We have been successfully managing an ‘in motion’ market since the August festivities kicked off. It is October and Money Managers (NAAIM), Newsletter Writers (Investors Intelligence) are thoroughly spooked and Small Speculators are thoroughly short the market. It’s a perfect contrarian setup.
Meanwhile, over in Goldbugsville there is a lot going on as well. NFTRH 363 is 30 pages of commentary and in depth analysis on all of this and also gets its geek on (with the aid of FloatingPath.com‘s awesome graphical breakdowns) and gets inside the September Payrolls report in order to flesh out the dynamics in a flagging economy.
NFTRH 363, a very helpful market management report if I do say so myself… out now.
Elliott Wave International’s European Financial Forecast Editor discusses deflation
In this new interview, Elliott Wave International’s Brian Whitmer explains the indirect connection between Europe’s volatility and deflation. Find out how Brian’s advising his subscribers prepare for deflation.
Not familiar with deflation? Learn more about how you can survive and prosper during deflation from the world’s leading deflationists — FREE.
Learn about the Unexpected But Imminent and Grave Risk to Your Portfolio PLUS 29 Specific Forecasts for Stocks, Real Estate, Gold, New Cultural Trends — and More (excerpted from Prechter’s New York Times bestseller Conquer the Crash — You Can Survive and Prosper in a Deflationary Depression)
This article was syndicated by Elliott Wave International and was originally published under the headline (Interview) Deflation: It’s Been a Stealth Move. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
In case you were not suitably moved by the post’s title…
DEFLATION is HERE!!!!
I just wanted you to be sure to know that deflation is here. Just like you used to know that…
INFLATION was HERE!!!!
You see, many of the same people who used to scare the crap out of us to prepare for the coming blow off in inflation (as in El Hyper) are now promoting deflation, just to make sure we are well up to speed with the current thinking.
Got to hand it to Prechter; he of the infinite patience promoted deflation through thick and thin. But it is a sure sign that something is readying for change when those who made their bones schooling us on one thing, go whole hog to its opposite after never seriously entertaining its viability until well after it became obvious fact.
It is just one tool, but I think a lot of answers reside in the Gold-Silver ratio, which continues in its uptrend during this deflationary phase. But remember our big picture chart has its limits. Registering the low-mid 80’s to 90 (which could still be many months out) will likely coincide with the next inflationary episode. Meanwhile, Prechter is getting a lot of weight on his side of the boat.
Let us begin with this: there is nothing inherently healthy about a series of +2% and -2% days within a range.
Having some grey hair (just a little!) is helpful in times like these because markets go through repetitive phases and it helps to have some historical comparisons to be able to guide an investor. At the same time, experience can be limiting if we try to force everything we are seeing into a particular historical comparison.
So, for example, I never view with anything but amusement the charts of day-by-day comparisons between this year’s market action with, say, that of 1929. Or, as another example I have seen: comparing a market to the Nikkei crash in the early 1990s. These are interesting an amusing market parallels, but there is no road map to markets. There is only a contour map.
Sometimes you (well, I anyway) can look at a graph representing data that is a culmination of history (i.e. reality) and just let it settle in for some perspective and even some conclusions.
Whether these conclusions are right or wrong is subjective and open to debate. But what I see here when viewing the Prime Rate historical is summed up after the graph (graphs courtesy of Economagic, mark ups mine).
In the pre-Greenspan era, every rise in Prime rates was eventually corrected through recession. This makes sense as the Federal reserve would, through its Funds Rate, make borrowing by banks more expensive during economic up cycles and hence, this was passed on to the borrowing public by the spread between FFR and Prime.
Why the 32% slide in the Shanghai Composite is more than just a “hiccup”
The Shanghai Composite fell another 8% at the open on Wednesday (July 8). Trading was soon halted by the authorities. (But for a different reason that the trading halt on the NYSE the same day.)
From its all-time high on June 12, China’s main stock index is down 32%. Using the word “crash” is becoming appropriate.
“At the moment there is a mood of panic in the market and a large increase in irrational dumping of shares, causing a strain of liquidity in the stock market,” said China’s Securities Regulatory Commission on Wednesday (bold added).
But the “dumping of shares” is not the only type of selling that’s going on in China right now. Bloomberg reports that (bold added),