Henning: The Central Bank World is Disappearing

By Thomas Henning

        The world as created by the central bank hustle is disappearing as its lifeblood of inflation has evolved into deflation, rising debt into defaulting debt, and rising tax receipts into falling tax receipts.
        Currently, the great preponderance of analysis is based on this disappearing central bank entity. This analysis presupposes that this central bank world is viable. It is not. The analysis is based on an imploding foundation and therefore is irrelevant.
        Meanwhile, the thieving bozo banking stooges in Washington and other sovereign capitals are flapping their arms in LaLa Land as their central bank world is imploding faster than they can collect taxes, trying to support their parasitic folly. Recently, it was reported that the April, 2009 tax receipts were 40% lower than those of the previous April. A very old, dear pal of mine suggested that things didn't really get bad until the last quarter of 2008, and if the 2008 tax collections were down 40%, what in the world would 2009 look like? I'm reminded of that old Frank Sinatra standard, "The Best is yet to Come, Babe."
        As this goes on, the Washington parasites blather on in a cesspool of impotent chaos. A farce. (Tee hee! Snicker!)
        It is important for the savvy player to take a gallon of brain castor oil to purge the mind of the poisonous irrelevant thoughts of the old epoch and to move forward into the new world of imploding chaos, into reality, to profit.
        Markets must be viewed with this perspective.
        The stock market has started a cyclic bear market having a life expectancy of about a decade, having completed a bull market that started in August, 1982.
        In the last couple of articles, I was looking for an upside move, and it came in after bottoming in early March. The recent upleg can be only one of two things: a new bull market, or a bear market rally. There are no other alternatives.
        At his stage, it is highly doubtful that the upleg is a new bull market. Throughout the move up, supply measurements have remained inordinately high; upside churning has evolved, which is to say that the quantified advances have been low relative to the upside volume; insider selling has been high; and, on the sentiment front, I'm hearing the faint strains of "Happy Days are Here Again." In addition, momentum started to fail in April, giving early warning sell signals, and on May 8th, the Dow scored a high 8574.65, which was unconfirmed by the Transports. As the upleg evolved from the April minor weakness, internal bearish divergences evolved. All of this action is not that of a new bull market, but is the basic intrinsic nature of a bear market rally.
        As to the form of the rally, I draw your attention to the Amex Index, which I've followed for decades because it is, I suspect, relatively free of the arbitrage games that are played with the more closely-followed averages.
        The rally has assumed the shape of a rather classic A,B,C configuration counter move within the larger downmove.
        Ultra-near term, the rally could slop into early June, but the bear alert is flashing.
        As of this writing, I would define a tentative breakdown level of a close below Dow 8200, confirmed by the Transports below 2950.
        The bond market has cracked downward taking out key lows at 124 and, to be blunt, looks ugly. Hello, higher rates.
        As stated in the last article, the wave tea leaves have turned to chop suey. I suspect that this is so because of the manipulative games that the Fed boyz are playing, buying bonds, trying to keep their thieving hustle alive.
        That being said, I still do have a count that another upleg could be in the cards, and some early daily momentum buy signals have flashed, which were preceded by some bullish divergences. This hints at the possibility that the count suggesting another upleg within the overall pattern may be valid. A close above 124, basis the spot month, would add more credence to this concept, but in the meantime, do keep the bear suit zipped up, because not to do so would be an exercise in fighting the tape. Not good.
        The gold market has corrected a bull move that started in 2001, which has assumed an A, B, C configuration of a II wave, as illustrated on the chart. Nearer term, the favored count suggests that the yummy III has started, and an attack on the old high is in gear. Under these circumstances, it is common for a market to labor through the old resistance: however, given the strong relative strength of the gold stocks, a bullish attitude should be maintained.
        If the old highs are busted, don't be surprised if an upside panic evolves.
        I do have a caveat: While the Rasbucknic Index (not shown) is truly ugly, I'm not totally convinced that the Rasbucknic is quite ready to crash. It must be remembered that the Index is but a relative measure of comparative stench, and gold has been strong versus all of these worthless currencies. How this Rasbucknic action plays out against gold remains to be seen. This caveat may simply be an expression of trader's paranoia, but I've found that paranoia is a healthy attribute in this game.

        Cause: the central banking hustle. Effect: implosion. The cause is ancient history. Credit card debt default, real estate implosion, derivatives default, central bank/Washington thievery, is all ancient history. Ho hum! Boring! It's over. We're at the effect: implosion. That is where the savvy player must direct his attention.
        Currently, our central bank guys are hustling into the next Bilder meeting in Athens to try to patch up their Titanic world to set up a one-world currency. Meanwhile, as this is going on, the Sheiks of Araby are a carting off the gold from London to Dubai, following the Golden Rule: "The guy with the gold makes the rules." This gang, along with the Chinese, is plenty mad, having been stiffed with worthless currencies and U.S. Government debt. My hunch is that these boys don't want to play this Bildergame. How can one approach this tentative conclusion? Simple: follow the Curmudgeon's rule: "Truth is the ebb and flow of money to the exclusion of all other factors." The gold is flowing from London to Dubai.
       Editor's Note: Thomas Henning's column, "The Musings of a Stock Market Curmudgeon," appears regularly in The Bull & Bear Financial Report, in both print and online editions.