Market Is Entering Rough Waters

I’m not going to sugarcoat this as it appears we may be in for a bumpy ride. This is not a bad thing. It’s just a cycle and if you remain calm throughout this you may even pocket some money in the process. Not even the prospect of nationalization could have turned the markets around, as we sold off hard into the close yesterday. What I saw with regard to my indicators is the same problem I’ve been noticing these past few weeks. A lack of fear. Option buyers still haven’t switched over to the massive put buying that one likes to see at major or short term bottoms. The crowd is almost always wrong especially at critical turning points and it feels like an important “something” is about to happen. Record new lows haven’t been setting in and even the media has remained fairly calm throughout this recent downturn.

You have to ask yourself, “What could turn this market around?” To be completely honest I don’t see many answers that would answer that question satisfactorily. However, maybe rephrase the question and ask “What could give this market a temporary bounce?” The answer to that lies in the form of a catalyst that gives the appearance of acting like a tourniquet on this bleeding market. And that is exactly what we have here. A market devoid of any significant buying, or put in simplified terms, confidence.

As far as catalysts go, there are a few out there that I feel could light a spark in this market. However let me be clear that I don’t condone any of these and I fear they would only be a short term spark that would eventually lead to new lows. I’m trying to pretend I’m the government, and think like they would think and react to what is going on in the markets.

1. Bank nationalization - this almost seems like a given at this point and it scares me so much because I already fear the government and believe this would be a major mistake putting the government in charge of our money. I was just out walking my dog and a thought popped into my head. The Federal Reserve will become our new banking system. They already loan money to the banks, why don’t they just become the bank? Oh, and don’t forget, the Fed is a privately owned cooperation. Scary stuff.
2. Start the war drums. Iraq, Iran, Afghanistan pick your opponent. Sometimes I think our government thinks it’s playing a live Risk game. The prospect of a war could lead people to perceive that a pickup in the economy is imminent, but I disagree. All troops should be brought home and the military should be sliced in half. That would be truly beneficial to the economy. The economic toll our military costs this country is staggering.
3. Amero - a new currency that is comprised of the US Dollar, Canadian Loony, and Mexican Peso. Don’t think this could happen but whoever thought the Euro would happen. Go ahead and google “Amero” and see what you find. It’s real and it’s coming. I have no idea if this is going to happen in the near term, but I tend to believe that the process is underway. A new currency, fresh start could be seen as a positive development.
4. One day crash of 20+ percent. - This alone could be a catalyst for buyers to step in and buy some stock as their perception could be that stocks are cheap enough to warrant the risk.

I have no idea if any or all of these will happen, but something has got to give. No market goes straight down, and this one seems to be building steam to the downside. Markets tend to get very irrational at times like these and I’m sure our government has got to be thinking things like “desperate times call for desperate measures.” When the government starts ushering phrases like this watch out and be sure to read the fine print.

Expand your mind as you contemplate these topics and please post your opinion. I really want to know what people are thinking out there about these topics and others. Long time readers of Zentrader should be all or mostly in cash right now, as I’ve been preaching about equity preservation and unstable markets for awhile now. These are the times to remain calm, observe what’s going on, and react to it. Leave predicting what is going to happen to amateurs.

Comments

[Roger Knights:]

A return to the gold standard or ratio? (Via the Amero??)

Feb 24 05:40 AM

[bosun.j:]

I agree with your general premise.

I take some bit of humor from your opening sentence with the market now off 50%...

Count on Iran kicking off as Main St. begins to wake up that there is nothing that can be done to stop a complete collapse! There will be civil unrest that will panic the leadership. Then you'll see another "terrorist" attack on US soil as an excuse to go to war to divert the public's anger.

Feb 24 05:41 AM

[ANTS:]

I think we have seen temporary bounces at times over the past few months. To my mind, they were in response to lower aLIBOR spread, and some similar indicators that showed a slight thaw in the credit markets.. Then at some point, this spread reversed slightly, then came the Merrill/BOA fiasco and in Europe, RBS at about the same time, and bingo, it was clear that things were getting worse.

There just has to be a resolution to the bank/insurance crisis. We have to believe that all the bad news is out, and especially from now on, no more rabbits in the hat. Unfortunately, some commentators, such as Rubini, are clearly indicating continuation of bad news.

So, no substantive uptick for many months yet.

Feb 24 06:04 AM

[drbob66:]

A modification ("relaxation"?) of mark-to-market accounting rules would be an excellent catalyst for a short-term bounce. Every time there's been a whisper of a rumor lately about this possibility, we've seen considerable short-covering in the financials and major indices. It's what short-sellers fear the most.

Feb 24 08:25 AM

[ChindiaRules:]

Jeff: Thanks for your guidance by affirming what we already know, that is, we know nothing about how to fix our impending demise.

When 1/3 of the entire world population (China & India...both with nukes & one is Communist) can supply tech & labor at 1/20th of the cost we need to afford life in the developed countries, we don't stand a chance.

Obama has promised "fundamental transformation of America". He's allowing it, fast. Socialism is the midwife of communism.

“Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more expensive credits, until debt becomes unbearable. The unpaid debt will lead to the bankruptcy of banks, which will have to be nationalised and the State will have to take the road which will eventually lead to communism.”
Karl Marx 1867.

Feb 24 10:47 AM

[drbob66:]

This does not sound like a quote from Karl Marx. Do you have the original quote (presumably from the German text)?
Or did you just make this up?


On Feb 24 10:47 AM ChindiaRules wrote:

> Jeff: Thanks for your guidance by affirming what we already know,
> that is, we know nothing about how to fix our impending demise.<br/>
>
> When 1/3 of the entire world population (China &amp; India...both
> with nukes &amp; one is Communist) can supply tech &amp; labor at
> 1/20th of the cost we need to afford life in the developed countries,
> we don't stand a chance.
>
> Obama has promised "fundamental transformation of America". He's
> allowing it, fast. Socialism is the midwife of communism.
>
> “Owners of capital will stimulate the working class to buy more and
> more expensive goods, houses and technology, pushing them to take
> more expensive credits, until debt becomes unbearable. The unpaid
> debt will lead to the bankruptcy of banks, which will have to be
> nationalised and the State will have to take the road which will
> eventually lead to communism.”
> Karl Marx 1867.

Feb 24 11:52 AM

[Bruce Pile:]

When I first read that quote, I was thinking it was from Peter Schiff circa 2007.

Feb 24 02:03 PM

[ChindiaRules:]

Strike the Marx quote...

The message doesn't change.

What our leaders are not telling us is that the Earth cannot support 6 billion Earthlings. Only about 500 billion can be reasonably accomodated (but then we have other creatures consuming earth resources as well).

There are only two feasible approaches to this management problem:

1.) Centralize all management authority into a centralized One World Government with wage parity throughout the world and equal distribution of wealth, or

2.) Cull about 5.5 billion people (the Chinese made a half-hearted attempt at this with their One Child per Family rule.)

If you were the supreme world authority naturally charged with perputation of the species, what would you do?

We all know the answer but we are too politically correct to express it.

"The last capitalist we hang shall be the one who sold us the rope." Karl Marx

Sorry but......Chindia Rules.


On Feb 24 11:52 AM drbob66 wrote:

> This does not sound like a quote from Karl Marx. Do you have the
> original quote (presumably from the German text)?
> Or did you just make this up?

Feb 24 03:02 PM

[fleeing omega:]

Jeff,

For what it's worth, I feel pretty much the same way. I got out of major equity positions last August, but have been dabbling some since November bottom. Today I got spooked and closed out with cash intact,leaving any bigger profit for the next guy. Now I only have a couple short postions. Would close those out too if they were solvent, that's how I am feeling at the moment.

Feb 25 12:07 AM

[Paul_L:]

After a quick rebound we are waiting once again for Timid Hiding Geithner to unleash his massive Do Right force to send the market down..

Feb 25 08:05 AM

[ckh:]

I oppose the controlled demolition of the US dollar by hidden Orwellian Illuminati inspired globalists and placing the One World Government Amero in it's stead. Please see my research site below for more commentary, news, research and networking opportunities for all world citizens who oppose a Godless one world government run by Illuminati dynasties:

2012poleshift.wetpaint...

ckh

Mar 04 01:50 PM