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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
is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com
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.

 

 

 

 

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Sun, 02/27/2011 - 16:03 | 1001995 junkhand
junkhand's picture

take a look at human population vs available energy. 

small peak at industrial revolution. 

major exponential peak as oil came online. 

with solar and wind making up just 1% of total energy supplies, and nuclear plants taking 20 years to come online if we start today, what will replace cheap oil and sustain the exponentially growing populations of humans on our small planet?

crises, crises, crises, indeed!

Sun, 02/27/2011 - 15:25 | 1001916 southerncomfort
southerncomfort's picture

crisis crisis crisis.  for whatever reason, I read this press, then think this:  okay 3 billion+ emerging consumers.  And all the new noncurable money makers (like diabetes, obesity, nikes, ipods, etc.) that come along with these problems.  And the fact that just cause the USA isn't the major perp in these changes USA will in fact be some level of provisor or addon to this new market face ... Wouldn't the billions created with all these new incurable problems constitute its own economy - viable enough to sustain investors with its growing preponderance? and wouldn't the substitutes that will need to be created (ie, what will be used when cotton's gone, what will be used when oil's gone, etc.) also become sustainable as the new cotton, the new fuel, and like the things used today, become the market products?  change IS the only guarantee.  amazes me all the fear press generated instead of excitement and opportunities available in spotting the new substitutes and leveraging change instead of focusing - always fear based - on old structures that worked in the past that there's really now way would work in the future anyhow.

Sun, 02/27/2011 - 14:44 | 1001835 junkhand
junkhand's picture

there wasn't the large confluence of negative connected events in the 1970s.  in fact, this large ponzi scheme started in 72 when backed money was exchanged for fiat.

 

the only question is what phase of the ponzi are we in now?  still more suckas coming in to pay off the old money, or the collapse which eventually results in everyone whos still playing losing it all?

 

i don't see many sources of new money these days.  unlike the 1970s.

Sun, 02/27/2011 - 13:30 | 1001712 ChartreuseDog
ChartreuseDog's picture

How can Bernanke be out of bullets if he can conjure them out of thin air? Between him and the gub'ment, you ain't seen nothing yet. Since the US is still the reserve currency, and have enough military might to level the entire world if we so choose, all sorts of perverse mischeif is possible. $10,000 gift cards for every inhabitant (not citizen, mind you, but inhabitant) of the US? No problem. Food stamps extended to cover restaurant meals? Got it.

Whether these measures get applied is a political decision, but every time some economic commentator has drawn a line in the sand and said, "Surely the Fed won't cross this one," they have.

 

Sun, 02/27/2011 - 13:20 | 1001696 grgy
grgy's picture

 Milestones - "Hell Canada could not occupy and control Detroit."

Why would Canada want to invade Detroit when we've got Toronto to look after.

Sun, 02/27/2011 - 12:35 | 1001640 Cult_of_Reason
Cult_of_Reason's picture

Actually, the S&P-500 bounced off the trend-line.

http://i51.tinypic.com/250v8g2.jpg

Phoenix Capital Research is full of beans (or full of overhyped gold) and no credibility.

P.S. I am bearish on the market, but the facts remain the facts (apparently unless you are a used car salesman or a gold/silver salesman).

 

Sun, 02/27/2011 - 03:06 | 1001251 laosuwan
laosuwan's picture

Don’t get me wrong, I appreciate the content insight in this contribution but I have to ask myself are these charts good for anything except predicting the past? I mean, on the one hand, ZH tells us the only people trading stocks are robots, yet we are supposed to believe that by charting the past we can predict the robots next move? Is there any evidence that charting has external validity? I haven’t seen it; if there was everyone would use charting and by charting everyone would affect the market and charting would no longer have any predictive power.

I recall articles like this one from the 1970s predicting imminent collapse of the market, economy and usa. In fact, the theme is ancient. Escaping complex civilization and heading for the hills to ride out coming chaos was even a common theme in Shakespeare’s writings. So when is this big coming collapse finally going to happen? We have all rode out this bull market because we all thought we were smarter than the market. And while you can make a case there is a lot of bad out there and not much good, you cannot convince me that a graph of the past is going to predict the future and I wont base any decisions on technicals any more than I would economics or any other pseudoscience. Charts are interesting and provide some frame of reference but they are no subsitute for data points from the future, which nobody has.

Sun, 02/27/2011 - 11:15 | 1001556 SheHunter
SheHunter's picture

Anyone who has traded the market for over 3 years can see the changes in daily stock movement now compared to a few years ago.  You watch some of these hot stocks-like fcx-on a one or 5 minute tick screen and see the hft's kick in at various times during the day.  Usually following low activity spans of time, sometimes during the 0815-0900 fed QE feed, sometimes for no discernable reason. 

http://www.newyorkfed.org/markets/tot_operation_schedule.html   I agree most chartology is luck of the draw.  I do use S/R for day and swing trades- found this often successful to guage entry/stop points.  But the game's different these days and if anything is getting more rigged, more hft'd, more dangerous.  I'm more of an observer than participant these days.

Sun, 02/27/2011 - 04:11 | 1001303 RichardP
RichardP's picture

So you work with what you have.  Not with what you don't have.

Sun, 02/27/2011 - 02:47 | 1001233 thegr8whorebabylon
thegr8whorebabylon's picture

So, is gold a hold?

Sat, 02/26/2011 - 23:04 | 1000900 Stuck on Zero
Stuck on Zero's picture

When Berbanke loses control he'll pack up his bags and gold and move to a villa in the South of France to live with his other Bankster friends.

Sat, 02/26/2011 - 22:59 | 1000883 JimboJammer
JimboJammer's picture

90 %  of  the  Americans  don't  care  about  this  stuff... but  they   will  care  in  about  6  weeks... Justin  Beaver  and  Linsey  Lohan  won't  be  their  main  concern...

Sat, 02/26/2011 - 22:38 | 1000841 sbenard
sbenard's picture

News is irrelevant. Analysis is irrelevant. We havve printed prosperity now! Now don't you feel just RICH?

My theory is that since everyone knows that this recovery is just a mirage created by the Fed and bailout heroin, when the bad news hits that no one can dismiss any longer, it will be a stampede for the exit, and a bloodbath will ensue. Everyone is still buying on the Greater Fool theory, that they won't be the last one to run for the exit, and that there will alwayss be someone else to step in and buy -- that perennial "greater fool". But when everyone is counting on that strategy, it will no longer work, and it's going to get even more UGLY when that day happens!

Sun, 02/27/2011 - 08:43 | 1001442 spinone
spinone's picture

The Taxpayer is the greater fool of last resort.

Sat, 02/26/2011 - 20:32 | 1000612 zebra
zebra's picture

the bear that is still drinking kool-aid.....

take care..

 

 

Sat, 02/26/2011 - 20:03 | 1000581 Jim Billy Bob J...
Jim Billy Bob James IV's picture

I have been saying the United State will experience the French Revolution just as the Frenchies did in the 1790's.  Someone has to pay to pacify the peasentry.  That is why the unions are running amuck in the U.S. and Greeks are burning down the parthenon.  Regarding this round of civil unrest - "THIS TIME IT IS DIFFERENT" and the human sacrifice must be made to appease gods.

Sat, 02/26/2011 - 19:45 | 1000557 Fíréan
Fíréan's picture

Makes one wonder if this whole show is really what it is purported to be .

Sat, 02/26/2011 - 18:13 | 1000431 candyman
candyman's picture

I like your technical analysis better...you lay it out clearly and in simple plain English

Sat, 02/26/2011 - 16:56 | 1000227 Wyndtunnel
Wyndtunnel's picture

Is not QE tantamount to removing control rods from the core of a nuclear reactor that's not  reacting enough? To trust a handful of men in one country with such supernatural power is folly.  Money and finance are very much black arts that determine what springs from the Earth's bowels including such demons that forever dwell just beneath the surface of humanity's thin crust of civility . The arrogance of puny humans who think they can boil it down to simplistic charts and static models and sell the idea to the masses that they can control it in perpetuity for the greater good inevitably opens the floodgates of benevolent evil that scorches the land of good and bad alike until a new equilibrium has been achieved from which familiar yet new forms of biological and economic life may rise anew.

Sat, 02/26/2011 - 15:54 | 1000127 banksterhater
banksterhater's picture

Look at S&P futures, it's already retraced almost 50% of the drop last week, maybe it goes to 62% 1335 or so, but I'm selling into it, imo, windowdressing for end of month only lasts on Monday I bet. Tuesday down. chart is from jesse's cafe.

http://2.bp.blogspot.com/-w28RYPKZL4o/TWgdv4jJjOI/AAAAAAAAQGI/knzXf_z4MW...

Sat, 02/26/2011 - 15:12 | 1000051 banksterhater
banksterhater's picture

The short pullback showed once again, unless you're a real pro using inverse ETFs to short, you can't be nimble enough and the PDs are ready to burn you in the morning. 2 days down, impossible to make money shorting for most. The key next week is it's end of month windowdressing then there's new money coming in beginning of March. I plan on taking profits into it, reducing positions. I've had the best luck paying the $7/trade, getting out and sitting.

Sat, 02/26/2011 - 14:39 | 999979 Dan Duncan
Dan Duncan's picture

Mr. Summers, thanks for this post.  I have a couple of "technical" questions:

Summers writes:  "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)."

Even if "rising bearish wedge" was clearly and explicitly defined, do you have any idea how often it's a "termination pattern" that results in the "underlying falling to restest its base" (which also is not clearly or explicitly defined).  

For some reason, I don't think you do. 

Even if you happened to have any idea as to how often a "rising bearish wedge" results in a retest it base (which, again--you don't), do you have a definition of the "underlying's base", and do you have any idea as to how often "base retests" occur without the benefit of a "rising bearish wedge".   [If, for example, "base retests" happen with great frequency without "rising bearish wedges", then why should we give a shit about a "rising bearish wedge"?  The retest is just going to happen anyway...]

Again, you don't have a clue. 

Even if you happen to know how often "rising bearish wedges" happen to result in "base retests" (you don't)...and even if you also happen to know how often "base retests" happen to occur without the benefit of "rising bearish wedges" (you don't)...you have no F*ing clue as to how long after the occurence of the absurd piece of shit thing called a "bearish rising wedge" that the absurd piece of shit thing called "the base retest" would actually occur? 

Even if the base fucking retests do occur after the stupid "rising bearish wedge", BUT the base fucking retests occur anywhere from 7 days to  7 months after the stupid fucking "rising bearish wedge"...does it make a difference in your analysis?

If for example, it took the full 7 months, WTF is the underlying instrument doing during this period of time?  Evidently it's not going down to retest, so will it meander aimlessly in a range? Or, does will the price action of the instrument continue to go up until the wedge is so fucking narrow and the frequence of oscillations so fucking high that we need to run the security's time series through the atom smasher at CERN to get any idea as to what exactly is going on?

Thanks for your time!

_______

Seriously, though Mr. Summers:  As one who is disgusted by the bullshit fomented by our government, our media and our FIRE economy, you're perpetuating the problem.  Bullshit is bullshit and the source matters not...If you're going to promote a "Survival Kit"...which nothing but a lead-in to your "Phoenix Capital Barbell Investing" program where you promote--AND I SHIT THE READER NOT---an average return of 18% A MONTH--then please, for the love of God, do a little better than "rising fucking bearish wedges".]

For those who don't appreciate my tone, please accept my apologies and this peace offering...

It's a link to Graham Summers 95/5 Barbell Investing Method that averages 18% per month:

http://www.phoenixcapitalmarketing.com/RFOA/index.php

You too will earn Madoff smashing returns!

For those that don't mind my tone, you gotta check out the link.  Summers  actually addresses the letter to "Dear Income Hunter"! 

It is priceless.

 

Sat, 02/26/2011 - 19:06 | 1000506 Escapeclaws
Escapeclaws's picture

Only $299 per quarter! Thanks for pointing out the absurdity of this "technical" pattern. Poor naive folks who are desperate to make a few bucks to compensate for the fact that it is getting harder and harder to earn a living in this country, much less save money, are suckers for this baloney. For the life of me, I can't understand why Graham Summers gets a free ride on ZH when somebody who actually knows about trading like Robotrader gets nothing but abuse, even when he does post soft-porn.

Sat, 02/26/2011 - 19:56 | 1000571 Gold 36000
Gold 36000's picture

More porn please.

Sat, 02/26/2011 - 18:09 | 1000422 Jack Sheet
Jack Sheet's picture

Agreed. For me, the only phenomena in technical analysis that can be explained by the psychology and actions of buyers and sellers are support and resistance for a single stock or commodity. But how even that can be applied to an index of 500 stocks is a mystery to me

And then there are Harry Browne's 2 laws of investment advice:

1. The investment expert with the perfect record will lose his touch as soon as you start to act upon his advice

2. If he has a perfect or almost perfect system to beat the market why would he sell it to you?

 

Sat, 02/26/2011 - 13:32 | 999795 lbrecken
lbrecken's picture

Again no one is presenting evidence that QE3 is a fable...TYLER are you awake?  Until then all these BS posting are not getting to core of the issue.....

Sat, 02/26/2011 - 15:18 | 1000065 banksterhater
banksterhater's picture

There are hints by many it must stop. Hoenig, many foreign countries put the unrest square on zero rate speculation. Hoenig is PISSED, he lives in Kansas and said the asshole hedgefunds are running up cropland, 12% in the 4th Q 2010 alone. Buffett in his letter hinted big gains are over, lots of decension forming. China finance minister calling for end to Dollar, it's building that US bringing global destruction we're so known for. All gains from here will be wiped out in 2days.

Sat, 02/26/2011 - 13:39 | 999813 Gold 36000
Gold 36000's picture

And the core issue is?

Sat, 02/26/2011 - 11:42 | 999628 goldstandard
goldstandard's picture

It's the fun things that keep Tiny Tim up late at night and you can throw another log onto the fire tomorrow evening when the Academy Of Motion Pictures bestows its highest honor on a documentry called "Inside Job". There going to come after you Timmy, Ben, and you to Hank. If you haven't watched it just Goggle it or go to http://www­.sonyclass­ics.com/in­sidejob/ 

"Inside Job"--The film Washington­, Wall Street and the Fed don't want you to see.
Sat, 02/26/2011 - 13:21 | 999774 Gold 36000
Gold 36000's picture

The bernank is just a humble technocrat charged with a difficult task. Hank should be targeted. Timmah is the low level criminal you lean on and offer rewards to convict Hank.

Got rope?

Sat, 02/26/2011 - 11:12 | 999594 Conceptwizard
Conceptwizard's picture

If your looking for somewhere to start over, Canada is the correct choice. however I don't agree that BC, particularly in Vancouver is the correct choice. New Brunswick area is the lowest costs, natural gas rich, housing affordability, Internet friendly, farm land rich, fishing & lumber accessibility, property tax rates, non-predatory animal arena in the North American continent. Not to mention much milder weather. For that matter all of eastern Canada is a lower cost of living that western Canada. The border towns with the USA in Particular as you get the best of both worlds. Cheap groceries and fuel and the Canadian medicare system. You can buy a 100 wooded for $20,000

Just a thought...

Sat, 02/26/2011 - 16:54 | 1000266 ZeroPower
ZeroPower's picture

NB?

Lol, the guy would quicker move back to the US.

I might be biased, but id suggest Montreal.

And if you can't stand the french (many can't), then Toronto.

Sat, 02/26/2011 - 17:10 | 1000288 Wyndtunnel
Wyndtunnel's picture

Montreal? Seriously.  I'm leaving this shithole after 20 years... There's only so much navel gazing poutine eating English bashing state bleeding one can take you know?

Quebec is to Canada what Greece and Spain are to Europe... It's a sink hole of other people's money.  This place is going DOWN!  Anywhere in the Rest of Canada is what I would recommend.  As the world economy grinds lower I think Canadians will tire of Quebec's demands and essentially boot it out! And then the separatists will be left to canabilize each other as they starve to death in their sinking dingy. </rant>

Edit: FYI I'm French Canadian born and raised outside the Enclave and soon to return.

 

Sat, 02/26/2011 - 12:44 | 999705 ElvisDog
ElvisDog's picture

You didn't mention how fricking cold New Brunswick is 8 months out of the year. There is a reason land is cheap in New Brunswick.

Sat, 02/26/2011 - 09:41 | 999504 eddiebe
eddiebe's picture

Stocks taking a break happened as bonds rose back up past the lower short term trend. So it looks like the markets are kept afloat by manipulating sectors in turn. The Pm stocks are kept in check the same way to keep those pesky physical metals from going totally parabolic for the time being. 

 This Q.E. game will go on for a while in my opinion.

My take is as follows:

 Gold prices will be allowed to rise in a sawtooth fashion as the dollar is manipulated down in the same way. If unforseen swans hatch ( or made to look like hatch), expect massive interventions.

 The grains are a huge problem, as manipulating them is harder and massive shortages could develop, adding to the civil unrest where poverty drives people to revolt.

 It will be hard to keep a lid on the oil price all but in the short term adding fuel to the fire. Nat gas will have it's day in the sun and should be accumulated now.

 Eventually the fed will have to link the $ to gold to re establish $ reserve status credibility and to help extinguish debt. This will happen after gold has gone parabolic.

 Stay away from bonds til after the gold/$ link.

 Best of luck!

Sat, 02/26/2011 - 09:19 | 999483 SheHunter
SheHunter's picture

Who doggie.  You are overdramatizing just a little about the market breaking, and forming a bearish pattern.  It's a little too early to tell if this is the big one or another mini.  A one day retrace does not a bear flag make and Spy ended the day Fri back at the 20.  I'm in the camp we go lower but nothing is confirmed quite yet.  with fed intervention this may be another mini-correction.

Sat, 02/26/2011 - 08:51 | 999467 johnQpublic
johnQpublic's picture

my sheeple...extract your revenge

 

http://www.youtube.com/watch?v=0gEDUDmZkyc

 

trailer for the best sheep movie ever made, and yes its a real movie

Sat, 02/26/2011 - 23:25 | 1000958 prophet_banker
prophet_banker's picture

wow, what a masterpiece, i'll file it next to, THEY LIVE

 

 

http://www.youtube.com/results?search_query=THEY+LIVE&aq=f

 

 

 

Sun, 02/27/2011 - 08:34 | 1001438 spinone
spinone's picture

Look at what's happening all around you - they live is REAL!

Sun, 02/27/2011 - 02:27 | 1001203 thegr8whorebabylon
thegr8whorebabylon's picture

'The violence of the Lambs', isn't that what's happening in Libya right now?

Sat, 02/26/2011 - 13:19 | 999773 RockyRacoon
RockyRacoon's picture

Now how am I supposed to get to sleep after that?

Sat, 02/26/2011 - 07:05 | 999411 TeMpTeK
TeMpTeK's picture

Dead Cat Bounce Bitchez

Sat, 02/26/2011 - 06:20 | 999388 UncleFurker
UncleFurker's picture

 

Tehnicals mean nothing when the only thing guaranteed is rampant fraud.

 

 

Sat, 02/26/2011 - 13:17 | 999766 RockyRacoon
RockyRacoon's picture

That's a good one:  RAMPant fraud.

Sat, 02/26/2011 - 04:53 | 999352 cranky-old-geezer
cranky-old-geezer's picture

"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."

American stock markets artificially inflated with printing press dollars only fools American sheep (like some posting here apparently). 

Other nations aren't fooled.  They see what's happening.

Sat, 02/26/2011 - 06:54 | 999405 Treeplanter
Treeplanter's picture

Baaaaaaa.  Keep those shears away from me.  I'm busy.  Treasuries are where it's at.

Sat, 02/26/2011 - 12:41 | 999701 cranky-old-geezer
cranky-old-geezer's picture

You like negative real ROR? 

Knock yourself out.

Sat, 02/26/2011 - 03:50 | 999316 Mediocritas
Mediocritas's picture

Ben isn't out of bullets. He still hasn't even started up the helicopter yet!

Sat, 02/26/2011 - 06:52 | 999402 Treeplanter
Treeplanter's picture

That's good for the PMs and miners.  Delays the moonshots so we can take profits on leg ups with shares bought on margin and buy back in on dips (thank you Fed banks) with our very own new Monopoly money.  Hang in there, Ben.  But could you give us a signal when it's time to go short big time against this lovely house of cards?  Share the wealth, remember?

Sat, 02/26/2011 - 14:38 | 999976 cranky-old-geezer
cranky-old-geezer's picture

"But could you give us a signal when it's time to go short big time against this lovely house of cards?"

I don't think we'll see any more crashes.  I see Dow heading steadily to 35,000 ...and keep going.

... but gas will be $20 / gallon, silver $250 / oz, gold $7,000 / oz. 

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