State of the Markets, April 2015

Posted: April 7, 2015 in Uncategorized

We are now in April 2015, the US is keeping on bouncing around 2,000 – 2,100 – so where we are at – now.

In the short term (say this month) we are still Bullish/ lateral positive trending – but weaknesses are constantly increasing.

There is a definite disconnection between real economy / markets – and professional investors never been so bullish because of the new mantra “the Reserve Banks will save the day”.

Apart being wary of the herd mentality, the stock markets is showing some signs of real weakness and May to July  usually is a weak period, anyway.

Apart these “sensations”, we have also some technical indicators that are flashing red, specially one in the US market that went in RED ALERT on the US Market (never done like that since 2011).

No indicator is fail prood, but on 115 of US Data it failed only 4 times (91% accuracy).

This indicator does not distinguish normal crashes (10% to 20%) from super crash – but it is better be wary when also market guru are quite wary  (Bond King El Eryan, ex manager of PIMCO has most of his assets in cash – Perma Bull Jim Paulesens of Wells Fargo is greatly alarmed by the bullishness of the professional investors).

The biggest common thread that I find unite these expert is this (which I subscribe to).

After 2008, the politician did not move – but the Reserve Banks saved the day.

Their theory was Quantitative Easing to the max. This will create a “wealth effect” (you see your savings goes up so you will spend more and restart the economy).

This did not happen in large scale as you need savings in the share market to see your savings go up. On a large world scale people savings were zeroed (in US 80% of the Stock Market is owned by a 20% of the population – in 2010 The Survey of Consumer Finances (USA) showed that less than 16% of US families held stocks, moreover the highest quintile of wealth population held 50% of stocks – while just the second highest quintile t held a mere 9%!!).

So practically the Quantitative Easing stimulated supply (new products), but not demand (buyers) – hence the constant chatter of deflation (more items to be sold – less people to buy it).

Still the politicians would be the one with the real power to make a difference – but they are just going along.

So the idea behind the “crash predictor” is that when the masses (so the media) will realize that the Reserve banks got it wrong…everything will crash (apart gold and a few other things).

Please note that I am not predicting that this will happen (a mega crash – a correction in May is pretty much warranted).

After 2008 different powers became really good at manipulating the media. It is simply something that we need to keep constantly in mind.

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