The most bearish pattern - a bullish declining diagonal

Characteristically, people look at falling diagonals (often referred to as wedges) as highly reliable bullish price patterns. That is true in general if you are in an uptrend. However, at trend chenges...people become very used to the trusty pattern for their profits. So, they attempt to continue to use the pattern to no avail...just as many bears did on the rally out of the 2009 lows.

The irony is that the traders trapped in these patterns tend to be very well trapped and so a failed pattern produces a very powerfull move in the opposite direction. For a bullish falling wedge...expect big downside if the pattern fails...for a bearish rising wedge...expect big upside when the pattern fails.

The banks, from this participants perspective, are not looking likely to hit the positive targets for this pattern.

Want to see the future of stocks and commodities

Ask yourself a simple question...were the run ups in commodities, silver, gold and equities funded with savings and/or the results of productive economic activity? The obvious answer is NO. They were funded by awarding incompetent people, in fact the ones who caused the last crisis and have always used accounting fraud to cover their losses and malinvestments, more money and credit. The public has not received more money or credit neither has small business. The result of this arrangement has been malinvestment...and its highly combustible at this point...which is why I loaded up on the dollar overnight near the lows around 75...

If you ever wonder what the charts of commodities, silver, gold and equities will look like...look at the last Federal Reserve funded manic asset inflation - housing...and ITS STILL COLLAPSING. Whats more is that its responsible for the destruction of our currency to the tune of more than 2.5 trillion over the last 8 months...anyone wanting to put that in persepctive will quickly understand that before the fed induced malinvestments in commodities started to implode the Fed was simply pumping enough money into the system in an attempt to compensate for this destruction of money. The reality is that, in addition, credit has contracted further which has exacetbated the money supply contraction even more. Then, when one compensates for the malinvestments in risk assets that are imploding (and have MUCH further to fall incidentally), the money the fed has printed has already vanished (and will ultimately significantly exacerbate money contraction) - with one caviat...the participants in the economy paid inflated prices for consumable products and commodities and that money is also gone without having the chance for productive velocity...so its a more than double whammy...

Ben has taken trillions of dollars dropped them from helicopters into buring fields and they have simply inflamed the inferno and now apparently Ben BURNanke thinks that adding some gasoline to the mix will improve the situation...the result of this nuclear destruction of money is a lack of supply and availablity of our currency - which will translate to a VERY VERY strong dollar.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of the further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig Von Mises, Human Action

And Sovereign Debt...

And one last point, the collapse of sovereign debt throughout the world is a grave contributor to the net money supply. The US dollar is the reserve debt instrument of the world. Gold, Silver or any other commodity backed currency IS NOT DEBT MONEY...the unwind of this mess requires debt money to transact and insolvency to repair. Contrary to Eric Sprott's highly misinformed views regarding silver...Metals will NOT be a good store of value in this environment - his reputation will lay in tatters with the amount of money he will lose people with his rediculous hyperbole. Silver is at this time, a terrible investment, not a currency and not a good store of value/purchasing power.

In my view, Gold will most likely retain similar purchasing power as it does now. If you can buy 10 tanks of gas now with an ounce of gold, then I imagine in the future you will still be able to buy 10 tanks of gold or something near that. However, with cash you will likely be able to buy 25 to 40 tanks of gas...take your pick.

As many sovereign nations find the hand of the ECB, IMF and World Banks trembling with Parkinsons and dripping with disease, they will not be able to extract much of value from them...this will directly effect the US money contraction and fuel the dollar shortage. Mark the words...this is going to be a while and its going to be painful. The dollar money supply contraction implies an asset and credit over-consumption. Those instruments will collapse much further than anyone is expecting...or imagining.

The Dollar...so goes the market.

Forget all those crazy elliot wave counts out there...they are too distracted coming up with scerario 1, 2, 3, 4 with alt B. One needs to watch real patterns in the market not imaginary ones.

The EURO lends credibility to the Dollar Index pattern indicated above.

now we know the situation was normal...and the outcome certain...

Some Charts

As the implosion continues...the implications grow for the deperate financial elites

I wonder what the ethics really are of those in charge...we know by now that BURNanke and Geithner have the character of a south american cane toad...the other financial elite cronyists, I suspect are similarly impressed with their capabilities as Strauss-Kahn...

Atleast, Nigel has the character to say it the way it is...

Manipulation of the masses on a massive scale...

Lets take a look...the role of the press in our lives:

1. Obama's clearly digitally assembled and altered birth certificate is a white out
2. Fukushima is in a news black out
3. News related to the 98% mortgage market shutdown is a black out
4. News from Syria is a brown out 
5. News from Libya is a brown out 
6. News from Egypt is nearly a brown out
7. News related to massive increases in leverage and fraud in the largest financial institutions is a black out
8. 100+ Price to Earnings ratio for the Russell 2K is a smoked screen
9. The complete failure and financial destruction at the hands of Fed and its QE2 are a black out
10. Unemployment is a full white out
11. Inflation is a white out
12. Supply and Demand is a white out
13. Integrity with in the ECB, Central Banking Cartel is a full white out

Our illustrious Mr. BURNanke has presented a load of crap after a load of crap and asked us to believe him. The guy is an amateur or a charlatan - most likely both. Timothy Geithner and our friends at Citibank would like us to believe that a full scale sovereign credit contraction would results in catastrophe for the dollar and the US. Well, as you can see, my posts regarding the dollar (as well as my trades) have been rather more objective. PIMCO is busy defending the most obvious trade in history...higher rates and inflation. I am not a big fan of obvious trades and I am guessing that many who are in this trade may not end up being a fan of the trade either. The dollar has a lot of ground to gain after the full fledged assault by BURNanke's QE which has destroyed twice the dollars that were intended to be created. More than 2 trillion in credit and money supply has been killed by the economy while BURNanke has quietly killed another 1.2 to 1.8 trillion with his QE2 malinvestment program. That creates a large shortage of credit/currency in an already tight environment. Expect to see a very painful situation become much more painful for the people who have fallen for the QE game and theory. I think that many notable analysts have been totally overwhelmed by what they see as a technical money printing issue...what they are not seeing is the real dynamics that are going on.

Marc Faber was recently interviewed on CNBC and while he made some very interesting and valid points...the dynamics he is talking about are old...QE has failed and there is no chance that it or any future version of it will succeed. In fact the super destructive nature of the malinvestment paradigm that BURNanke has created with this version of QE will likely lead to his ouster as Fed Chairman...notwithstanding public pressure caused by his many lies and manipulations. I think that it should be clear at this point that, though margin selling has had some effect, the primary driver of the increase in commodities was tons of available liquidity from QE and not supply and demand as the ever blind fearless leader has professed. There is simply no way that collapses like we have see can be caused due to supply and demand in such a short time and in so many markets. The reality is that the shortage of dollars, real purchasing power and the greater fool have been the primary culprits for the contraction (or demand fall off as Ben would have you believe). Additionally to that, the margin collateral increases will be blamed for the the commodities and equity markets collapse...however, though the impact of leveraged securities in notional value can be large, the reality is that the amount of money required to satisfy the margin increases pales in comparison to the notional losses. Technically, the margin increases have not required such a significant amount of cash or collateral as to be the cause of the declines. The cause is the dynamics of liquidity or absence thereof...and the results of an absence of liquidity are usually increased margin requirements - and that, while inconvenient, is the way it should be. However, there are many who are blaming the entire silver debacle on the margin increases. What will they be blaming the decline on when silver breaks $4.39 which it is highly likely to do? The same situation will repeat for market after market.

Additionally to this, we have Warren Buffett downright lying to attempt to encourage complacency and talk his book...we have Obama attempting to reduce prices by solving an apparent supply problem via the acceleration of oil production. This is for a market that Exxon testifies, is suffering demand problems...and under normal conditions should be trading at $50 to $60 a barrel. This is coming the CEO. So, any further intervention by the Government is likely to create another overshoot in the prices of oil on the downside...which by the way works rather well with the charts I have been showing. Rather than oil settling into a trading range in the 50 to 60 dollar area, intervention stands a very good chance of overshooting because its working on the wrong problem and oil can easily decline to below $30 or $20...nobody could have imagined a greater than 70% decline in 2008 and the can not imagine it now...though it appears likely to happen.

Below is an analysis of the Fukushima situation...why is this not on the news? Why is so much information repressed or preprecessed? Clearly, as I see it there are not very many explanations as to why we are not hearing about the large scale violence and killing going on in Syria...we only hear about Isreal defending its borders...but not that Syrians are being murdered enmass and are trying to get away...to anywhere including Isreal. Its kind of funny, I agree in a very perverse kind of way with BURNanke on inflation...inflation is not the problem...however, though I see the net environment in our economy as deflationary, there are pockets of malinvestment caused by increases in credit and leverage in those markets which have directly resulted in higher prices...but remember higher prices are NOT inflation...while they are generally a symptom of inflation we must be sure not to confuse them for an inflationary environment which we most certainly do not have.

The concept that equities can be trading as such high multiples with analysts all forward guessing the exponential curve of earnings expections in a vacuum is truely mind blowing. The PE of the Russell 2000 is over 100 and the index is at the highest valuation relative to large caps ever...many of the small companies in the Russell are commoditiy related or financial...these areas are not setup for expansion of anything in my opinion. What every these people are smoking...I refuse to try it because its just much to hallucinogenic.

I don't think I need to even address the outright fraud in the BLS and unemployment rate reporting. NFP was a 75% overstatement of the amount of jobs created in the last report and the revisions continue to be in the wrong direction with such consistency that its clear that the numbers are deliberately misstated.

Then we have the absolutely high level of ethics that are underlying totally fraudulent wealth transfer and global government front operations like the IMF and ECB...fun stuff and one day soon enough people are going to get pissed enough to do something about it!

When you add to this weekly engulfing candles on a very large number of markets I think the realities are starting to reinforce what is going on...and its not a pretty picture.

Fukushima....what's that...situation normal and not news worthy

"fuel rods are fully exposed in the No. 1 reactor at its stricken Fukushima Dai-Ichi nuclear plant, setting back the utility’s plan to resolve the crisis. The water level is 1 meter (3.3 feet) below the base of the fuel assembly, Junichi Matsumoto, a general manager at the utility known as Tepco, told reporters at a briefing in Tokyo. Melted fuel has dropped to the bottom of the pressure vessel and is still being cooled, Matsumoto said. The company doesn’t know how long the rods have been exposed." from zerohedge.com

Looks like a spent "Spent Fuel Pool"...why is this not getting the worldwide attention is needs...this is a global issue at this point.

Matt Taibbi's must read...

Click this link for the article:
The People versus GoldmanTax

This article is a must read. I have some commentary as we implode in another cronyist experiment gone awry - front and Center Goldman Sachs and JP Morgan. It must be understood that the conflicts in our system are now so big...so absolutely dreadfully big that the leverage ratios of both Goldman and JPMorgan are allowed to be at the highest ever...that's EVER and this while they represent the greatest threat to the stability of the financial system after a period in which we learned that a leverage ratio of 30 to 35 was enough to cause nuclear fusion for the financial system. These assholes are at it again with leverage ratios far in excess of that...and whats worse is that all their hold-to-maturity debt is accounted for on their books at 90 to 100% of its par value. The consequences of that are not factored into their leverage assessments...and even without that consideration these instituations are the highest leveraged ever!

WHY...WHY...WHY...WHY is this ok. Well, we will find out the consequences in a "GIANT thunderbolt of truth" margin call that will implode the orgy of excess that Fed driven/induced leverage, fraud, lies, misrepresentations and balance sheet bloating, not just of itself, but of its cohorts can do. Double and triple theft has been the result it will be revealted ofr all to see.

The Fed's QE program supposedly created new money out of thin air...the program did do that...but it use that money as fuel to light the incendiary sparks of financial destruction. It has destroyed far more money than it has created and I venture to say that the $600 billion QE program has created well north of $1.2 trillion on monetary contraction...and they accomplished this task through their overleveraged, cronyist cohorts...of which JPM and GoldmanTax ar but two. Howver, the damage is most likely double that number...I will get into that at another time.

In any case...this is not the first time that Wall Street deception has used leverage and pyramiding to facilitate conflict of interest and cronyism at the highest levels that ultimately passes the rewards to the few and losses to the many...below are two notable quotes from Taibbi's article I find outrageous given the wreckage these guys are creating with their deplorable antics and motivations:

in the 1930's:

...The trusts, were a major cause of the market's historic crash; in today's dollars, the losses the bank suffered totaled $475 billion. "It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity," Galbraith observed

Now:

Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict of interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.

One GIANT Margin Call

In defence of Warren Buffett, what would you do if you were at risk of a margin call? Most likely you would try to talk yourself and anyone else that would listen into all the reasons that your position was bonafide and the trade worth the risk. The reality is that the markets are now in a GIANT margin call funded by dollar short carry tradesand the fed - both of which are exhausted. The dollar daily chart looks far from done and as the margin call extends the collapse in liquidity will also. Many funds that were down 20% as of last week and now likely down 30% as a result of trying to defend their trades and fight the dollar.

The reality is that if Mr. Buffett can not see that the biggest risk to the recovery (if there were actually one) is structural and that its not a risk - its a certainty that the structure will be unstable if not totally collapse - then I would be astonished. But then again many things in the world lately are astonishing...the Fukushima news black out...the scientific community refusing to get within hundreds (even thousands) of miles of the accident for marine projects, the every increasing and violent social unrest, the curious timing of the Osama Obama-rama...and the stupendously pyramided trades and transactions that are supposed to be able to support our markets and economic mechanisims. This is why for me the more money I can get out of the leveraged financial system the better I feel. The trick that most people have not figured out is that allocation is everything. So, many are significantly over-leveraged...they have also not figured out how to trade with less than 10% of their liquidity and generate a good return on their net worth.

Tomorrow could provide more unwinding of this fruitcake system of over leveraged and overvalued securities. I do not think it will be pretty. Everyone and their mother has been supporting investments with carry assumptions on the dollar...too many over leveraged firms with drawdowns are approaching levels at which the business viability comes into question are in these carry trades based on short dollar positions...this effectively doubles their leverage and will be the source of many fund closures and liquidations in the near future.

Warren "No Big Risk to the Economy" Buffett - disinformation once again...

Whatever he is smoking I will take some. How can anyone take Buffett at his word when we know what is really doing is talking his book.
Mr. Buffett again encourages complacency as he did in his moody's testimony - conflicts of interest abound...he can not possibly be a ridiculous as he comes accross with this statement in real life...or can he?

Update...

I will likely be posting quite a few charts tonight. I added dollar on today's pullback, added index shorts and will likely look to take metals short again once silver converts the people who sold and lost - that its a buy again. This is a similar situation for energy. Even funds who got hammered are very bullish. Liquidity is the problem...fundamentals have nothing to do with that, so, most people are dreaming about what may happen in a vacuum.

I am working on several charts which demonstrates exactly how silver trades and why its not just realistic but likely that we have a complete retracement of the parabolic rise and then some. The reality is that there are already posts referring to the silver crash that wasn't...and when I see a few more of those I am quite sure that my system will be taking the opposite side of that trade for another 12 to 16 points down...but I may miss the trade as I am not sure that any of the prognosticators are going to get much of a chance to prognosticate.

It is very clear that the naked short from the 1920's on the dollar has to be and will be covered...in the near future. The retracement in the dollar is nearly a complete a-b-c. The c wave has a little bit lower it can go...but its a very shallow retracement and we have broken key levels to the upside and into a trend move on according to my system. I an not expecting the dollar to let the shorts out nor the longs in conveniently.

As to whether rates rise or fall here...the 30 year bond is looking a little a-b-c ish and that may be a clue that indeed rates may be rising if the impulse up can not get more momentum due to weak inflation asset trading. For me its a first come first served issue. If inflation assets weaken first, rates will be under pressure and bonds will rally. If the debt ceiling issue blows up, then rates will rally and bonds will be under pressure. Either way inflation assets will be sold and the dollar will rally. I am not on the rates trade - I will leave that to Bill Gross and friends...and I give favor to the bond rally rather than rates rally.

The election hinges on finance...

The Federal Reserve has blown it and Ben BURNanke will stand a very good shot of being out of a job beofre year's end...if the market decides, as I anticipate it will, then the country will decide accordingly...though I think the country is actually ahead of the market at this point because the Fed is still meddling there with some influence in the near-term. The country has had it with lies from BURNanke and a Wall Street inhabited executive branch.

I guess T. Boone Pickens was not telling us the truth about natural gas...

For the first time, a scientific study has linked natural gas drilling and hydraulic fracturing with a pattern of drinking water contamination so severe that some faucets can be lit on fire.

A peer-reviewed study, published today in the Proceedings of the National Academy of Sciences, stands to shape the contentious debate over whether drilling is safe and begins to fill an information gap that has made it difficult for lawmakers and the public to understand the risks.

For more info: click here

Apple will be the world’s first $2 trillion company...brainiac is spewing thoughless goo everywhere

I have no grudge against James Altucher...but he has worked for the Street.com peddling one rediculous idea after the next. Certainly, this has to top the list...People came out with Silver $150 at the top when it was trading near 48 yo 50 per ounce...very few people shorted it there...I was one...and even fewer will tell you that silver is going below 4.39 while it is still trading near the 40's or 50's. I suggest that the mania is a little overheated here regarding the potential for companies to earn and earn and earn - in a vaccum of course.

The exonential extrapolation is so attractive that most don't even notice what they are doing when they make rediculous extrapolations...not even our illustrious Mr. Ben BURNanke can grasp the significance...so why should anyone else. That of course, was the reason that Warren Buffett gave as to why Moody's did not warn about the housing crisis.

Altucher is rather amusing and should probably get a hair cut soon to avoid looking like the caricature that he seems to be...back in your box James!

The top is apparently in!

Questioning...why? ...and when?