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Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

Robert McHugh

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania.

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An Abysmal August Jobs Report Announces a New Bear Market

The Labor Department released the August 2011 Jobs report Friday, September 2nd, and it was simply abysmal. The Bureau of Labor Statistics reported that the economy did not generate any net new jobs during the month of August 2011. But, if you consider that they got up to the zero figure by fudging an estimated 87,000 jobs they think were possibly created by new businesses they hope started up in August, the real figure is the economy lost 87,000 net jobs in August. The labor market is worsening fast. In addition, excluded from the unemployment figures the BLS reported Friday, which was 9.1 percent according to them, we there are 8.8 million good folks who want full time work, but involuntarily are stuck with part-time work. That is an increase of 400,000 over July. So from July 2011 to August 2011, 487,000 people lost full time jobs. Another 2.6 million folks were out of work, but not counted as unemployed by the BLS because they had not searched for a job in the previous 4 weeks, many of them so discouraged as to say, "why bother."

The August 2011 Jobs report is an indictment against the Central Planners' economic policies over the past several years. The Fed threw $2.0 trillion at Wall Street in QE1 and QE2 supposedly to trickle down and ignite economic growth. All that did was keep Connecticut, New York and New Jersey shore property values high as the Wall Street beneficiaries of this $2.0 trillion government gift enjoyed prosperity. None of the money got into the hands of mainstream America, none for the households, or small businesses (unless you run a hot dog luncheonette in lower Manhattan I suppose). Yet it is a stone cold fact that economies grow and prosper, that jobs are created, from the ground up, from households and small businesses, not from Wall Street and megafirms.

Had the Fed loaned that same $2.0 trillion to the U.S. Treasury, and that loan been used to rebate the past two years of income taxes to American Households, we would be looking at a new era of economic prosperity perhaps never rivaled before. Had the Treasury required as part of this rebate that half the rebate be used to pay off debt, the longest delinquent debt paid first, this economy would be growing through the roof, jobs would be created at a plentiful rate, and markets would be taking off to the upside. Households would see their balance sheets improve, with debt paid off. Bank risk-based capital levels would rise dramatically, strengthening the financial sector. Bank loan appetite would increase as their loan to deposit ratios shrink. Households would spend the extra cash from the tax rebate, increasing demand for small business' products and services. Small businesses would hire more people to provide goods and services to meet rising demand. Small businesses would purchase more goods and services from large corporations, increasing revenues for large businesses. Large businesses would hire more people to meet rising demand. Large businesses would go to Wall Street for capital to finance goods and services required to meet rising demand. In total, employment would rise, profits at all economic levels would rise, wages would rise, tax revenues for local, state and federal government would rise without the need to increase income tax rates. Increased tax revenues would be used by the Federal Government to payoff the loan from the Fed that started this boom with income tax rebates. Infrastructure spending would increase as government budgets improve, creating more jobs. Household income would improve, enabling them to qualify for home mortgages and other consumer loans, spurring the housing, auto, and consumer staples markets. And make no mistake, it is very difficult to qualify for a home mortgage right now. The down payment requirements are through the roof, and most households cannot come up with the cash. The value of existing homes has fallen, so where is the cash equity going to come from? Hence the housing market is frozen.

But, no, the Central Planners did not do this, and instead have blown up $2.0 trillion of money, with no effective improvement in the economy at any level except Wall Street and shore property.

And now we face the next Great Depression, perhaps one that will be the worst ever seen. They blew it.

Dow Jones Industrial Average

This is the major Topping Formation that is the Multi-Century Top. This is a Broadening Top, Megaphone Top pattern. These patterns are reliable and appear at tops. This one is huge, as it should be for the conclusion of a multi-century rally.

There is a pattern that just jumps out at us, which is our highest probability scenario for the big picture. We now believe that the Grand Supercycle degree wave {III} top did not occur at the January 14th, 2000 top, and did not occur at the October 2007 top. We believe those tops were waves (A) and (C) of a massive Megaphone Top pattern in stocks.

What is intriguing about this scenario is that each wave has three subwaves, that the pattern has five waves (key characteristics), and that the fifth and final wave (E) up of V up is finished.

If so, this means that the coming Grand Supercycle degree wave {IV} down is starting, and will be much worse than what we have seen over the past decade.

This price pattern is looking more and more like a textbook Megaphone topping pattern. The slope of the top and bottom boundary lines is identical in reverse, and authentic since the lines are drawn off two top and two bottom points, which adds to the probability that this pattern is occurring.

This pattern has appeared at many of the major tops over the past century.


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"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."

John 6: 35, 38, 40


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