The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, November 13th, 2012.

Bye bye Miss American Pie
Drove my Chevy to the levee but the levee was dry
Them good ole boys were drinking whiskey in Rye
Singin this'll be the day that I die.
This'll be the day that I die.

It takes a devastating catastrophe like Sandy to mark before and after times. New Yorkers, who to this point have done a miraculous job of insulating themselves from the ravages of a collapsing economy (while ironically largely causing it), will look back on this time years down the road and conceptualize life in terms of before and after this faithful time - a profound milestone within their minds - a time when many will have waved bye bye to the (modern) American way and dream. (i.e. consumerism.) The first verse from the classic sung by Don McLean above captures this sentiment perfectly in my opinion.

For New Yorkers certainly 911 falls within this category as well. However New Yorkers, and America, rallied off of the tragic twin towers turmoil manufacturing manifestations of evildoers to be feared and retaliation. This proved to distract the masses, providing new purpose and focus. However, such an exercise (rue) will obviously not be repeated with Sandy (and Nor'easter), as this time it was Mother Nature at work - nobody to blame for being unprepared and misfortunes here.

Side note: Sandy is a 1000-year event and will cause aggregate US GDP to decline in 2012 and beyond. (i.e. many cannot afford to rebuild or buy new cars.) One wonders if this and the compounded effects of the Nor'easter on the center of modern day society (New York) is in actuality the extent of what the Mayan's foresaw, because apparently even they saw things happening past 2012. I guess we'll know after December 21st.

And there will be nobody else to blame for the financial super-storm that is about to descend on America for the ill-prepared either - nobody but you. Because even realistic mainstream post mortems are negative, so the reality could of course be much worse. Gone are the days of unsustainable spending habits for the masses, as real wages continue to decline caused by a corrupt kleptocracy attempting to preserve a dysfunctional status quo.

The election has come and gone, and Obama was re-upped because he loves to redistribute the wealth to increasing numbers who correspondingly love the free handouts. They think that with Obama back in office the status quo of increasingly debased policy will remain - and they are undoubtedly correct. And if that's not the case Bernanke will see to the freebees with an increasingly debased currency. Even those with 70 IQ's understand this now. The consensus has unfortunately become the equivalent of 'the mob' in Ancient Rome at the time of 'bread and circuses'; or the bureaucrats that put Hitler into power. With the exception of 'a few good people', this election proves America have gone over the line in terms of moral debasement, and that things will get much worse with Obama in office for another four years. (i.e. think loss of liberties and a lasting structural economic collapse.)

Side Note: The only hope is, as Ron Paul says, the Republican's embrace a more libertarian orientation, attracting a growing constituency.

What's worse, it didn't matter who won the election because the Beltway Boys (Super Pack) are still playing divided and set to scare the begeezes out of anyone (with an IQ below 100) over the fiscal cliff farce just around the corner. Certainly a big problem that could develop for the stock market is traders have become so desensitized to risk, like Sandy, they are apparently not planning on making preparations for the possibly deeper spending cuts / tax increases that may in fact be on the way. And they (the populace) are probably right in not worrying about the politician's ultimately; not that anything these characters do to postpone mounting fiscal problems will have the desired effect. (i.e. even if the fiscal farce is pushed down the road stocks and bonds are still set to crash both now and into the future.)

I call it the fiscal farce (it's a hoax) because anybody who believes fiscal cliff finagling is more than a ruse designed to generate a relief rally in the stock market when the can is kicked down the road again (the term was coined by Bernanke - chief manipulator at the Fed) must have an IQ well south of 100 if you base your opinion on past performance; or simply how the American people wish their representatives to vote - based on the election. (i.e. Obama symbolizes extreme right wing thinking and that American's have become a bunch of 'good time Charlie's' looking for a free lunch.)

This subject matter is not new to you if reading these pages for some time. And as you can tell from the above I could go on forever about why it's becoming self-evident the days of big government are numbered due to exploding deficits and debt, and that the bureaucracy will increasing be unable to paper over uncontrolled spending without sending commodity prices to the moon. (i.e. collapsing the economy.) This is of course the fundamental reason why socialism does not work, especially as it becomes increasingly predatory in terms of wealth confiscation.

But let's move onto the markets now shall we, before I get myself into more trouble. In relation to the serious nature of the above sentiment however, you should know that unquestionably the markets are an accident waiting to happen, with special emphasis on the stock market. Economists have become too optimistic again considering the reality of the situation, setting the stage for a repeat of 2008. Market management meddling, along with wealth effect considerations both here and abroad, have worked to create dangerous and worrisome divergences in the markets, setting the stage for some real trouble in the not too distant future. Along this line of thinking I would like to discuss and show you one, and only one, chart this week - that being the CBOE Volatility Index (VIX) - in all it's glory. (See Figure 1)

Figure 1

Why concentrate solely on the VIX today? Several reasons actually. First, in being an ever-aware speculator and contrarian, naturally my interest in something is piqued when standards appear to be discarded or disrespected by 'would-be professionals', which is exactly what has recently been happening on bubblevision again regarding the VIX. (i.e. I keep Bloomberg on in the background often to pick up such nuances.) I could not help but be struck by the manner in which both the commentator and his guest almost took pleasure in categorizing the VIX as a useless and antiquated tool / indicator because it's correlation to the stock market has loosened in terms of day to day swings somewhat, accounting for such thinking.

Of course when one steps back and looks at the monthly chart of the VIX above, you should get quite a different picture, one where the big picture is still well reflected within the trade. (i.e. stocks tend to be less volatile when rising, and visa versa.) What's more, and as you can see, at present its trading just below 20, where once it breaks above this milestone we will have a signal a (possibly prolonged) period of increasing volatility (in stocks) should be expected, which again, is exactly what the VIX is supposed to do. And I can assure you it still performs this task well.

The question does arise however, 'why has the VIX become less responsive to apparent increasing volatility in stocks with the S&P 500 (SPX) down some 100-points since September, and performing particularly poorly since the election?' Well, for one thing a 100-point swing in the SPX is not 'trend setting', which is one aspect to consider. And another is manipulation by price managing bureaucrats. But you should know that the real reason the VIX trades the way it does is largely due to speculator betting practices in the options markets of its related derivatives, which is well reflected in VXX contracts. (i.e. the leveraged ETF.)

Here, I will simply borrow from last week's analysis on this subject matter with a few additional insights, the first being open interest put / call ratios on the VXX (attached here again) continued to climb right up until Friday, creating more pressure for further selling in stocks. The fact North American trading is deviating from the 1987 analog by apparently not crashing this week is a result of the global interconnectedness of the markets, where like the US, Chinese bureaucrats are making sure stocks don't decline while their elections are in the lime light as well. (i.e. other than like paper silver, being an easily manipulated and small localized market, increasingly it's being suppressed both directly and covertly because of the anti-establishment signals it throws off.)

Still however (this being the second insight), with Obama confirming last Friday that some degree of tax increases within the fiscal farce will likely go through, with the prospect of capital gains taxes rising next year, you can count on more selling just because of this one factor alone, which by implication means stocks should move lower into year-end. That being said, the downside targets for both the broads and precious metals shares mentioned last week remain in force then, however with respect to the relative positive action in the latter group (precious metals), one is advised to be far more forgiving in accumulation, meaning one is advised not to argue with the bullish price behavior, although we may need to get past liquidity related jitters heading into next year.

" How far can prices fall over the next few days before stabilizing? The Dow has a 600-point head and shoulders pattern in it so the measured move would put a low in the 12,400 area. (~ 1344 on the SPX.) Thus, short sellers would be advised to cover positions there, but with the GLD / SLV Ratio putting in an apparent 5-wave advance (still in progress), this means any upside off the 1350ish level (on SPX) is nothing more than a corrective bounce, with more downside later on, likely convergent to when fiscal cliff deliberations begin to get steamy. (i.e. in December.)

And the same sentiment applies to precious metals shares, where the dips are being bought by aggressive speculators in the paper markets (including SLV, AGQ, GDX, and NUGT), which should be the harbinger of lower prices as well. Typical of this kind of set-up would be for the HUI to break the 200-day moving average (MA) support at 465ish before it can recover on a lasting basis. This is what it normally takes to get the morons that buy this kind of crap (leveraged derivatives) to stop; where again, I see no reason for the pattern not to repeat this time as well. In terms of targeting, the clearest structure in the complex right now appears to be the triple bottom break of the descending triangle in the XAU that measures down to approximately 168, putting it below its 200-day MA as well. This is where I would be a buyer looking for a lasting move higher, possibly extending into next year as per Dave's Contracting Fibonacci Spiral (CFS) thesis.

It should be noted the HUI is acting much better than the XAU, which is a positive sign, and likely more than simple elation over an Obama / Bernanke win. That being said, the downside targets discussed above can still be easily achieved once / if the broads continue to fall. So again, and for the short-term, with Bernanke's position solidified for another possible term (if he chooses), as long as less endowed traders keep buying bullish bets on the broads, stocks will keep declining, especially with margin calls undoubtedly beginning to heat up, likely keeping pressure on precious metals shares as well. Defending 1400 on the SPX (now breeched) is key for the price managers, but once it becomes apparent this level will not hold, prices will drop quickly, so be prepared. Options expiry next week looks like a good target date area for a low."

With options expiring this week, next week both the VIX and dollar($) should put in countertrend moves, which should see them both decline. (i.e. which is supportive of equities.) We are getting a taste of this early this week, especially for the VIX, where speculators are apparently unwinding near-term positions. Based on the degree stock futures are down this morning however, it appears post election hedge covering may now be complete, clearing the way for the Dow and SPX to reach the head and shoulders pattern targets discussed above as expiry approaches this coming Friday. With open interest put / call ratios on key indexes (ex. SPY) continuing to fall with prices last week we have a sentiment backdrop supportive of such an outcome.

Past this, stocks should rebound into Thanks Giving next week, with the SPX possibly reaching the large round number at 1400 to test this level and begin tracing out an ever-larger head and shoulders patterns on the SPX and Dow. Along these lines, one thing is for sure; it will continue to be dangerous having a bullish disposition on stocks as long as extreme gamblers (and hedgers) continue betting the wrong way.

Fast foreword to today (December 3rd) and unfortunately its the same old story. The excessively greedy speculators continue to buy calls on all varieties of derivatives across the sector, where by and large the shares are becoming increasingly ignored. If you want to know why precious metals shares cannot put on a lasting rally - you have your reason.

One wonders just what it will take to alter this behavior. Lower prices don't work unless prices are crashing, and that only works until the numbskulls are emboldened again with a rally lasting a few days. The market riggers have an excellent self-managing system here because they know just how greedy these characters are and regularly topple them over at options expirations.

I'm beginning to think it will take bullion unavailability to create enough demand to go around the growing list of paper alternatives - but that's just speculation on my part.