Silver Gold Ratio

Talk about drama!  The Dow Jones this week closed only 1.00% away from its last all-time high of last October 3. From here it should be easy for the Dow Jones to make a new BEV Zero in the Bear’s Eye View chart below.  But I don’t get a sense of urgency on the part of the bulls, so maybe not next week.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 597\Chart #1   DJ BEV 2013_20.gif

Looking at the Dow Jones in the daily bar chart below, market action again looks good. I know the stock market does best with low volatility, but seeing the Dow Jones so close to making history, advancing with such pathetic small daily steps is boring me to death.  

Come on. The Dow Jones is only 268 points; 1% away from making history.  One would expect a little excitement from the bulls in the stock market, but it’s not there. It’s almost as if trading is dominated by robot traders programmed by the big Wall Street firms.   wonder just how much public participation is in this market?

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 597\Chart #2   DJIA Daily Bar Chart.gif

It’s a safe bet public participation in today’s bull market is far below where it was in the 1990's, and again before the 2007-09 credit crisis.  After those two bubbles deflated, they greatly deflated the capital accounts of the general population that used to buy and sell the stocks trading on Wall Street. That plus having to endure two massive bear markets in less than a decade, the 2000 to 2002 78% bear market in the NASDAQ composite and the 2007 to 2009 54% bear market in the Dow Jones brutalized the bulls.

Wall Street itself isn’t looking too good either, as seen in this Zero Hedge article  on the Russell 2000 stocks. It all comes back to an unpleasant fact that the Federal Reserve has “injected” too much “liquidity” into the financial system. When this “liquidity” is ingested by corporations, it metabolizes into insupportable liabilities on their balance sheets, where debt service for all too many companies today absorbs their profitability.

Here’s more from Zero Hedge on the shabby state of public finances in Democratic controlled states and cities.

It’s not just Illinois and Chicago; most of the big block-buster states in the Electoral College have spent more than they can pay back.  At some point, a shock wave of defaults is going to spread terror in the debt markets.

Every now and then I receive comments on how the Federal Reserve System can support low bond yields indefinitely. Well yes they can, as long as the issuers of those bonds continue servicing their interest and principle payments. Whether the FOMC can maintain low yields as bond defaults roll across America is another thing entirely, and the day is coming when we’ll come to that point in the municipal and corporate bond markets.

At first fiduciaries and money managers will most likely “seek the safety” of the Treasury Bond market, as everyone knows Uncle Sam can’t go broke. He has the printing press making all the dollars he needs to pay his bills. Unfortunately, the dollars the Treasury’s debts are denominated in are backed only by the Full Faith and Credit of the United States Government. In other words, they are only accepted as payment for goods and services in the economy because the financial system has confidence in them. You can count on Mr. Bear targeting confidence in the US Dollar as a high priority target in his pending bear market.

Which brings us to gold’s BEV chart below; so how does gold look at the close of this week?  Gold is seeing a bit of a correction from its advance of September 2018 to January this year. Nothing to be worried about as it prepares for its fifth assault on its BEV -27.5% line ($1360) since 2013.

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