I warned all through the last week that the market rally was just a snapback bounce common to collapses. Indeed, as noted before, during the 2008 Crash we had bounces of 11%, 17%, even 20% as the market worked its way lower.
So it should be no surprise that after rallying 10% in a week or so, the market is now rolling over in a big way. You don’t wipe out 9 months’ worth of gains in two weeks from a simple correction.
Treasuries know this. They’ve already taken out their Euro Crisis 2010 highs:
And then of course there’s Gold, THE catastrophe trade, which has just hit new all-time highs against the US Dollar, Euro, and Japanese Yen:
And people were really thinking the bounce was the start of a new sustained rally?
The facts remain: the financial system is now more leveraged than during the Tech Bubble, mutual funds are more heavily invested in stocks than at any point in the last 40 years (hello redemptions), the derivatives market has not been reined in, the global economy is once again turning sharply downward, the EU and European banking system are collapsing, the US economy is now clearly in a double dip (within the confines of an ongoing DE-pression), and China is heading into a hard landing…
You don’t get a simple market correction from this. Indeed, we’re now officially in the Second Round of the Great Crisis. And if you thought the first Round of the Financial Crisis was bad, wait until you see the next one. Indeed, I fully expect that what’s coming is going to be 2008 on STEROIDS. I’m talking about market crashes, civil unrest, riots, bank holidays and more.
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