We're Rapidly Approaching the Crisis to Which 2008 Was a Warm Up

Phoenix Capital Research's picture

Stocks broke
down in a big way this week, falling below the trendline that has supported
them since late August. Indeed, it looks as though we not only broke below this
line but have since rallied to retest it: a classic pattern during corrections.

 

 

The question
now is if this is just a minor correction or the start of something more. The
S&P 500 appears to have formed a rising bearish wedge pattern (see above),
which usually is a termination pattern that results in the underlying security
falling to retest its base (in this case 1050 or so on the S&P 500).

 

However,
with Government intervention in the markets being what it is, we could also
simply see a minor correction here followed by yet another ramp job. Indeed,
this is exactly what happened in 2009 when stocks broke a near perfect rising
bearish pattern only to bounce back and begin yet another ramp job:

 


 

Thus, the
BIG question for US stocks is whether the market has already digested all the
QE hype to the point that threats of additional liquidity does nothing, OR if
the Bernanke “Put” is still in play.

 

While this
might not seem like a big deal, I can assure it is THE most significant issue
the financial markets face right now. The reason for this is that IF the
Bernanke “Put” is no longer relevant, that is additional liquidity and
bailouts, doesn’t actually induce a rally anymore… then the entire financial
system will collapse in one form or another.

 

Remember,
the only thing that pulled us from the brink in 2008 was Bernanke printing like
a lunatic. It’s the ONLY thing that has held the market together. And while it
may have kicked off a major rally in stocks… it FAILED to address the underlying
issues that caused the Crisis in the first place: namely excessive debt and
leverage.

 

In fact,
Bernanke has made the financial system even MORE leveraged than it was in 2008.
So if the Fed’s moves no longer have an effect on the markets, then it’s time
for the REAL Crisis… the Crisis to which 2008 was a warm up.

 

Why?

 

Because when
the stuff hits the fan this time around, the Fed will be powerless to do
anything. Bernanke’s already shot every bullet he’s got. So when he loses
control this time around, not only will the market crater, but the belief that
has kept the financial system afloat through every Crisis of the last 30 years
(namely that the Fed can always save the day) will shatter.

 

And when
that happens it will be the US financial system, NOT just stocks that goes
down.

 

Prepare Now!

 

Graham
Summers

 

PS. If
you’re getting worried about the future of the stock market and have yet to
take steps to prepare for the Second Round of the Financial Crisis… I highly
suggest you download my FREE Special Report specifying exactly how to prepare
for what’s to come.

 

I call it The Financial Crisis “Round Two” Survival
Kit
. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).

 

Again, this
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and click on FREE REPORTS.

 

PPS. We ALSO
publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.

You can
access this Report at the link above.