Some basic Time Cycle Analysis

Here’s a few charts looking at Time Cycle’s that are potentially turning points – I have no Idea (nor does anybody else) whether these will work or whether they will be significant turning points – All I know is that is what the maths is saying.

Chart 1:

1

The Dynamic Time Projection within my  software and displayed in the chart above shows a few high probability dates that could potentially call a high – These calcs have been done using Fibonacci numbers/projections from the swings you can see in the chart.

The expectation is IF the market abides by Fib numbers and Fib time – then these projections ought to catch another market swing

My own personal use of this has not been fantastic – I get too caught up in it being specific! Anyway based on Fib Time projections these are the approx. dates.

Chart 2:

2

In chart 2 we have my personal favourite Time Cycle projections – I’ve analysed all the market swings displayed in the chart, and projected the most likely time periods for the next high as displayed in the Indicator window on the chart.

Again – no one in the world can 100% say whether it’s a temporary high or the top – my experience just tells me that can’t be done.

What the chart is telling me is, IF the market is following the same swing cycles as are displayed in the chart and it’s followed of the past then the most likely time (displayed & shown) for a high is calculated.  (End Nov 2013 – Jan 2014)

Chart 3:

3

Last chart – Chart 3 – rather than using TIME, I’ve projected PRICE

Based on previous market swings over the past year or so – the area displayed on the chart  is a high probability target zone and especially the shaded section – price is there NOW!

I will make a note to try and post this type of analysis once per month on the S&P500 with BOTH Time and Price projections

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Paradigm Shifts

Another great free article by Van Tharp

Van

Paradigm Shifts for Trading Success

(or “AH-HA”s for Traders)

by Van K. Tharp, Ph.D.

View              On-line

When the topic of paradigm shifts came up at a workshop, I suddenly started talking about the all the paradigm shifts that were in my book Trade Your Way to Financial Freedom.  I had never before thought about the book in terms of paradigm shifts, but suddenly all of the information about the shifts discussed in my book was pouring out of my mouth.  After being totally amazed, I decided to spend some time thinking about what I’d said.  At the time of the workshop, I remarked that there were four major paradigm shifts in my book.  I have no idea where that number came from, but I was able to elucidate four of them very well.  Since that time, with considerable thought, I’ve only been able to come up with two more.  Nevertheless, these are major paradigm shifts for most traders and investors.

Trading success has very little to do with what’s outside of you, such as what the market does.  Instead, you must determine who you are and what your objectives are.  Once you have done that, you can design a trading system that fits you.

Most people believe that trading success has to do with the markets, with indicators and analysis, and with finding some magical edge that will help them perform slightly above their competitors.  This is totally wrong!  Instead, trading success is an inner search.  It has to do with finding yourself.  Who are you and who do you choose to be? When you’ve answered those questions, you can then decide how to express the new you through the markets.  However, this is a major decision.  Most people give it no credence or, even when they are aware of it, no time.

There is no Holy Grail in the markets outside of you.  But there is a Holy Grail and that comes from developing a trading system that fits you. When you do this you can do much more than outperform the majority of market players.  You can achieve levels of performance that others might think are impossible.

Academic psychology is full of people who have done marvelous research studying the shortfalls of the average trader.  As a result, economists are beginning to say perhaps the markets are not efficient.  And, perhaps by studying human frailties, one can begin to predict how the markets are not efficient.  Thus, the field of behavioral finance has been born.

I consider myself to be a student of behavioral finance and one of the few people who is really helping others to apply it.  However, applying behavioral finance doesn’t mean predicting the inefficiencies in the market.  Applying it means working on yourself to make sure you don’t have these inefficiencies.  However, that is too much of a major shift for most people who are into what the markets are doing.  But, when I talk about traders making consistent 50-100% returns in the market with little risk, the people who believe it is all outside of themselves think we’re doing the impossible.

You don’t have to predict the market to make money.  Instead, making money comes from controlling your exits. 

I’ve discussed this one extensively many times.  The golden rule of trading is “Let your profits run and cut your losses short.”  What does that have to do with prediction? Absolutely nothing.  Instead, it has everything to do with getting out of the markets using a systematic plan.  Enough said!  However, this one can stimulate an argument in many of my students—even those who have read Trade Your Way to Financial Freedom several times and think they understand it.

The fourth paradigm shift is simply an elaboration of the third.

You don’t have to be right to make money.  Instead, you must understand R-multiples, expectancy and opportunity.

Suppose you trade high priced stocks that are going up consistently.  You get into the stock, but get out immediately if it goes against you by more than $1.  Thus, your risk per share is $1, which I’ve defined as 1R.

Suppose you enter a rising stock and get stopped out.  You’ve lost a dollar or 1R. Suppose this happens five more times.  You’ve now had six 1R losses.  On the seventh trade, the stock takes off on you.  You ride the stock for a $30 profit.  That’s a 30R profit.

You’ve now had seven trades—six 1R losses and one 30R profit for a net of 24R. Let’s even say that your transaction costs amount to 0.5R per trade, so we must subtract another 3.5R.  Even now, we still have a total profit of 20.5R.  If that’s your average for seven trades, what if you make 21 trades each month?  You’d have a profit of 63R while being right on only about 14% of your trades.

If you have not made this paradigm shift yet, you’ll probably find all sorts of reasons to refute the logic of my example.  I’ve heard them all.  And all of them have come from people who were having trouble with this paradigm shift and needed to defend their position.

Big money does not come from any of the factors that most investors and traders focus their attention upon.  Instead, big money comes from having a position sizing strategy that is designed to meet your objectives.

Let’s use the example given above.  Suppose you risked 0.5% of your equity on every trade.  After six losers in a row, you’d be down about 3%.  However, after your 30R gain, you would be up 12%.  And in the scenario above (even assuming huge transaction costs of 0.5R or 0.5% of your portfolio), you’d be up over 30% in a single month on 21 trades.

Again, if you haven’t made this paradigm shift, you’ll find lots of flaws in my logic to support your position.  That’s okay and it won’t bother the people who regularly make big profits while giving up being right.

Let’s assume that three 30R trades in a month is unrealistic.  Three 15R trades is not. It would still give you a net profit of 27R per month.  That’s 13.5% with our 0.5% risk per trade scenario.  And, let’s add in the unrealistic transaction costs.  That would give you a net return of 16.5R per month—or 99% per year.  And again, you are still only right 14% of the time and not risking more than 0.5% of your account per trade.

While my purpose in writing this article has simply been to get you to think and step outside of your own perspective, I’d like to point out that I’ve only scratched the surface on the paradigm shifts most of you could make.  There are probably at least five major paradigm shifts (not covered in this article) in each of the volumes of my Peak Performance Course for Traders and Investors.

How to Make Your Own Paradigm Shifts

One of the greatest skills I can give you is the ability to make your own paradigm shifts—to look at the box you’ve put yourself in by your thinking and then step out.  For those of you who would like maximum benefit and are really willing to “go for the moon,” here is a five-step program for creating your own paradigm shifts.

Step 1: Examine who you are and what you are doing from multiple perspectives.  NLP (Neuro Linguistic Programming) suggests that there are at least three perspectives of every event: your perspective, another involved person’s perspective, and the perspective of an outside observer watching what is going on during the event.  If you were to continually observe yourself from perspectives two and three, then it would not take long at all to jump out of the box.

A simple exercise you might do is to simply replay each day at the end of the day from the perspective of an outside observer.  Amazing changes will occur in you when you do so.

Step 2: Examine your beliefs.  Your beliefs might form a set of concentric circles.  In the middle are the beliefs that you know are true.  Around that are the beliefs you think are true.  The next circle contains beliefs that might be true.  The fourth circle contains the beliefs that you have real doubts about—things on the fringe like the existence of ghosts or UFOs.  And the final circle might be beliefs that you know are not true.

chartMost people tend to spend their lives rejecting beliefs on the outside of the circle and finding evidence to support the beliefs on the inside.  There is even a journal called The Informed Skeptic, which devotes itself to debunking fringe beliefs.  While I’m all in favor of questioning fringe beliefs, I think the beliefs that are probably the most damaging are the beliefs in the inner circle—those we know to be true. Spend time questioning those beliefs and you’ll begin to make major paradigm shifts.  In fact, try questioning one or two of your major assumptions about life that you know are true.  What would life be like if those assumptions were not true?  Questioning of this sort is what would be most profitable and evolutionary for most people.

Step 3: Notice your projections.  One of my true beliefs that is on the “fringe” for most people, has deep psychological underpinnings. It is that what you see “out there” really reflects what is going on inside of you.  If you operate as if the world is a mirror to your own mind, then you will really begin to find out what your boxes are.  And when you know where a box is, it is a simple step to get out of the box and make a paradigm shift.

Step 4: Keep a daily journal of your emotions and experiences.  One of the best ways to observe yourself is to look at the way you were at some prior point in time and to compare that version of you with another version.  You can do this through journaling and reading your journal on a regular basis.  Doing so will really help you observe your paradigms and then step out of them.

Step 5: Meditate regularly.  Meditation is all about listening.  When you listen, you get intuition and immense guidance.  As a result, twenty minutes of quiet meditation is probably the best thing you can do for yourself.  Simply pay attention to your breathing for twenty minutes.  Think of breathing in as “inspiration,” for it very well may be that. And when any thoughts come to you, simply notice them and let them go.  If you get stuck in your thoughts, when you notice that, let it go and return to watching your breath.

These five steps should help you to make immense paradigm shifts on a regular basis.  Plan to do it for the next 30 days.

About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.vantharp.com. His newest book, Trading Beyond The Matrix, is available now at matrix.vantharp.com.

World Gold Update

Please watch attached You Tube clip for content

China Announces That It Is Going To Stop Stockpiling U.S. Dollars

There is a lot of great articles on http://theeconomiccollapseblog.com/ – I would recommend signing up for his free updates.

I’ve previously mentioned on here that China and Russia have over the past decade or so been stock piling Gold and moving away from the US $ – trying to join up the dots is very, very hard – but I think I’ve done it to a half reasonable level – a few more things need to fall into place before I publish and the only reason I’m not publishing them now is because they sound crazy.

It’s even been rumoured that China bought Gold from the US, took delivery and had the gold tested – I can’t verify this, so all it is is rumour and speculation – what they found were tonnes of Gold plated metal!  If this is true it will no doubt find it’s way out at some time, but if it is true it will say a lot about the true Gold holdings in the USA and it also provides a very valid reason to why China are doing what they are doing!

This new article by Michael Snyder is something that I’ve been waiting to happen, it looks as if the early stages are well under way – there is more time to pass, this won’t happen overnight – the possible things to watch out for in future months/years is US Treasuries surpluses when auctioned, this will signal DEMAND is falling and when demand is LESS than supplies it means prices must fall – watch for a potential fall in any Bond bubble.

The ultimate outcome is the demise of the US$ – so far I’ve resisted the temptation to be drawn into this argument, as it;s behaved as expected during the Deflationary Depression we’ve been in since 2000 – this has been proved by the bond market and Elliott Waves books Conquer the Crash, written in 1999 by Robert Pretcher and on my recommended reading list.  for me the only way I can see the US$ failing is if it’s done so on purpose, to make way for a new world/International currency – If that happens then the whole thing will stink of a set-up, I’ll show you the dots to connect if it comes to that.

If this happens it will have repercussions, ALL the way through virtually EVERY market in play and you’ll be looking at 2007/08 all over again – regular readings will note that I’m not expecting the 2009 lows to be taken out, but it could get close – I might be wrong, only time will truly tell – Elliott Wave International and many others are expecting prices to crash well under 2009 levels, so it’s going to be interesting to see what actually happens – it’s important to note that BOTH scenarios are valid.

Enjoy

China Announces That It Is Going To Stop Stockpiling U.S. Dollars

By Michael Snyder, on November 21st, 2013

Money - Photo by Pen WaggenerChina just dropped an absolute bombshell, but it was almost entirely ignored by the mainstream media in the United States.  The central bank of China has decided that it is “no longer in China’s favor to accumulate foreign-exchange reserves”.  During the third quarter of 2013, China’s foreign-exchange reserves were valued at approximately $3.66 trillion.  And of course the biggest chunk of that was made up of U.S. dollars.  For years, China has been accumulating dollars and working hard to keep the value of the dollar up and the value of the yuan down.  One of the goals has been to make Chinese products less expensive in the international marketplace.  But now China has announced that the time has come for it to stop stockpiling U.S. dollars.  And if that does indeed turn out to be the case, than many U.S. analysts are suggesting that China could also soon stop buying any more U.S. debt.  Needless to say, all of this would be very bad for the United States.

For years, China has been systematically propping up the value of the U.S. dollar and keeping the value of the yuan artificially low.  This has resulted in a massive flood of super cheap products from across the Pacific that U.S. consumers have been eagerly gobbling up.

For example, have you ever gone into a dollar store and wondered how anyone could possibly make a profit by making those products and selling them for just one dollar?

Well, the truth is that when you flip those products over you will find that almost all of them have been made outside of the United States.  In fact, the words “made in China” are probably the most common words in your entire household if you are anything like the typical American.

Thanks to the massively unbalanced trade that we have had with China, tens of thousands of our businesses, millions of our jobs and trillions of our dollars have left this country and gone over to China.

And now China has apparently decided that there is not much gutting of our economy left to do and that it is time to let the dollar collapse.  As I mentioned above, China has announced that it is going to stop stockpiling foreign-exchange reserves

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.

It isn’t going to happen overnight, but the value of the U.S. dollar is going to start to go down, and all of that cheap stuff that you are used to buying at Wal-Mart and the dollar store is going to become a lot more expensive.

But of even more importance is what this latest move by China could mean for U.S. government debt.  As most Americans have heard, we are heavily dependent on foreign nations such as China lending us money.  Right now, China owns nearly 1.3 trillion dollars of our debt.  Unfortunately, as CNBC is noting, if China is going to quit stockpiling our dollars than it is likely that they will stop stockpiling our debt as well…

Analysts see this as the PBoC hinting that it will let its currency fluctuate, without intervention, thus negating the need for holding large reserves of the dollar. And if the dollar is no longer needed, then it could look to curb its purchases of dollar-denominated assets like U.S. Treasurys.

“If they are looking to reduce these purchases going forward then, yes, you’d have to look at who the marginal buyer would be,” Richard McGuire, a senior rate strategist at Rabobank told CNBC in an interview.

“Together, with the Federal Reserve tapering its bond purchases, it has the potential to add to the bearish long-term outlook on U.S. Treasurys.”

So who is going to buy all of our debt?

That is a very good question.

If the Federal Reserve starts tapering bond purchases and China quits buying our debt, who is going to fill the void?

If there is significantly less demand for government bonds, that will cause interest rates to rise dramatically.  And if interest rates rise dramatically from where they are now, that will set off the kind of nightmare scenario that I keep talking about.

In a previous article entitled “How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System“, I described how China could single-handedly cause immense devastation to the U.S. economy.

China accounts for more global trade that anyone else does, and they also own more of our debt than any other nation does.  If China starts dumping our dollars and our debt, much of the rest of the planet would likely follow suit and we would be in for a world of hurt.

And just this week there was another major announcement which indicates that China is getting ready to make a major move against the U.S. dollar.  According to Reuters, crude oil futures may soon be priced in yuan on the Shanghai Futures Exchange…

The Shanghai Futures Exchange (SHFE) may price its crude oil futures contract in yuan and use medium sour crude as its benchmark, its chairman said on Thursday, adding that the bourse is speeding up preparatory work to secure regulatory approvals.

China, which overtook the United States as the world’s top oil importer in September, hopes the contract will become a benchmark in Asia and has said it would allow foreign investors to trade in the contract without setting up a local subsidiary.

If that actually happens, that will be absolutely huge.

China is the number one importer of oil in the world, and it was only a matter of time before they started to openly challenge the petrodollar.

But even I didn’t think that we would see anything like this so quickly.

The world is changing, and most Americans have absolutely no idea what this is going to mean for them.  As demand for the U.S. dollar and U.S. debt goes down, the things that we buy at the store will cost a lot more, our standard of living will go down and it will become a lot more expensive for everyone (including the U.S. government) to borrow money.

Unfortunately, there isn’t much that can be done about any of this at this point.  When it comes to economics, China has been playing chess while the United States has been playing checkers.  And now decades of very, very foolish decisions are starting to catch up with us.

The false prosperity that most Americans are enjoying today will soon start disappearing, and most of them will have no idea why it is happening.

The years ahead are going to be very challenging, and so I hope that you are getting ready for them.

Full and Proper update to the May 2013 Time Cycle

Hi,

Thought I’d provide a proper debrief of the May 2013 Time Cycle  – I’ve produced various posts referring to it and it’s on the Gann page too, so thought it’s only right to provide an up to date and accurate debrief.

In May 2013, I was expecting a major turn in the markets (so far it’s not happened), the expectation was that it would be a Bearish period leading to significant falls in the market.  That was the best case outlook for the Time Cycle, let’s look what actually happened:

TC update

On reflection, and we’ll have to do this one more time when looking back from 2014 price action! There’s some good positive points that need to be acknowledged and looked at:

1) The Time Cycles WORKED, look at the chart, the 2 down arrows could have been forecast DECADES in the PAST – they hit to the very day and made the market turn – what did not work was PRICE action, we only had a 7.5% fall in price

2) The entire May – October 2013 period was NOT significantly Bullish – Yes it was Bullish in the sense of rising bottoms and tops, but compared to Jan 2013 – May 2013 no.  So we can say that the TC caused price action to stall.

3) This is the minimum you have to expect from Time Cycles, sometimes there’ll provide a really good fall and other times all you’ll get is a trading range, as happened in May 2013.

There’s not much more to expect from this Time Cycle, it hit, moved price but not as expected.

Remember we should be in a Deflationary Depression from 2000 – so far to date the evidence is that we are and have been, the expectation is that, that Deflationary Depression will exist until January 2017.   SO all is still not rosy in the Investing garden.

The only action we can really take is to watch as the market action unfolds.

At some stage the market will drop by 15%+, it’s just whether that becomes a possible buy area – too soon to tell at the moment.

So to conclude, the May 2013 TC failed in the expected PRICE follow through for the market but it worked as a TC and managed to stall the market.

I will be revealing a few more dates between 2014 and 2017 to watch – whether they work or not is anyone’s guess – the point is we are aware of their potential, that does not mean guaranteed success!

 

Trade Analysis – November 2013 – GBPUSD Long

For the past week I’ve been in a LONG GBPUSD trade

Here’s the Stats – Entry – 15896, Stop 52 pips @ 15844, Target 275 pips @ 16171 = 5R trade, Risk £150 to make £750

The exit/entry figs are from my trading platform, other trading platforms might show slightly different figs.

Anyway, it’s now getting close to a possible SHORT position, so I’m out of the Long position – the set-up used for this trade is not detailed or described on this blog – I often take a peek at the position the majority of people are taking when I a) Take the trade and b) Exit the trade.

This is a screen capture of this trade @ exit:

Capture

I was long, I’m now out of the trade as my profit objective has been met, but I always find it interesting that as price has been rising the past few days – It would be great to know and understand everyone’s reason for the trades but it’s fairly clear that over 501 people are trading this market – actual figures not known so it could be 20,000 accounts!

Only a few of us have long this market, other might be holding on expecting a fall in price – truth is you don’t know what is going to happen for sure.

I find using Client Sentiment hopefully it’s accurate!) often gives me confidence in a position, because most people lose in this industry, having the opposite side to the majority when I take a position gives me more confidence than when I’m trading in their anticipated direction.

Don’t get me wrong, sometimes the majority are right, it’s just another tool to use to gauge a potential/existing trade – please note that I’ll take the trade if my set-ups tell me to, REGARDLESS of client sentiment.

So in the trade above I’d of still gone Long even if 100% of clients where Long – I don’t shy away from a trade based on client sentiment, I just use it as a confidence tool sometimes – depends upon the set-up I’m using.

It’s interesting to note from the latest Elliott Wave publication that the vast majority of people Invested in the stock market are LONG, this is confirmed by the cash holdings of mutual funds being at there LOWEST levels for years – the significance of this is that this typically occurs right before serious stock market falls – although not a certainty, but something to be mindful of going forward.

The Federal Reserve Is Monetizing A Staggering Amount Of U.S. Government Debt

Another great article by Michael Synder of http://theeconomiccollapseblog.com/

The Federal Reserve Is Monetizing A Staggering Amount Of U.S. Government Debt

By Michael Snyder, on November 14th, 2013

Federal Reserve Balance Sheet

The Federal Reserve is creating hundreds of billions of dollars out of thin air and using that money to buy U.S. government debt and mortgage-backed securities and take them out of circulation.  Since the middle of 2008, these purchases have caused the Fed’s balance sheet to balloon from under a trillion dollars to nearly four trillion dollars.  This represents the greatest central bank intervention in the history of the planet, and Janet Yellen says that she does not anticipate that it will end any time soon because “the recovery is still fragile”.  Of course, as I showed the other day, the truth is that quantitative easing has done essentially nothing for the average person on the street.  But what QE has done is that it has sent stocks soaring to record highs.  Unfortunately, this stock market bubble is completely and totally divorced from economic reality, and when the easy money is taken away the bubble will collapse.  Just look at what happened a few months ago when Ben Bernanke suggested that the Fed may begin to “taper” the amount of quantitative easing that it was doing.  The mere suggestion that the flow of easy money would start to slow down a little bit was enough to send the market into deep convulsions.  This is why the Federal Reserve cannot stop monetizing debt.  The moment the Fed stops, it could throw our financial markets into a crisis even worse than what we saw back in 2008.

The problems that plagued our financial system back in 2008 have never been fixed.  They have just been papered over temporarily by trillions of easy dollars from the Federal Reserve.  All of this easy money is keeping stocks artificially high and interest rates artificially low.

Right now, the Federal Reserve is buying approximately 85 billion dollars worth of U.S. government debt and mortgage-backed securities each month.  We are told that the portion going to buy U.S. government debt each month is approximately 45 billion dollars, but who knows what the Fed is actually doing behind the scenes.  In any event, by creating money out of thin air and using it to remove U.S. Treasury securities out of circulation, the Federal Reserve is essentially monetizing U.S. government debt at a staggering rate.

But Federal Reserve officials continue to repeatedly deny that what they are doing is monetizing debt.   For instance, Federal Reserve Bank of Atlanta President Dennis Lockhart strongly denied this back in April: “I object to the view that the Fed is monetizing the debt”.

How in the world can Fed officials possibly deny that they are monetizing the debt?

Well, because the Fed is promising that it is going to eventually sell back all of the securities that it is currently buying.

Since the Fed does not plan to keep all of this government debt on its balance sheet indefinitely, that means that they are not actually monetizing it according to their twisted logic.

Try not to laugh.

And of course that will never, ever happen.  There is no possible way that the Fed will ever be able to stop recklessly creating money and then turn around and sell off 3 trillion dollars worth of government debt and mortgage-backed securities that it has accumulated since 2008.  Just look at the chart posted below.  Does this look like something that the Federal Reserve will ever be able to “unwind”?…

Federal Reserve Balance Sheet

Remember, just the suggestion that the Fed would begin to slow down the pace of this buying spree a little bit was enough to send the financial markets into panic mode a few months ago.

If the Fed does decide to permanently stop quantitative easing at some point, stocks will drop dramatically and interest rates will skyrocket because there will be a lot less demand for U.S. Treasuries.  In fact, interest rates have already risen substantially over the past few months even though quantitative easing is still running.

Right now, the Fed is supplying a tremendous amount of the demand for U.S. debt securities in the marketplace.  According to Zero Hedge, Drew Brick of RBS recently made the following statement about the staggering amount of government debt that is currently being monetized by the Fed…

“On a rolling six-month average, in fact, the Fed is now responsible for monetizing a record 70% of all net supply measured in 10y equivalents. This represents a reliance on the Fed that is greater than ever before in history!

Overall, the Federal Reserve now holds 32.47 percent of all 10 year equivalents, and that percentage is rising by about 0.3 percent each week.

If the Federal Reserve does not keep doing this, the financial markets are going to crash because they are being propped up artificially by all of this funny money.

But if the Federal Reserve keeps doing this, it is going to become increasingly obvious to the rest of the world that the Fed is simply monetizing debt and is starting to behave like the Weimar Republic.

The remainder of the planet is watching what the Federal Reserve is doing very carefully, and they are starting to ask themselves some very hard questions.

Why should they continue to use our dollars to trade with one another when the Fed is wildly creating money out of thin air and rapidly devaluing the existing dollars that they are holding?

And why should they continue to lend us trillions of dollars at ultra-low interest rates that are way below the real rate of inflation when the U.S. government is already drowning in debt and the money that will be used to pay those debts back will be steadily losing value with each passing day?

The Federal Reserve is in very dangerous territory.  If the Fed wants the current system to continue, it is going to have to stop this reckless money printing at some point or else the rest of the world will eventually decide to stop participating in it.

If the Fed wants to go ahead and make quantitative easing a permanent part of our system, then eventually it will need to go all the way and start monetizing all of our debt.

Right now, the Fed is stuck in the middle of a “no man’s land” where it is monetizing a significant amount of U.S. government debt but it is trying to sell everyone else on the idea that it is not really monetizing debt.  This is a state of affairs that cannot go on indefinitely.

At some point, the Fed is going to have to make a decision.  And for now the Fed seems to be married to the idea that eventually things will get back to “normal” and they will stop monetizing debt.

Even Janet Yellen is admitting that quantitative easing “cannot continue forever”.

However, she also said on Thursday that it is important not to end quantitative easing too rapidly, “especially when the recovery is still fragile“.

Well, at this point quantitative easing has been going on in one form or another for about five years now.

Will it ever end?

And when it does, how bad will the financial crash be?

Meanwhile, with each passing day the faith that the rest of the world has in our dollar and in our financial system continues to erode.

If the Fed continues to behave this recklessly, it is inevitable that the rest of the globe will begin to move even more rapidly away from the U.S. dollar and will become much more hesitant to lend us money.

Ultimately, the Federal Reserve is faced with only bad choices.  The status quo is not sustainable, ending quantitative easing will cause the financial markets to crash, and going “all the way” with quantitative easing will just turn us into the Weimar Republic.

But anyone with half a brain should have been able to see that this debt-based financial system that the Federal Reserve is at the heart of was going to end tragically anyway.  The 100 year anniversary of the Federal Reserve is coming up, and the truth is that it should have been abolished long ago.

The consequences of decades of very foolish decisions are catching up with us, and this is all going to end very, very badly.

I hope that you are getting ready.

Market Update – 14th November 2013

Just a quick brief market update of the S&P500.

Quite clearly we can see an Up Trend, as per the chart:

Market Update 14th Nov 2013

Until this changes you should have no reason whatsoever to be shorting this market – the proof just is not there that this market is shortable.

Have I been looking for and waiting for a Top – yes I have, but obviously I have been WRONG – what have I been doing then?

Well I’ve been trading my trading set-ups (yep I have a few of them) both on the long and short side as they set-up – good job unless I’d of lost a bit of money by just backing my hunches.

Gann said trade by rules, never guess – the rules show an up trend – even if it’s looking a bit messy.

The 4 Tops since May 2013 are Interesting and not that Bullish, although technically price has moved upwards so it is Bullish – The key is to watch the lows if the recent lows of August and October are taken out then things could be changing – until that happens though things are BULLISH.

The only way we’ll know what is going to happen next is by market action – let that guide you, If you’re not sure then just sit on the sidelines until you are confident.

Now I’ve posted this update cue a massive slide in the market!

Take care and good luck

How the Stock Market Is Rigged, According to a Robo-Trading Whistleblower

Quantitative Easing Worked For The Weimar Republic For A Little While Too

This is another take on what has previously been mentioned over the past few years by Elliott Wave International.

Article courtesy of http://theeconomiccollapseblog.com/

Quantitative Easing Worked For The Weimar Republic For A Little While Too

By Michael Snyder, on September 22nd, 2013

Wheelbarrow of MoneyThere is a reason why every fiat currency in the history of the world has eventually failed.  At some point, those issuing fiat currencies always find themselves giving in to the temptation to wildly print more money.  Sometimes, the motivation for doing this is good.  When an economy is really struggling, those that have been entrusted with the management of that economy can easily fall for the lie that things would be better if people just had “more money”.  Today, the Federal Reserve finds itself faced with a scenario that is very similar to what the Weimar Republic was facing nearly 100 years ago.  Like the Weimar Republic, the U.S. economy is also struggling and like the Weimar Republic, the U.S. government is absolutely drowning in debt.  Unfortunately, the Federal Reserve has decided to adopt the same solution that the Weimar Republic chose.  The Federal Reserve is recklessly printing money out of thin air, and in the short-term some positive things have come out of it.  But quantitative easing worked for the Weimar Republic for a little while too.  At first, more money caused economic activity to increase and unemployment was low.  But all of that money printing destroyed faith in German currency and in the German financial system and ultimately Germany experienced an economic meltdown that the world is still talking about today.  This is the path that the Federal Reserve is taking America down, but most Americans have absolutely no idea what is happening.

It is really easy to start printing money, but it is incredibly hard to stop.  Like any addict, the Fed is promising that they can quit at any time, but this month they refused to even start tapering their money printing a little bit.  The behavior of the Fed is so shameful that even CNBC is comparing it to a drug addict at this point…

The danger with addictions is they tend to become increasingly compulsive. That might be one moral of this week’s events.

A few days ago, expectations were sky-high that the Federal Reserve was about to reduce its current $85 billion monthly bond purchases. But then the Fed blinked, partly because it is worried that markets have already over-reacted to the mere thought of a policy shift.

Faced with a choice of curbing the addiction or providing more hits of the QE drug, in other words, it chose the latter.

So why won’t the Fed cut back on the reckless money printing?

Well, as Peter Schiff recently noted, Fed officials seem to be convinced that any “tapering” could result in the bursting of the massive financial bubbles that they have created…

The Fed understands, as the market seems not to, that the current “recovery” could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed’s monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago.

As I have written about previously, the Federal Reserve is usually very careful not to do anything which will hurt the short-term interests of the financial markets and the big banks.

But at this point the Fed is caught in a trap.  If it continues to pump, the financial bubbles that it has created will get even worse.  If it stops, those bubbles will burst.  But as Doug Kass noted recently, it is inevitable that these financial bubbles will burst at some point one way or another…

“Getting in was easy. Getting out—not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”

In essence, we can have disaster now or disaster later.

But most Americans don’t care much about what is happening on Wall Street.  They just want economic conditions to get better for them and for those around them.  And to this day, the mainstream media continues to sell quantitative easing to the American people as an “economic stimulus” program by the Federal Reserve.

So has quantitative easing actually been good for the U.S. economy?

Not really.

For example, while the Fed has been recklessly printing money out of thin air, household incomes have actually been going down for five years in a row

Real Median Household Income

What about employment?

Don’t more Americans have jobs now?

Actually, that is not the case at all.  Posted below is a chart that shows how the percentage of working age Americans with a job has changed since the year 2000.  As you can see, the employment to population ratio fell from about 63 percent before the last recession down to underneath 59 percent at the end of 2009 and it has stayed there ever since

Employment-Population Ratio 2013

So where is the “employment recovery”?

Can you point it out to me?  Because I have been staring at this chart for a long time and I still can’t find it.

So if quantitative easing has not been good for average Americans, who has it been good for?

The wealthy, of course.

Just check out what billionaire hedge fund manager Stanley Druckenmiller told CNBC about quantitative easing the other day…

This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.

“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”

Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”

“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”

Sadly, Druckenmiller is exactly correct.

Since the end of the last recession, the Dow has been on an unprecedented tear…

Dow Jones Industrial Average

Of course these stock prices have nothing to do with economic reality at this point, but for the moment those that are making giant piles of cash on Wall Street don’t really care.

Sadly, what very few people seem to understand is that what the Fed is doing is going to absolutely destroy confidence in our currency and in our financial system in the long-term.  Yeah, many investors have been raking in huge gobs of cash right now, but in the long run this is going to be bad for everybody.

We have now entered a money printing spiral from which there is no easy exit.  According to Graham Summers, the Fed has “crossed the Rubicon” and we are now “in the End Game”…

If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.

Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.

Most Americans don’t really understand what quantitative easing is, and most don’t really try to understand it because “quantitative easing” sounds very complicated.

But it really isn’t that complicated.

The Federal Reserve is creating gigantic mountains of money out of thin air every month, and the Fed is using all of that newly created money to buy government debt and mortgage-backed securities.  Over the past several years, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington though the end of the presidency of Bill Clinton

The same day that the Federal Reserve’s Federal Open Market Committee announced last week that the Fed would continue to buy $40 billion in mortgage-backed securities (MBS) and $45 billion in U.S. Treasury securities per month, the Fed also released its latest weekly accounting sheet indicating that it had already accumulated more Treasuries and MBS than the total value of the publicly held U.S. government debt amassed by all U.S. presidents from George Washington though Bill Clinton.

To say that this is a desperate move by the Fed would be a massive understatement.  We have never seen anything like this before in U.S. history.

And look at what all of this wild money printing has done to our money supply…

M1 Money Supply

In many ways, the chart above is reminiscent of what the Weimar Republic did during the early years of their hyperinflationary spiral…

Hyperinflation Weimar Republic

Just like the Weimar Republic, our money supply is beginning to grow at an exponential pace.

So far, complete and total disaster has not struck, so most people think that everything must be okay.

But it is not.

In a previous article, I included an outstanding illustration from Simon Black that I think would be extremely helpful here as well…

Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.

Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.

But let’s assume that it’s an exponential leak.

At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.

By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.

For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.

Are you starting to get the picture?

What the Federal Reserve is doing is systematically destroying the U.S. dollar, and the rest of the world is starting to take notice.

Why should they continue to lend us trillions of dollars at super low interest rates when we are exploding the size of our money supply?

It is simply not rational for other nations to continue to lend us money at less than 3 percent a year when the real rate of inflation is somewhere around 8 to 10 percent and reckless money printing by the Fed threatens to greatly accelerate the devaluation of our currency.

When QE first started, the added demand for U.S. government debt by the Federal Reserve helped drive long-term interest rates down to record low levels.

But in the long-term, the only rational response by all other buyers of U.S. government debt will be to demand a much higher rate of return because of the rapid devaluation of U.S. currency.

So QE drives down long-term interest rates in the short-term, but in the long-term the only rational direction for long-term interest rates to go is much, much higher and in recent months we have already started to see this.

The only way that the Fed can stop this is by increasing the amount of quantitative easing.

Right now, the Fed is buying roughly half a trillion dollars worth of U.S. Treasuries a year, but the U.S. government issues close to a trillion dollars of new debt and must roll over about 3 trillion dollars of existing debt each year.

If the Federal Reserve eventually decides to buy all of the debt, then interest rates won’t be a major problem.  But if the Fed goes that far our financial system would be regarded as a total joke by the remainder of the globe and we would reach hyperinflation much more rapidly.

If the Federal Reserve stops buying debt completely, the financial bubbles that they have created will burst and we will rapidly be facing a financial crisis even worse than what we experienced back in 2008.

But almost whatever the Fed does at this point, the rest of the world will probably continue to start to move away from the U.S. dollar as the de facto reserve currency of the planet.  This move is just beginning, but it is going to have major implications for us in the years ahead.  This is a topic that I will be addressing extensively in future articles.

Most of the debate about quantitative easing has focused on the impact that it will have on the U.S. economy in the short-term.

That is a huge mistake.

Of much greatest importance is what quantitative easing means for the long-term.

The rest of the world is losing confidence in the U.S. dollar and in U.S. debt because of the reckless money printing that the Fed has been doing.

But we desperately need the rest of the world to use “the petrodollar” and to lend us the money that we need to pay our bills.

As the rest of the planet starts to reject the U.S. dollar and starts to demand a much higher rate of return to lend us money, the U.S. economy is going to experience a tremendous amount of pain.

It is hard to put into words how foolish the Federal Reserve has been.  The Fed is systematically destroying what was once the strongest financial system in the world, and in the end we are all going to pay the price