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Sunday, April 13, 2014

Market Topping?

In my post January 2014, The Great Unwinding Starting in 2014, I called out mounting evidence that the global economic ponzi scheme was starting to crack in 2014.   Since then, the market has made valiant attempts to re-establish a sustained bull market, but has failed to materialize.

We had Ben Bernanke leave the Federal Reserve, replaced by Janet Yeltsin.  I think Ben knew the top was potentially near, and wanted to exist on a high note.  I am not a Ben hater, I just don't think any one person can fix the global economic system, and his attempts where I believe in good faith given the many constraints of the current model.  But if I was to believe his actual words, he is naive to think buying time by relaxing laws and policies will 'teach' people to be economically responsible.
World Ward 2 is best example how appeasement doesn't lead to better results.  Germany now is also a lesson on how LACK of appeasement does not lead to better results.

Before I go on, credit where credit is due, Gary of the Smart Money Tracker posted market topping as a possible scenario right now.  I believed the market has been topping for the last few weeks if not since January.   But that is a feeling, and I relied on Gary to give a harder signal to trigger this post.

When in doubt, I try to go to the MACRO view of the markets.  In my post about long term investing, how to spot a market top, we have NOT yet had a signal this has occurred.  So if you want to wait for the signal, please do!  Read my post When to buy stocks or get out of the market . I encourage everyone to review their holdings and pick hard stops.

Below is a picture of the current market valuation, and I recommend watching this video making a case of peak everything.

Assuming there is a near term top in the market now, the USD valuation should rise.  Latest USD chart of valuation below. Right now there is no indication USD will rise, but it isn't failing yet compared to recent years. (TheChartStore.com)

US 30 year interest rates, this is the most damning for markets.  The US government knows that interest rates for 30 year bonds MUST stay in the range below, or a crisis could trigger.  To force rates lower, we need a 'flight to safety' for investments, that is usually triggered by stock market valuation problems.  See my post on The Hard Road MUST be Taken on the global currency battle stakes.

Assuming safety is the play, I have to imagine gold is going to get hurt, and buying bonds is good now.  If the USD valuation breaks down, or interest rates break up then this assumption is likely wrong.  This is one of those periods in time, I see risk everywhere.  If the market falls, so should gold and gold miners.  HOWEVER, GDX is about to show it is entering into a bull market!  So I am torn.  I did lighten up GDX and GDXJ this past week and keep an eye out for what happens next.

Back to market topping.  A market usually tops with high fliers cracking first.  Here is a bunch of charts, while most have not shown a convincing top using 20-50 weekly SMA, many look toppish.

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