S & P – Demand, [Bernanke], Cannot Be Sustained As Is.

Saturday  6 July 2013

If central planners were put in charge of managing the Mohave Desert, out West, it would
eventually run out of sand.  When central planners manage anything, they distort natural
market forces, and that ultimately creates an exaggerated effect in the opposite direction.
At some point, and now sooner rather than later, the Fed’s [Bernanke] interference with
the stock market is going to make the 2008 crash  seem like a minor correction.

There is one thing, and one thing only, driving the stock market, and that is debt.  It is not
new capital.  It is not new investment in plants and machinery, the “old fashion” way of
creating a sustained bull market.  It is borrowed money, and the cost of cheap money is
going to become dear.  When that happens, the [overly] leverage factor is going to destroy
everyone who is leveraged.  This “party” to the upside will end, and when it does, those
who chose to believe in the lies will suffer dire financial consequences.

Friday’s “positive” jobs “growth” is a lie, plain and simple.  More and more Americans
are leaving the work force, [not by choice], joining those who have already left, but are
considered “invisible” by the Bureau of Lies and Statistics.  More and more Americans
receive some form of welfare from the Federal teat…Food stamps, an example of the
government’s latest “growth industry.”  Full-time jobs are disappearing; part-time jobs
ascending, mostly all minimum wage, offering no health care.   “Thank you, Obamacare.”

The government, on every level, is financial dead weight.  Every cent spent by government
comes from the public, and now, more so than ever, from deficit spending.  Guess who is
responsible for all deficit spending?  Read the 14th Amendment.  With almost zero rates
of interest, Congress has zero reason to exercise fiscal “responsibility.”  They do not care.

Why mention all this?  The charts are distorted, based on lies, just like those of gold and
silver, where the COMEX has been used as a sledge-hammer against rising precious metal
prices, the antithesis of fiat creation.  The government hates anything that exposes its lies.
Federal Reserve Notes are not dollars, not by law, and even according to their issuer, the
Federal Reserve itself.  Federal Reserve Notes, [FRN], are debt instruments.

Here is a shocker for everyone:  Debt cannot be money, yet almost everyone treats it as
though it were money, believing in the lie.  When presented with the truth, it is not
believed because it goes against the lie, which is believed as true.  Do not take our  word
for it.  DYODD.  [Do your own due diligence].  Cognitive dissonance reigns.

We see the lies in the charts, and that is why the above lesson in reality was provided.

Mention has been previously made that volume has been greater on declines, an indication
of increasing seller activity.  The addition of the dark channel lines show the weekly chart
to be stronger than expected.  The last swing high reached the upper supply channel, and
the  swing low of two weeks ago stayed well above the lower demand channel line, and also
above recent lows from March and April, all appearances of underlying strength.

The amount of time and price for the last swing lows are labeled.  The current decline was
similar in point value to the middle swing correction, but the decline accelerated in just
half the time, an indication that sellers moved the market down with greater ease.

Price has rallied to the upper supply line of the down channel, seen in more detail on the
daily chart.  We get to see the how of price approaching a potential resistance area on both
time frames when the market opens on Monday, [Sunday evening].

EPU W 6 Jul 13

The LL and first LH are used to create the down channel.  A line connects the high and the
LH, extended lower into the future, the dashed portion, and a parallel line is drawn from
the LL, extended into the future, also represented by the dash spaced portion.  A new LL
was formed at an oversold condition, and now price is retesting the upper channel.

The dashed horizontal line off the wide-range bar down, in mid-June, usually offers some
resistance, just not in this case.  The ease of upward movement from the correction low of
Thursday and continuing in Friday’s rally would suggest a higher price on Monday.

ESU D 6 Jul 13

An intra day inspection of the wide-range bar from 19 June, on this 90 minute chart, tells
us price accelerated lower starting at 1638, and it can act as resistance on a retest, if price
does go higher on Monday.  The high of the entire bar is labeled at 1646, just below the
1650 area swing high, and it, too, can be a potential resistance.

The volume on the left hand side of the chart, as price was declining, is about twice the
volume on the right hand side, as price rallied.  There has been ample evidence of this out
of line supply v demand activity in the past.  This happens to show the disparity quite
clearly.  It is why this commentary began with the editorial caveat.  No market can ignore
the basic laws of nature without eventually succumbing to natural order.

The lesser volume “demand” side comes from the Fed, injecting unlimited fiat into the
market, overwhelming the natural inclination to sell.  The forces of supply and demand
remain distorted.  Central planners can keep it that way longer than rational opposing
forces can remain solvent, so sellers simply stay out of the way.  They will have their day.

Monday’s activity can be telling for the immediate term as price goes into the obvious
resistance areas, as shown on all three time frames.  The daily and intra day time frames
have been down, and a few attempts were made from the short side, resulting in small

If price weakens against support, expect a reversal to the downside.  If price stays around
the resistance area, its ability to hold is the market’s way of telling us buys are absorbing
the sellers, and price will continue higher.  Plan accordingly.

ESU 90m 6 Jul 13


This entry was posted in Market Commentaries. Bookmark the permalink.