The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, December 12, 2016.
The Battle of Hamburger Hill, later made into a movie directed by John Irvin, refers to the epic, but completely unnecessary, Vietnam War engagement between the US (and South Vietnamese) and North, aligned with China (a proxy war), that saw huge casualties suffered on both sides of the equation. It was a bloodbath. The boys were ground into hamburger. All for Wall Street greed. All so unnecessary. (i.e. if JFK was allowed to live.)
Of course some may view such things as completely necessary, because we humans are competitive creatures. What's more, it's not as if we have progressed in any way over the last half-century. In fact, it could be argued we've regressed. But it's all so much more civilized these days - no? We don't have wars anymore - we have guised crises, interventions, and peacekeeping missions that must be supported in the name of democracy - all the while America (and friends) still exercise colonial rule.
This is because the real wars are not fought on the battlefields anymore, however they are still with us, just not as obvious. Today, the economy of war is being waged in trade agreements and in the courts, which was the whole idea behind The Transatlantic Trade Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP), both designed for corporate America (and friends) to exercise continued colonial power over its subjects, just not on a conventional battle field on which a strategic advantage was held, but in the courts.
Because in the end it's all about money and power - and who hold's it. So as your adversaries become more sophisticated - so must empire (the corporate superstructure) if its' rule is to continue. For corporations, such deals don't matter whether you are from the West or East. It doesn't matter because it's the taxpayers (state) on the hook for whatever the corporations want. So if a company is 'wronged' by a colonial victim because they no longer wish to be exploited, no problem, just sue the country. This is why Canada is the most litigated country in the World, because of NAFTA - because their politicians are idiots. Canadian citizens are being turned into Hamburger (taxed to death) in an undeclared war their politicians do nothing to protect them from because they don't run the country - multinational corporations do.
So with TTIP and TPP about to be shot down by Donald Trump, corporate America is naturally working on a new deal they are hoping to sneak in (in order to maintain the West's neo-fascist corporatist system), however things might not go so smoothly here as well if the Presidents recent comments are for real. (i.e. as well as taken literally around the world.) While we wait for this to unfold, we'll have to be happy watching scumbag politicians in Washington attempt to ram through as much leftist (authoritarian) legislation as possible before Trump is sworn in it appears, with the 'fake news' construct at the top of the list at present. I sure hope Trump follows through with his promise to drain the swamp in Washington (the government), or at least get the crazies under control.
Because if he doesn't, The United States of America won't make it to the next election without some kind of a civil war / secessions. Apparently the embedded parasites in Washington didn't get that memo at election time. They just don't get it. The people of America are tired of their bullshit. No Chinese style totalitarianism will be tolerated.
On to the markets now, as warned, you likely don't want to be shorting stocks until the last day of the year, and then only for a trade because higher highs are likely coming afterwards. And now we have another factor supporting this thesis. Last Thursday, a Dow Theory Confirmation Signal was triggered with the Trani's going to new highs. The criminals that run the markets in New York have been allowing the CBOE Volatility Index (VIX) to rise with stocks so that they can smash the stupids buying calls (on the VIX) going into options expiry next week after the Fed pulls the trigger on Wednesday. This is how they intend to keep stocks up next week. And they will probably do it with Dow 20,000 excitement building.
What's more, price managers have the wind at their collective back going into year-end because there's definitely no tax loss selling to worry about. There could be a pullback next week anyway around Fed day (Wednesday), but make no mistake, it shouldn't last. This feels just like the tech mania in 2000, right down to the timing. If that's true, the first week of January should be when the volatility picks up. And this makes sense from the perspective Trump's tax cuts, which should be a high priority item for him next year, would be retroactive, so anybody selling in the New Year would pay half the tax on capital gains compared to this year. So those who want to sell will wait until January - that's for sure.
Do you understand why stocks are melting up now? You got the naive buying fundamentals. And then you have the tax planners who aren't selling - hoping for a Santa Claus Rally. That's the formula right now.
So Dow 20k - here we come.
What's more, if the S&P 500 (SPX) is able to close over 2280 on the cash market, a 'buy signal' will be triggered, where although it may not come immediately, a move to 2450 becomes in play.
It's Trumponomics in case you didn't know. Trumponomics today - Hamburger Hill tomorrow. Of course if you're short, it's Hamburger Hill today, because you will get chewed to bits as process unfolds. As discussed previously, the thing about Trumponomics is it's predominantly non-regenerative spending, where sure enough between the massive spending planned (but harder to do) and the tax cuts, it's not surprising to see investors excited. However again, unless The Donald can bring back all those manufacturing jobs from China the benefits will be fleeting, so there's no telling how long it will take for all the excitement to fade just yet. The thing to remember in this regard is inflation will likely ramp up in response to all the stimulus (which is happening), which will keep pressure on bonds, and then stocks once the fairy dust wears off this rally. (See Figure 1)
Technical Note: As indicated above, expect to see the risk adjusted SPX to ratchet higher as month (year-end) end approaches, where it would not be surprising to see this all important ratio close at higher fan line trajectories. What's more, this process could continue well into next year before a final blow-off top is put in place for reasons discussed both above and below.
In the meantime however, the trick with the VIX is working fine, with both stocks and it moving higher at the same time, keeping the risk adjusted SPX contained at lower trajectories as the blow-off continues. And this is what should be happening right now if the bureaucracy's price managers are to keep the rally alive into year-end. This process should turn short sellers into hamburger by year-end with stocks grinding higher right into January once the volumes dry up as the few sellers out there go on holidays. Volatility at the beginning of January due to tax deferral / planning considerations (see above) should recharge this dynamic however, bringing back all sorts of sellers, including short sellers that will fuel the next rally. (See Figure 2)
Technical Note: As you can see above, tech stocks still likely have more gains ahead. Again, as pointed out above, it wouldn't be surprising to see the NASDAQ hut the first Fibonacci resonance target by Christmas, and the second in March. Such an outcome could coincide with the cessation of the Trump effect honeymoon, which is possible from the perspective events are accelerating on a daily basis. This might not be the final top for stocks with hyperinflation still coming, however it's not unreasonable to think a major correction will be experienced starting some time next year - sooner (March?) or later (August?).
In looking above, one can see tech stocks have essentially been disenfranchised for the present mania, however at some point this should change. (i.e. when inflation expectations see a temporary reversal.) Again, if the year 2000 analog is maintained, we should expect to see tech blowing off into March. After that we can start looking at 87 and '28 / '29 analogs to see if this rally is 'the big one'. Thing is, the longer it lasts, the higher the degree on the Elliott Wave Principle scale, where a repeat of the '28 / '29 analog would raise the possibility of a 'Grand Supercycle Degree' top. (i.e. not likely because hyperinflation is still coming.) Obviously it's too early to say right now, however make no mistake, important things in the markets are happening right now. Not the least of which is gold's (precious metals) continued decline.) (See Figure 3)
Technical Note: The Dow / XAU Ratio, pictured above, broke above the monthly 'swing line' on Friday, where if this breakout is not proved 'false' quickly, could lead to more profound selling across the precious metals sector. With speculators buying every dip in the precious metals sector right now, evidenced in falling open interest put / call ratios with prices, unfortunately this could in fact become a reality as harebrained hedge fund managers chase performance / window dressing considerations into year-end. More on this below.
The way the traders are getting chewed up right now. Stock market bears are getting chewed up because there are no sellers. And many would be bulls are not participating because it's nuts. (i.e. and they have memories.) Precious metals players are getting chewed up because they are bullish. If they'd just stop buying the derivatives and buy the shares and metals things might start going different, but they are not that smart. (i.e. the hedge funds.) The precious metal markets are severely broken because the participants literally don't know what they are doing anymore. This is why they are getting ground up into hamburger. They keep playing the derivatives, only to get chewed up every time. And it's not over yet. It won't be over until they give up and the machines no longer have these fools to screw over.
I'm not picking on hedge fund managers for no reason; because it's not the little guys doing this - it's you. The little guys are done - broke - putting what little they have left into their houses and attempting to pay off credit cards. Going up the ranks, these guys are being thinned out increasingly as well, in a process that will continue until each successive group gets used up. And that's where the billionaire fund class comes in. These guys won't stop what they are doing until it's too late, because top down funds must be right all the time (which is why they don't), because it's a fashion show - not money management. So they need liquidity whenever the wind changes in order to give the appearance they know what they are doing at reporting time. They don't make money, but they sure are pretty. As unbelievable as this sounds - it's true.
So bottom line, because of this paper market 'clusterf*ck' that controls precious metal prices, what will happen in the end is many producers will go bust as commodity prices are kept at or below cost set against debt induced bankruptcies, which is of course the big reason gold (and silver) producers keep putting out ore under such adverse conditions - because they must pay the bankers. As this process works through however, what will happen is increasingly supply will become tighter, especially for silver, which is not hoarded like gold. This is important to realize as very little silver production is actually turned into bullion savings, maybe 15%. So again, eventually, perhaps sooner rather than later, 'peak silver (gold) production', for whatever reasons (declining base metal production byproduct, etc.), should become an issue that supercedes present paper market pricing controls. (i.e. Comex and LMBA.)
Until then however, we do have present realities to contend with, where although open interest (OI) on Comex gold and silver are now declining, speculators are attempting to hand tough, especially in silver. Why is this the case? Because it's the especially stupid and greedy funds that play the silver market (because of it's far greater potential - it's very low in relation to gold), where they just can't believe how much money they have lost, and are going to hang until it recovers. Only thing is, the market will continue to go against them longer than they will be able to remain solvent - we hope - which with any luck will at some point put these dumb bastards out of business. This is when silver (and gold) will go up - when these greedy bastards are no longer participating - hopefully following their true vocations as shoe salesmen or ditch diggers.
In the meantime however, and unfortunately for them, precious metals could keep plunging as hedge fund managers are forced to play the window dressing game going into year end - buying stocks and selling precious metals - because you won't want to look like an idiot at year end right? This might affect one's ability to attract more dumb money next year. Remember - it's a fashion show for intellectual idiots that inhabit the financial circles these days. Nonetheless, with the 'Trump Effect' so strong (think strong dollar[$]), and the hedge fund industry being what it is, an orgy of gluttony (think Seven Deadly Sins), that will eventually collapse due the rampant corruption finally catching up to these characters.
So, in spite of the likelihood of the Fed raising rates this week, and topping indicators for stocks (see here, here, and here), don't be fooled. As discussed above, once we move into next week, with options expiry and diminishing volumes paramount in terms of influences (with the Fed meeting over), stocks should ratchet higher and precious metals lower as hedge funds continue posturing for the year-end fashion show.
Despite this, next year is sizing up to be quite the battle however, a year ending in '7', with big changes likely that will discussed in further commentaries - fundamentally changing many lives.
For now however, best to focus on enjoying the holidays, because the markets are a simple and controlled one-way street (for now).
So Merry Christmas all.