Graham Summers Weekly Market Forecast (Risk Off Edition)

The
financial world is beginning to break down in a big way today. In the currency
markets, the second Greek bailout is turning out to be precisely the dud I said
it would.

After all,
it was only one year ago that Greece received its first bailout. Having now
asked for extensions on returning those funds AND a second bailout, it’s
bizarre that anyone would think giving more money to Greece would fix its
problems.

Italy,
Spain, and Portugal are all on equally shaky ground. The last of those three
was actually just downgraded to “junk” status by Moody’s last week. So it’s not
too surprising that the Euro is breaking down in a big way this morning.

We look to
have broken out of the triangle pattern I talked about before. We’re now coming
up against major support at 140. If we break this line it’s 136 in short order.

The drop in
the Euro has coincided with an explosive jump in the US Dollar this morning,
which in turn is kicking stocks and commodities (with the exception of Gold and
Silver) down in a big way.

I said
before that I thought the ramp job in stocks was more manipulation and
performance gaming than anything else. If the S&P 500 breaks below 1325 and
stays there I’ll be proven right as we’re then going to 1,300 if not 1,275 in
very short order.

Meanwhile,
Gold is on the verge of challenging its all-time high in US Dollars (and Euros)
once again asserting that it is in fact a currency, NOT a commodity. If we
break 1,550 and stay there then the next leg up in the precious metal will have
begun.

In plain
terms, the financial world is on RED ALERT this week as there is really little
to hold the markets up anymore (QE 2 ended). Meanwhile the whole financial
system is showing signs of extreme duress.

European
banks (and nations!) continue to remain insolvent and we will be seeing
defaults in the near future. The situation there has not ended by a long shot
and I am certain the Euro will no longer exist in its current form within 12
months.

Meanwhile,
China’s inflation is spinning out of control. A liquidity crisis is brewing
over there that could rival the Lehman Brothers collapse, as the vast majority
of local government debt in China is toxic. Indeed, China just failed to sell half
of its intended local government debt in a recent bond auction.

And then of
course there is the US, where we have officially breached the debt ceiling and
are stealing from pension funds to meet new debt issuance. Indeed, things are
now so bad with the US that Tim Geithner is potentially jumping ship.

My question
is:

How bad must
things be getting that Geithner, a man who has lied and swindled the American
people with impunity, and has never once suffered the consequences of his
actions, is voluntarily “getting out of Dodge”?

The answer:
BAD.

Indeed, I
think we could very easily see a repeat of the May 2010 Collapse, if not
another 2008 type event in the near future. Only this time, the Crisis will be
far far worse because the financial world will have realized that the central
banks CANNOT solve the problems that brought about 2008.

When that
happens, the REAL Crisis will start along with stock crashes, currency
defaults, food shortages, and the like. Which is why if you’re not taking steps
to prepare for what’s coming now, you need to start moving.

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Good
Investing!

Graham
Summers

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Comments

[Zero Govt]

Yep. We're all waiting for the bankrupt bankers and Govts to go to hell... a clear out of the rotten old ships that cannot be patched up any longer or saved... bring on the storm and begin building anew ..that's capitalisms way, not socialism for the selected few

[Goldbugger]

"Only this time, the Crisis will be far far worse because the financial world will have realized that the central banks CANNOT solve the problems that brought about 2008."

BRING IT ON!!!

[Robslob]

Time to "rearrange the chairs on the Titanic again" to see how much longer that keeps the ship afloat...

[zorba THE GREEK]

 I think the Washington crowd is in over their heads. The Fed's trembling lip leader recently

 admitting he doesn't know why his policies aren't working, isn't very reassuring either. 

 World leaders must, by now, be experiencing that sinking feeling in their stomachs that Bernie

 Madoff had when he realized the Ponzi had reached the end of the line. It's like being on the

 Titanic and the captain,the navigator, and helmsman (Obama,Bernanki,Geitner) have little or

 no real experience. It's full speed ahead in the fog, the sea is full of icebergs, there's far too

 few lifeboats, and the passengers have a false sense of security because their ship is the

 largest to ever sail the seas.

[President Palin]

Graham,

You're actually a very good writer, but do these pieces have to be a non-stop commercial for your reports and services?

[XitSam]

That title should be "(Rip-Off Edition)"

[IQ 145]

 Very interesting gold and silver charts today. New York took a big bite out of somebody's apple as soon as London closed, but the metals are recovering nicely. I'm long at $33.75 basis December with a zero loss stop.