The list of looming black swans and immediate issues continues to grow as markets advance. This fearless market will not crash into the “wall of worry” until the bears, “justifiably” cautious and concerned about the unprosecuted fraud and unsustainable debt, finally capitulate and jump into the cesspool. The bearish brokers and analysts who have been screaming the truth about the fraudulent economy for five years will fail to be listened to “just one more time”, and the retail investor will once again be left holding the bag.
The ones who claim they are only dancing while the music plays, will once again be caught offsides by their hubris. They will also ignore the warnings provided by hundreds of “flash crashes” over the last several years, and discover the fact that High Frequency Trading (HFT) doesn’t add liquidity to markets. The next bubble to pop will actually be an air pocket under the market, which will make trying to find a bid much more difficult than a chair when the music stops.
Since the sovereign debt crisis has only begun to impact Europe and Japan, and the full consequence of FATCA (which has been chasing dollars out of foreign holding since 2011) will not be felt until it becomes law on July 1st, the capital flight into dollar-based assets has a while to go. Armstrong has been forecasting that the Economic Confidence Model (ECM) will turn down again at the end of 2015. Can US markets continue to climb higher until then or will the collapse of markets come sooner and produce the loss of confidence that the ECM is predicting? Only time will tell, but one thing is certain, conflicts will continue to escalate as govt’s hunt down capital so they need not reform, and barring divine intervention, an international war seems inevitable.
The Jaws of Death technical pattern from June 2013 remains valid, which at that time showed the top of the upper boundary at 16,500 to 17,500 on the DOW. The DOW has been trying to push through the neckline (around 16,600) of a fairly large head and shoulders pattern that has formed since the beginning of the year, and if busted, could propel the DOW to the 17,700 range. If the sovereign debt crisis can be held off in this country until late 2015, then the DOW could easily get over 20,000 (according to the upward slope of the upper boundary of the expanding bearish wedge pattern).
As depicted by Eric De Groot’s chart above, the concentration of Average Weekly Initial Jobless Claims (AWIC) is also set to turn up again in 2015 (shaded red box), just in time for the peak in the ECM. If anything could foretell an increase in unemployment, it just might be the NASDAQ, with its basket of momentum stocks based on earnings promises that have been bought with record amounts of margin debt, but not yet realized. The tech index is looking very shaky, with darling’s like AMZN, NFLX, and FB showing signs of breaking down. If the Plunge Protection Team does not come to the rescue soon, Obama may be looking for a war distraction sooner than many expect.