Today's Market
by Dr Invest

Some people have read in my yawn, that I'm somewhat disinterested in everyone's losses over the past few weeks.  Well, that's just unfair. In my last blog, I reported that in May of 2012 there was a well formed "head and shoulder's" pattern waiting to exert itself upon the market. Bernanke answered  that threat with months of bond buying at the costs of trillions of dollars. The clear cut result of that bond buying, stimulus, liquidity, or money printing was the stock market rocketing to new heights, while copper fell to new lows. If you are a trader, you will already know that copper moves in concert with stocks and can be used like a "canary-in-a-mine" to show the health of stocks. Listen, the canary has been dead since May of 2012.

The canary in the mine, that stopped singing in 2012, is simply showing us that the robust economy we thought we had is a mirage, a figment of our imagination. The reality lies with the descending price of copper.

A More Truthful Season?

You may ask: Is the Federal Reserve moving us into a more truthful season of economic reality?  The answer is NO! The FED has printed money at such a pace, that there are real concerns about inflationary impact. No one would argue that inflation is rising; yet with the failing economy in Europe, the dollar looks remarkably strong. I used the word, MIRAGE. What you see as economic reality is not real. When Japan and Europe begin the very shallowest of recoveries, the U.S. Dollar will fall like a rock and the foolishness of stimulus will show itself in a devalued dollar.

Patient on Life Support

No one.... absolutely no one, would argue that if the Federal Reserve removed all stimulus at this very moment, we would solidly and immediately fall into a RECESSION/DEPRESSION. This is inarguable! Without stimulus, the patient would die. (PERIOD)

Why then, are our political leaders talking about the robust economy they created? They revel in the declining unemployment numbers, while those employed are only part-time or at the bottom of the pay-scale. This SLACK as the FED calls it, is worrisome and reflects the economic sickness present in our system.

A New Head and Shoulders Pattern?

With a new weakness appearing in our market.... in spite of the continued FED stimulus, there is concern about technical indicators in stocks that would foretell the end of the Bull Market.  Here is what seems to be forming:

Looking at the current S&P 500, it appears that there is a head and shoulders pattern unfolding. I am projecting that it could be at the beginning of 2015, after investors mistakenly think that a market correction will result in a buying opportunity.

Changes to the Projection

The FED could aggressively increase bond buying to bolster the market once again. Yellen has suggested that she is not timid about more stimulus and Peter Schiff, James Rickards, Jim Rogers, Marc Faber and other perma bears have suggested that the FED would do so. I do suggest that you go to YOUTUBE and watch the analysis of James Rickards in "The Death of Money". Though Rickards analysis may be more theoretical, you should be prepared with an understanding of how things could unfold.

Governments are devoted to making their citizens believe that taxes are low, the economy is improving, and their dollar is strong. If it is within their power, they will keep the economic ball rolling.

The Problem

The problem is that there is no such thing as an eternal bull market. Given time, every Bull Market will collapse. Our market did so in May of 2012. Instead of allowing a market correction, Bernanke implemented a course of action that has prolonged this Bull Market for an unheard of almost five years. Economists will tell you that there have been such Bull Markets in the past, BUT THEY OCCURRED IN A ROBUST MARKET EXPANSION. There is no such expansion presently, and no hope of such an expansion in the near future.  Let me say it again, SMOKE AND MIRRORS. What you see as a robust economy, ISN'T! The economy is on life support. This is a time for defensive positions.

(note: the above information is for entertainment purposes only and should not be used for investment purposes in any way.)