The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Wednesday, July 30, 2014.

Aggressive financial repression is the cornerstone of subversive market manipulation being imposed on the macro by the 'powers that be' (think oligarchs, fascists, and bureaucrats) at present, which is affecting not only prices, but also investor attitudes. At the core, this practice is very unhealthy, because not only has it created the most profound example of wide-ranging mal-investment in the history of mankind, but more, it has also engendered dangerous embedded misunderstandings and a sense of complacency associated with real world constraints and conditions that have material affect on life. (i.e. which will eventually become life endangering.) Because too many non-renewable and scarce resources are being misallocated and wasted on non-productive and non-regenerative activities, which has worked to hollow-out and fundamentally weaken our 'modern economies'.

But this discussion is not the thrust behind our commentary today. No, instead it's the measurement of the turning point in the broad stock market that these factors have led us to, which as you would know in reading these pages regularly, lies dead ahead in our estimation. Many have attempted this feat over the past few years with little success, and we may also suffer the same fate. However, even if this is true, still, our margin for error will likely be viewed as acceptable in the big scheme of things. Because while stocks could continue surging due to intensifying nefarious measures manufactured by the 'crazies that be', still, the end is within site at some degree, which is likely to be profound considering it's been so long in coming. And again, by our estimation, we are close in this regard; meaning even further ' sideways ratcheting' of the CBOE Volatility Index (VIX) against stocks (as stocks continue to rise), using the S&P 500 (SPX) as our primary measure, will not matter.

We need the mania in fear (see comments here on this subject matter) to subside to some extent first however, which could come for several reasons, with speculator exhaustion at the top of the list. Given the dire circumstances in the economy / world today, it's understandable to ask just what could bring such speculator exhaustion on? The best answer I can come up with in this regard is some degree of a 'game changer', like seasonal tendencies, which can affect speculator betting practices. Another factor that could be big enough, which in fact was the case in the year 2000, is an election, where the perception price managers will not allow stocks to fall prior caused index (ETF) open interest put / call ratios to fall. (i.e. removing the fuel for the machines to prop stocks.) And we may have in fact witnessed such a turn in this regard this past expiry cycle, seen here, with the beginnings of noticeable drops in key index (ETF) open interest put / call ratios (and rise in the VXX) registered last week, led by the Transports ETF (IYT). Again however, most of the other key measures are still too high to get excited about significant downside just yet, and who knows, we may have to wait for seasonal strength tendencies (and the election closer) before speculators stop buying index puts (and VIX calls.)

Further to this, there are also still a few stunts the bureaucracy's price managers can pull in order to extend the stock market's rise, however again, the longer this lunacy goes on, it will come at a heavy cost. Because, for example, by exploiting money market / bond market investors today, ultimately more savings / capital will not be available tomorrow in order to defend the system when required - in the heat of collapse - which such measures would only postpone. Of course such thoughts don't mean much to the desperate idiots running things today - so please - give me that hamburger today and I will gladly pay you for on Tuesday. The only problem is mental midgets like this won't have money to pay you with tomorrow, so in order to keep the game going they will have to steal it from somewhere else, which is what fascisms is all about - right? And what this means in present circumstances is if not outright asset confiscation (the threat of which is designed to spur spending now as well), which will soon be coming to a theatre close to you, clandestine confiscation through accelerating currency debasement will be required, which is why real physical precious metal ownership is a must for anybody concerned with preserving wealth today.

Don't tell that to the brokers however, or how are they ever going to make you broker? Along this line of thinking, and an observation made a few weeks back, don't expect stocks to reverse lower before the brokers exploit their clients in the Alibaba IPO, which is close now, likely coming next week. With earnings deceleration accelerating, evident in core companies like Amazon and VISA, the bigger picture for a meaningful reversal in stocks to occur is just about complete, where again, once the Alibaba IPO is out, expect a hasty retreat from the educated money. What's more, and in honing in on the thrust of today's big message, this should also be the last instance of VIX related ratcheting against the SPX, which would send the SPX / VIX Ratio into our targeted finishing range. Again, the storyline goes, if this is the top in stocks, as measured by a completed sinusoidal in the SPX / VIX Ratio, it should finish the month in the 192 area (extreme resistance), but should continue to overshoot for another week or two (convergent to the Alibaba IPO) before reversing lower based on our observations concerning key open interest put / call ratios attached above. (See Figure 1)

Figure 1

And of course the same sentiment holds true for tech, as measured by the Comp / Nasdaq Volatility Index (VXN) Ratio, which is also now consolidating prior to completing it's present blow-off. As noted by John Hussman this week, although the present bubble stocks is more extreme in a broader sense, it's still not so in tech because of this diffusion. Of course it's supposed to be that way, because the year 2000 marked a generational bubble in tech stocks, where a bettering of Nasdaq highs within the present sequence would be a first in market(s) history. (i.e. although it's trying.) This is why although it may come close, such a bettering will most likely not occur, not (double negative) that the crazies won't try, evidenced with this week's Zillow(Z) takeover. Such is the risk of shorting individual tech stocks at times such as these. On a macro basis, shorting potentially bad news (and month end - now considered a macro factor apparently) has yielded similar (although less dramatic) results. A great many people are expecting stocks to swoon on Wednesday due to a GDP surprise, and they might, but then there's the Fed decision the same day, month-end the next, and the Employment Report Friday, so one should be careful if history is a good guide. (i.e. expect a great deal of manipulation and lying in order to boost stocks.) (See Figure 2)

Figure 2

So again, although stocks most likely have relatively little upside at this point given the degree of 'ratchet ability' remaining in the situation is limited; still, it could last longer than short sellers will be able to remain solvent. That being said, and allowing for three to five percent corrections along the way if things don't change; again, the big message here is if the past year and a half is any indication, stocks will not go down until speculators completely give up on shorting the market no matter how long the present sequence runs. This means that no matter what (widening credit spreads, etc.), as with the trade this week, stocks could continue higher indefinitely in theory, as they are already almost completely removed from 'worldly constraints' thanks to financial repression. (i.e. which includes VIX suppression these days.) One thing is for sure however, at some point hedgers and speculators alike will need to stop shorting the market, where the ranks remain thick at present (because of cost / performance issues), and stocks will come down hard at that time. Thus, it's very important to watch post expiration changes of the key open interest put / call ratios we follow for a collapse, which will come. It may take until seasonals become bullish in October (post options expiry) or as the election approaches in November, but this is coming, so watch out. (See Figure 3)

Figure 3

In the meantime however, as denote above we have a busy news related week for the algos to feed from, so as usual, expect a short squeeze to result, hopefully send the SPX / VIX Ratio to our monthly closing basis target of 192. Again, if this occurs it does not necessarily mean that stocks will top out this week, however it increases the odds they do by Alibaba IPO time at the end of next week considerably, only one week away from the August options expiry. Only thing is, unless the SPX and VIX have drama moves higher and lower respectively over the next two trading days, such an outcome does not appear likely at this particular moment, which will increase the probability of the rally extending into Fall considerably. (i.e. as per the above mentioned scenario.) The big question in this respect is 'why would hedgers (and hair-brained speculators) stop shorting stocks going into the weakest month's from a seasonal perspective with stocks at all time highs?' Apparently the answer to this question is they are not, which again, increases the odds of stocks continuing to be squeezed higher into a September to October window considerably.

As you can see in Figure 3 directly above, we are definitely in position for stocks to begin under-performing gold at anytime, however, we need to see the mania in fear, and all the hedging (think a collapse in the SPX put / call ratio), to run its course. This is why I say it might take until speculators / hedgers can no longer justify buying portfolio protection puts, the levels of which are reflected in the attached SPX Ratio. (i.e. at historical highs.) What's more, it could be argued that as long as you have guys like this going on CNBC talking about bubbles bursting (bubble babble) it will not happen because of all the associated put buying / shorting. Again here, one wonders if he will shut up about this once we enter the seasonal strength period beginning in October as well. Combining all this, and especially if the SPX / VIX Ratio does not close at 192 or higher this month (on Thursday), considering the put / call ratio for the SPX is at the highs, we would not be surprised at all if this were to happen. Oh, and don't worry about the overall market with the Transports acting up. The reason this is happening is the put / call ratio collapsed post expiry this past cycle (see above), which like the Russell 2000 the past two months since its put / call ratio collapse, has done nothing more than bring in more SPX put buyers, as we suggested this increased volatility would do.

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