The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, November 30, 2015.
That's what it's all about for technocrats - staying ahead of the curve. It's about managing you and your environment in every respect, from what you think to how you act - and they are winning. Wall Street, Washington, the media, and surveillance state - it's all about getting your information and using against you in exploitive tactics designed to bolster and enrich the status quo - and to hell with everybody else. The public is viewed as a never-ending resource to be exploited, and the objective for the psychopaths is to remain ahead of everybody else in the larger exploitation game.
But nothing less should be expected by you in this increasingly neo-fascist world in which we live, where thought managers wage war on a now confused and vulnerable mob (the public) 24 - 7 - a mob that sold out to the promises of perpetual 'good times' by the technocrats long ago. All this is nothing new of course. There have been many such episodes throughout history, with Nazi-Germany perhaps the one that comes to mind most easily. Of course the present craze is different in terns of size and scope, making it a real showstopper once the party is over.
Indeed, if there's one thing these characters never learn, its all good things must come to an end, and we are beginning to see such signs regarding our present mania, given because of its degree, this one will like not exhaust itself fully until some very nasty things happen. (i.e. world war, famine, etc.) The ISIS construct is a very good example of this at the core of what happening in that it's being used by Western authorities to further erode our civil liberties and freedoms; again, with the ultimate goal of such tactics being 'total control' and self enrichment.
There's only one insurmountable problem for the psychopath's in charge however, that being the continual need to increase the frequency of interventions, along with the necessity of intensifying thought control and expectations management (via propaganda and surveillance state), all with the goal of keeping the mob(s) placated and contained in their increasingly sordid and depressing lives. And again, the very sad part of all this is it's working on the unprepared and weak minds, which unfortunately is becoming a major percentage of the population. (i.e. because of continual conditioning.)
Zeroing in on the mania in stocks, which is the mirror on the beast essentially, here we have a somewhat less frothy repeat of tech wreck in 2000, where although stocks are undoubtedly in bubble territory, in theory we should never see the extremes witnessed way back when, in theory. Certainly credit conditions, along with other important factors are nothing like conditions in 1999, however one cannot completely rule out the unexpected. What's more, considering the amount of credit it's taken to maintain the illusion(s) into the present, we are far worse off today, where as pointed out by Charles Hugh - Smith (seen here), only a modest disruption (in credit) would be enough to shatter the status quo.
Because if they lose control of credit, they will lose control of the stock and bond markets, which they have allowed to become the economy (wealth effect, stock options, etc.), meaning it's all over except the crying for just about everybody if that happens. And the traders know this, which is why the Fed is their best friend ever. Therein, if the bond market(s) start to slide (which is happening), increasing the chances the credit markets might actually tighten, the Fed would be all over the situation faster than the wind passes through a goose.
All this rate hike crap it keeps harping on is for the benefit of the idiots, the idea being it keeps them looking credible because they haven't completely destroyed the business cycle - which of course they have. So don't be fooled by these fools, they are going day to day here with the rest of the crazies. Even if they tweak the one or both of the administered rates higher at their next meeting this would not lift the zero bound in market rates (sovereigns), which is what's important. You've got a got a very high short position in Treasuries right now, so market rates are not going up in the States - yet.
Of course if corporate credit keeps deteriorating, the stock market could still dump. Based on true sentiment conditions across the larger US complex, which is seen here in open interest put / call ratios, the consensus is expecting higher prices going into Christmas, which should prove interesting if the ratios can remain low, or worse (for the bulls), trending lower. Add to this short interest on the New York Stock Exchange (NYSE) is way down, and again, this optimism could prove counterintuitive if idiot hedge funds chasing returns into year-end chicken out. (See Figure 1)
As I write, the Dow / XAU Ratio is trading in the proximity of 400, which is significant monthly closing basis Fibonacci resistance, which looks like it will happen this month if a 'Cyber Monday' pop in stocks keeps things buoyant. That being said, we must remember just how desperate the bureaucracy's price managers are to keep stocks buoyant forever, so we cannot be surprise if the markets remain firm if they are willing to step up and be the ball. These guys and gals are crazy (literally), so anything is possible, especially if the Fed gooses stocks in and around Fed rate decision time on the 15th. (See Figure 2)
We can see this possibility in the Dow / CRB Ratio pictured above as well, where just like the Dow / XAU, and as pointed out previously, after reaching significant signature Fibonacci resistance (see here), it may need some time to actually turn lower in a topping process, which in this case means a surge to new highs. (i.e. highs for stocks against lows for commodities.) And again, this looks like it's going to happen to precious metals (shares) too, although you would never know it looking at the shares on Friday, victims of stubborn bullish idiots. (i.e. with gold and silver way down.)
This will not last however, once the broads turn lower for real and the liquidity dries up. Even a check in every mailbox can't prevent the initial liquidity flush in the broads affecting precious metals shares (especially the small ones), assuming that's all that occurs. (i.e. stocks don't crash like 1929.) Regular readers know of my long standing target of 400 for the CDNX, and I am still of the opinion the vicinity of 400 (if not the large round number itself) will be vexed once the inflation bulls are rattled. The big question in this regard then is when will the broads roll over.
The answer to this question is becoming more complex with the increasing interventions (etc.), however it will happen at some point in the not too distant future. And now that the lunacy has gone on for so long, it will be a complete wipeout once the selling finally arrives. The US will be seen for the banana republic it's becoming. Once the stock market rolls over process will accelerate in this regard. This is why the status quo crowd must stay ahead of the curve, because if they make one mistake it's all over. This is why the bubbles must remain inflated and growing, but sheer mass and peak complexity have become their biggest enemies.
Because at some point the bubbles will simply become too big to fool with any longer and begin deflating no matter what the technocrats do. The Japanese experience since the peak in their equity bubble in 1989 is the omni-present modern day exemplar of what the rest of the West should expect starting sometime very soon. Demographics are a killer. And no amount of monetary inflation can take the place of organic growth in an economy, although the technocrats will fight it tooth and nail to the end. In terms of measuring this end, if the SPX / VIX Ratio pictured below is able to vex the sinusoidal again, essentially measuring modern man's exhaustion signature, you would have a good sell signal for stocks as well. (See Figure 3)
And we would be amiss in not covering the stocks to gold ratios in putting the pieces of this puzzle together, but this time let's take a look at the SPX / Gold Ratio to see what messages can be gleaned in the technicals. (i.e. take from a long duration monthly plot.) The thing about a long duration monthly plot is if you know how to read it, you get profound messages. In doing just that below then, the first thing that you should notice is the big run-up into 2000, and the subsequent crash, a common trait of all markets to at least some degree in fiat currency based systems over the long run. And again, as you can see, this plot is no exception, where in fact an outright crash occurred last decade, when the status quo lost its grip on the system. (See Figure 4)
Further to this, it should be recognized if it were able to retake the 200-month moving average (MA), one would need to start asking oneself questions about secular trend change. We are of course not there yet, and it would in fact be quite surprising if this were to occur given the degree of the crash. As you can see, worst case in terms of the secular downtrend remaining in tact, what we are expecting at this point is a test of the 200-month MA. That being said, a 38.2% retracement is never out of order in such instances, so who really knows what lies ahead other than once the larger degree retracement is completed, a move towards the lows witnessed in 1980 is expected, below .25.
Looking at Western paper pricing mechanisms they call markets, that amazingly enough still set global prices, it should be noted internals / sentiment conditions have improved sufficiently on COMEX for gold to rally, however open interest (OI) and speculator betting practices in silver remain too bullish to start anything meaningful, so any rallies in coming days should be viewed as temporary. Remember, for COMEX silver, we need to see OI fall below 150,000 (hopefully towards 120,000) before a bottom can take form as long as speculators (big and small) keep betting bullish. Why do they do this in spite of silver's shellacking these past years? Because of silver's potential upside - they are stupid (playing a rigged market) and greedy. (i.e. they should buy physical in stead of the leveraged futures only to lose everything month after month.)
Because eventually just physical could pay off 35:1 from present levels if the returns witnessed from the end of the 70's mid-term correction (1976) to the peak in 1980 are duplicated in silver. Isn't this enough leverage without requiring a lobotomy because you lost your life savings in the futures market, only to watch the commodity price rise 35-times five years later. It's not just the stock speculators you should be watching for (think jumpers) if walking the streets of New York in coming years, it's the idiots playing the leveraged paper silver markets as well. And as you should know from our regular sentiment studies of the precious metal ETF universe, this is of course also true of these markets as well, with the open interest put / call ratios (see here) on SLV and AGQ at .32 and .54 respectively. (i.e. no hope for a short squeeze here until they get above unity.)
This is why one cannot be outright bullish on precious metals just yet, in spite of the important ratios in Figures 1 & 2 above being at or close to potentially profound topping metrics. Because as mentioned previously, what happens in the initial stages of secular degree turns back down in these measures is while commodity prices may not be falling as fast as previously high flying stocks, they fall too (creating what is dubbed a 'deflation scare'), meaning nominal values can still decline for up to six-months if history is a good guide. And it's this 'deflation scare' that finally gets the hedge fund knuckleheads to not only stop buying precious metal derivatives so enthusiastically, they also stop buying the derivatives on the derivatives once they realize such behavior will not get them to Elysium.
But what about the rapidly depleting physical bullion supplies in the West, increasing bullion demand in the East, and increasing prospects for war that could increase demand in parabolic fashion at anytime. Are these not things that can make faulty and fraudulent Western market mechanisms redundant in the pricing of precious metals? The answer on all fronts here is a resounding yes, however the pace at which these factors will become germane remains SLOW - and this will remain so until change becomes fast. That's the way these things always work - the bigger the bureaucracy, the slower the change, the greater the surprise when it finally arrives. And the way to survive then is to prepare ahead of time (for market closures, currency crashes, capital controls, bail-ins, etc.) using precious metals, crypto-currencies, etc., because again, when it hits the fan for real, there will be little to no warning.
So again, although precious metals might enjoy a bounce in coming days due to seasonality (and opportunistic news letter writers attempting to capitalize on this again), please be wary of the continued risks described above, because they remain very real, and likely to continue playing out once those foolish enough to continue speculating in this space without doing their homework are used up again. The trend change process (secular) discussed above is exactly that, a process, and these are the biggest markets in the history of mankind, so one must be both perseverant and penitent in terms of expectations - continuing to monitor and measure progress with a realistic attitude.
That's how you can stay ahead of the curve - by curbing your expectations to fit the reality of the slow change that is obvious and characteristic of a bloated global bureaucracy - up and down the scale - from the oligarchs to their dogs.
Merry Christmas all.