Wall Street’s Pending $100-Trillion-Dollar Margin Call

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 681\Chart #4   Gold BEV 2008-20.gif

Gold bottomed on November 30 with a BEV of -13.44% as its 15 count declined to a -5, or in the past fifteen daily closings, gold had seen only five advances. The specifics can be seen in gold’s Step Sum & 15 Count table below, but I have a feeling that with gold’s 15 count of -5 on November 30 as it came just short of breaking below its BEV -15% line, gold has seen a short term bottom at a minimum, and possibly the turning point for it to go on to new all-time highs.

Like me, my readers will just have to wait to see how this plays out; whether gold corrects down as far as to its BEV -20% line in the weeks and months to come, or if it should see a new all-time high early in 2021.Three weeks from Christmas and I’m feeling merry about the prospects for precious metal assets in the year to come.

Gold’s step sum chart below is a source of comfort. These step sum charts compare market reality (Blue Plot / Price of Gold) with market expectations (Red Plot / Market Sentiment).

Look at gold’s step sum plot during 2011, it zoomed upward with the advancing price of gold, as the bulls were sure gold was freeing itself from the oppressive hands of “policy.”  But in 2011 this was not to be.

Then came the 2012-2014 bear box, where market sentiment (Red Plot) refused to follow the market reality (Blue Plot) of deflating gold prices, and wouldn’t until May of 2014 when market sentiment (Red Plot) once again recoupled with the market reality of deflating gold prices. At their December 2015 bottoms, market psychology in the gold market was in a depressed state. But that’s what hard bottoms look like, bargain prices that few dare to take advantage of.

For the next few years gold struggled to break above, and stay above its $1360 line, or BEV -27.5% line in a BEV chart. Then in the summer of 2019 gold made a break out and finally closed above $2000 in August of this year, and for the past four months gold has been taking a well-deserved rest.  

I could be wrong, but I look at this chart and all I see is the potential for gold to do amazing things in 2021.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 681\Chart #5   Gold & SS 2014-20.gif

Market sentiment for the Dow Jones (its red step sum plot below) continues to be positive, and for good reason, has for years. So where do we go from here? See a repeat of the last nine months and have the Dow Jones at 49K by next August? That sounds ridiculous here in December, but how funny will that be next June? These big-bull markets tend to terminate with a blow off stage before Mr. Bear comes and takes it all away.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 681\Chart #6   DJ Step Sum 2017_20.gif

Below we see gold’s 15 count of -5 on November 30 as it bottomed with a BEV of -13.44%, marking a bottom, or so it appears. Let’s see how this works out in the weeks and months to come.

Looking at the Dow Jones side of this table, daily volatility (200 day M/A) closed the week at 1.65%. Looking at this data for the past 120 years in the chart below, there is something so wrong with that.  

And what would that be? Since 1900, every time daily volatility increased above its 1.00% line in the chart below, the Dow Jones was down 40% or more from an all-time high. But in December 2020 we see daily volatility at 1.65% as the Dow Jones has made three all-time highs since mid-November.

Obviously, the idiot savants at the FOMC are working hard “supporting this market’s valuation.”

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 681\Chart #7   Dow Jones 200 Day Volitility.gif

Corporate Bond yields have declined below levels seen in the mid-1940s in the aftermath of WW2. There is no mystery why that is so; Fed Chairman Powell announced last March the FOMC was going to “support the credit markets” by purchasing corporate bonds. 

The Federal Reserve Moves to Buy Corporate Debt

Forbes: Mar 23, 2020,10:56am EDT

“In an unprecedented U.S. action, the Federal Reserve moved on Monday to buy corporate debt, one of several actions the U.S. central bank took in a massive start-of-the-week intervention to support credit markets amid the dramatic economic impact of dealing with the coronavirus.”

This announcement marked the precise, March 23 turnaround in the swiftest market decline the Dow Jones has seen since 1885; last winter’s 37% market decline in only twenty-eight NYSE trading sessions. Looking at the chart below, had Fed Chairman Powell not “supported the credit markets” last March, I suspect the Dow Jones would not have broken above 30K in late November, but today find itself far below the lows of last March (Red Circle below).

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 681\Chart #B   Dow Jones 1900 to 2020.gif

Being no “market expert” myself; I doubt this action was in response to the CCP virus. My readers will have to excuse me if I believed this action by the FOMC prevented massive debt defaults in corporate America, which last March’s 37% market collapse in the Dow Jones was anticipating.

And then last June: Powell says the Fed doesn’t want to ‘run through the bond market like an elephant’

“In a move first telegraphed on March 23, the Fed said it will expand its purchase of corporate bonds beyond exchange-traded funds and into individual issues. The result will be essentially creating its own index of bonds that spread across a wide swatch of the market and could see the Fed ultimately purchase up to $750 billion worth of securities.”

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