A Globally Synchronized Crash Is Looming

7:45 am

A globally Synchronized Crash is looming

Wave 3 of Intermediate Wave (1) has just begun in the Shanghai Composite Index. The minimum decline in Wave (1) appears to be point 6.  It may go lower. China and the US have the two strongest markets, as you will see.  While it peaked on February 18th, it was able to hold off the decline until now.

ZeroHedge reports, “Good economic news is bad news for markets now.

A better-than-expected ADP jobs report sent the dollar and bond yields higher and stocks lower Thursday. A strong payroll report Friday would give more ammunition for folks calling for earlier QE tapering. In a sense, policy normalization has already started after the Fed announced plans to wind down its emergency corporate-credit facility. From that perspective, the peak of liquidity is near.

In China, the authorities are already mopping up the dollar liquidity awash in its domestic market. On Thursday, two Chinese policy banks, China Development Bank and the Export-Import Bank of China, announced the selling of dollar notes in the onshore market, the first such sales in years. It followed a move Monday when the PBOC required lenders to hold more foreign currencies in reserve.

Both aim to reduce the dollar supply and ease the pressure for yuan appreciation. As a result, one-year yuan swap points dropped to the lowest since January, reflecting higher dollar funding costs. The yuan rally has also stalled.”

The Nikkei 225 Index peaked on February 16, but try as it might, it could not recover. An attempted Wave (5) on May 10 truncated in a failed rally that normally have made a new high.

SPX futures are dead in the water, waiting for the May employment survey. The EW structure calls for another probe to 4215.00 to 4220.00.  A Minute Wave [ii] may go as high as 4234.00, but no higher. I will update this commentary as things develop.

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