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Michael Clark
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Michael J. Clark was born and raised in Sinclair, Wyoming. He is a poet, novelist, artist, historian, and market analyst. His fine arts portfolio can be found at the following address: His writing portfolio can be found at:... More
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    Respect for the FED? No. Not much. The FED has a very simple job to do -- micromanagement of markets is not their responsibility. The FED has only one job. To lead the economy out of its cyclical deflation by lowering interest rates; and to lead the economy out of its cyclical inflation by raising rates. The first part of this job the FED almost always does well; the second part it never does well. It is conceptually handicapped by trying to hammer a square peg (the idea that perpetual economic expansion is possible) into a round hole (aren't all holes round? The reality that Nature, and everything in Nature, breathes, expands and contracts). We are experiencing a classic denial of reality, based somewhat on good intentions. We need to follow Nature. We need BOTH expansion of spending and the evolution of civilization that goes with this AND the end of that expansion, rest, conservation of energy that is the basis of the rest season, and saving to replace spending as the driver of this dual cycle.

    If we know the cycles of Nature, and it is the FED's job to know this, the task becomes simple:

    Lower rates from 1911-1929; raise rates from 1929-1947; lower rates from 1947-1965; raise rates from 1965-1983; lower rates from 1983-2001; raise rates from 2001-2019; lower rates from 2019-2037....

    We are one-sided. We want only the pleasure side of life, the bright sunny side, the youth. But this is childish. Of course the child wants only candy. But are his parents supposed to give him only candy. If they do he never grows up; or he grows up stupid and fat with bad teeth. Where is the discipline here? The FED is supposed to be imposing discipline on the child. We expand, we get rich, we spend money, we are happy, the sun is shining. But then the day gets old, and the party has to end. The FED is unwilling to say that the party is ending. Lowering interest rates and flooding money into the economy to keep cost of carry debt low is a FED (a parent) who refuses to discipline his children. We become spoiled; decadent; eventually we will be overthrown as a nation because we have leaders who are afraid to give us bad news, that reality is not quite what we want. We have gutless parents who are willing to let the entire system we have created to bankrupt rather than to have to play the role of the bad guy who says "enough is enough". "We have to face reality."

    We will get a strong Father figure who will put his foot down. This will bring in suffering and austerity, probably connected with war. That is what ususally happens in history when the Mother Principle rules too long and spoils the children and the Father Principle (which includes the concept of discipline, and self-discipline) has been shunted out of the picture (because he's not intellectually sophisticated enough to 'know what is real'). Civilization dies from a lack of self-discipline; and from a people who insist on being told only the good news.


    Apr 22 10:26 PM | Link | 3 Comments

    Is the NASDAQ correcting? We ask, because one of our short-term trading systems is giving a short-sell trading signal on the Nasdaq (NASDAQ:QQQ). Here's the chart:

    (click to enlarge)The SQQQ is a BEARISH NASDAQ ETF -- meaning when it is long, NASDAQ stocks should fall.

    Note the top pane showing a bullish trend pattern beginning of higher highs and higher lows.

    Food for thought.


    Apr 02 1:23 AM | Link | Comment!

    I've been asked by a reader to update my position on CBI, Chicago Bridge and Iron. We have been short CBI for some time. CBI has rallied; and it is trying now to form a bottom.

    Let's look first at our current CBI monthly chart (we work with monthly charts rather than daily charts):

    (click to enlarge)One of the key indicators to watch is in the top pane, the brown line: M2F ALT Monthly. This actually shows one the strength (and density) of buying in the stock. No buyers in mid-2014, when the stock fell apart. Better buying now; but thin. The next chart will show what real bullish buying power looks like, back in the 2008-9 bottoming process.

    Another key indicator in this chart is T.5 Simple, brown line second pane from the top. This line is our real bull-bear line. During a bull move, this line will make higher highs and higher lows, putting in very clear support and resistance lines, and holding support and breaking resistance. During a bear move, the opposite will be true: support will be broken, and resistance will resist attempts to climb.

    Today, CBI continues to face overhead resistance. To consider this a bottom, CBI would need to put in another bottom above the current level and then take out overhead resistance. Currently 63.42 is overhead resistance for CBI. This will change as CBI rallies, pulls back, and then makes another rally.

    We looked back to the 2008 crash to get a picture of what real bullish buying looks like, and what a real T.5 Simple Trend bottoming action looks like. We are not there yet.

    (click to enlarge)

    CBI has another problem as well. CBI has historically tended to move with the price of oil. And oil has a long-term problem, the strength of the US Dollar. I think this is an even bigger problem for CBI. I know the arguments that CBI is not an oil stock, and is not even related to oil. But look at the picture of the correlation between the price of CBI and the price of XOI, the Oil and Gas stock. It's pretty striking.

    (click to enlarge)What this says is that CBI and oil prices march together.

    My understanding is that oil prices and the US Dollar moves diametrically against each other, as this chart suggests.

    (click to enlarge)I did one last chart of UUP (US Dollar) vs CBI prices.

    (click to enlarge)Perhaps not as perfect a correlation as the UUP vs XOI is. But very close.

    I think the strong Dollar is here to stay for a few more years. My take on this is that oil and CBI will be under pressure for some time now.

    The real test will be over time to see how CBI handles its next bout of selling. If it breaks through 34.51, then it could go below 20. If FED QE returns, then CBI will roar back up. If the FED rebels against Dollar Strength, then oil will rise, stocks will fly back up; and we will head into negative interest rates and the destruction of all currencies. Negative interest rates are the final act of the apocalypse. Then gold will rise exponentially. And the only currencies that will survive will be those backed by gold. So, the choice will not be easy for the FED. If they raise interest rates, it will support the US Dollar, perhaps save the US Dollar, but it will deflate the global economy, brick by brick, oil and commodities first, then multinational corporations, then force foreign defaults of US Dollar debt taken out during the massive QE flood of money that inflated the global debt bubble, then the crash of banks, then the Great Depression (finally).

    It seems like the FED has to choose either the Great Depression now, or later, after the complete destruction of the fiat currency system. The strong Dollar begins the deflation now. The weak Dollar begins the deflation after all the currencies have been destroyed. That seems to be the only choice the FED has now. It should have begun raising interest rates (small steady increases) in 2001, making money more expensive and not supporting the debt bubble inflation that has been the new religion of central banks, which I believe will be proven to have been a catastrophe.

    Good trading.


    Mar 31 2:28 PM | Link | Comment!
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