EC When Rare Market Data Screams, Listen

Are US stocks going up or down next week? Is the euro or pound trending up or down? What trends do we see in corporate earnings, employment numbers, trade deficits, and GDP numbers? What technical indicators are we following and what do they tell us?

In the financial world there are plenty of pieces of information to follow. Financial information is sought 24/7.

However, there is one set of numbers I rarely see discussed when living through these financial bubbles: very rare market data regarding price.

In this short piece, we will look at why every investor, whether big or small, should be seeking this information constantly. If we were, we would see that rare market price data continues screaming at everyone to stop listening to central bankers and centrally planned schemes on how to keep the bubble up another quarter. This game is now far beyond the 9th inning.

NASDAQ 100, FTSE, and the Pound

When we look at the Nasdaq 100, we can see that it is currently under its 200 day and 50 day moving average after being above both last month. We can see that the April high did not manage to break above its December 31, 2015 closing price. The FTSE was above its 200 day in April, and today is back under both its 50 and 200.

Finally, we can see that the exchange rate of the pound to the dollar was at its lowest over the last 8 months as February ended, and has since moved up above its 50 day, and appears to be heading for its 200 day. All of this is widely seen by market technicians looking for patterns.

However, for someone like myself who focuses on how to keep your bearings when bubbles are deflating and central bankers want to keep up the ruse that “this time is different, we have unlimited schemes available to ‘inflate’ the bubble”, I look for very, very rare data. Let’s take the three major markets above as examples.

On March 27, 2000, the Nasdaq 100 closed above 4700 for the first time. That was the last time as well until November 2, 2105. Whoever says that looking for the top and timing is worthless is a complete idiot based on this one example alone. Looking for a major equity index that has dropped more than 80% in the last 16 years to have another significant drop, seems like common sense.  

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Moon Kil Woong 3 years ago Contributor's comment

Interesting. Too bad more people haven't read this. Although the Federal Reserve preaches debt and thinks the solution is more debt, in reality it is not the solution, not has it been. And indeed too much debt leads to problems not solutions. The cycle of leverage and deleverage is a natural one and without deleverage we run into greater and greater dangers.

The simple fact is that many companies and individuals are so leveraged that a 3-5% prime rate would make it obvious that their debt is exceeding their ability to be solvent. Likewise the Federal government would be wallowing in interest payments and would need to curb spending. The Federal Reserve is playing a very dangerous game and is encouraged by government which wants to party on too. If inflation and interest rates rise they will be forced to pay the piper even if the economy doesn't rebound. And if we fall into a recession at this low rate there is little that can be done to help us out given the economy continues to become overleveraged from Federal Reserve games.

Doug Wakefield 3 years ago Author's comment

Thanks for your comments Moon. If you have ever read Charles MacKay's "Extraordinary Popular Delusions and the Madness of Crowds" (originally published in 1841), you understand that there isn't a lot of thinking going on by the public about these issues. As you so clearly point out, rates at this ultra low level which have already produced the lowest yields in US Treasuries in 200 years, and in British Gilts and German Bunds in 300 years, make it literally impossible to "cut rates" as a resue tool this time. The continued stalling of addressing the real problem (trillions in cheap loans), has only created a more powerful bust. Keep thinking and sharing with those around you who will listen. It has never been more needed.

Carl Schwartz 3 years ago Member's comment

So true.