcome.   We have no idea because we have never seen this type of market or financial storm before.  We are not only living through history but we are also making it.  The system could and should have been dismantled years ago but instead corruption and appeasement of evil allowed it to continue to grow in absurdity and complexity. 

Remember, over the last six months we have written of our concern about a coming market crash quite a few times.  And I said that while it may never happen, I would not be surprised to wake up one day and see the Dow down a few thousand points at the open.  No one can honestly tell anyone what to expect other than it could be more devastating than anything we have ever imagined. 

…….Or maybe we will come to our senses before that happens.  That will only happen if we push aside the banksters and a corporatist political stooges and restore economic democracy and the rule of law before the system completely implodes.  

2011-08-14_1913

posted by TimingLogic at 7:11 PM

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