Most people don't regard the Dow Jones Industrials Average a representative sampling of the stock market. Yet these thirty stocks represent somewhere in the ball park of 30% of the total capitalization of the U.S. stock market. That's a lot more representative than opinion polls typically sample, so a relevant message certainly can be gleaned from this well known benchmark, regardless the strange way it is calculated.
For some reason large caps have been receiving the greater brunt of pressure since Psych's peak. These multi-national beneficiaries of broad daylight robbery propping up the banking system since 2008's collapse of Adam Smith's Leveraged Ponzi Scheme certainly are not being drained with any inordinate intensity. Rather they're simply falling of their own weight. It's not so much that diminishing buying interest sustaining the Industrials' advance no longer is adequate to continue pushing the index higher. The past two days reveal that. Rather there's something halting sustained continuance of the bullish ruse itself, lifting the broad market generally.
So, is the new Ponzi scheme in sovereign debt, the likes of which is propping up a myriad of illegitimate financial claims on a still collapsing physical economy, approaching its endgame?
As the physical economy's robust upgrade to a 21st century standard has not been made an urgent priority (Step 1: Seize the Fed!), then the fact of the matter is financial collapse, one way or another, simply is inevitable. Be it by starving credit—whether intentionally (by way of a central bank policy reversal) or by force (by way of capital controls increasingly imposed by sovereigns under siege)—or be it by an even greater flood of misdirected, mispriced credit than has occurred since 2008, the global physical economy undoubtedly is very near the precipice of its chaotic shutdown. The question is not "if." The question is "when." So long as an historic imbalance between the physical economy's output potential and financial claims on that potential continues favoring the need to prop up a still ballooning pool of finance, the physical economy need be sacrificed, that every means available to support illegitimate claims on it is enlisted, how ever fleeting is success doing so.
Signaling growing risk of near-term upset in the ruse run by the imperialist committee to "save the world from suffering another Great Depression" are those stocks among its biggest beneficiaries. Very likely expiring is time bought pretending the pre-2008 game of hyperinflating a shadow banking system equipped with an infinite multiplier could be restored. Confidence that intervention by lenders of last resort recklessly acted to fortify still is inordinately fragile, and rightly so. Indeed, were confidence on the mend and risk of chaotic collapse of the global physical and financial economy minimal, then we would have seen real buying interest in large cap issues these past two days, rather than a contrived goose likely manufactured by way of a short squeeze (as ever). Muted volume these past two days is a dead giveaway that, at work are opportunistic scammers who, at the present rate of transfer from weak hands to the hopelessly blind, will need another ninety-eight years to unload stakes at the bottom of the capital structure.
The underlying technical setup here looks a good deal like that in the summer of 2011, right before the euro-zone periphery in August of that year was swindled, likely for the last time to be sure, as the European banking system's insolvency now has only its core to parasitize. The euro-zone's periphery effectively has been shut down. Yet this time is "different" by way of infinite QE presently in place, and Confetti clone Yellen now is positioned to assure this reckless policy's continuity, at least by all appearances. So, any near-term market setback probably will not be as devastating as that in August 2011. In the case of the Dow Industrials a decline to 13,750-14,000ish is a reasonable estimate, and this probably will find coinciding technical conditions supporting the Elliott wave-based view updated here this week and presented above via the Dow Jones Industrials Average.
Increasing vulnerabilities existing throughout the trans-Atlantic banking system nevertheless make extremely doubtful the U.S. Senate's confirmation of Janet Yellen as the next Fed chair. If there is anything the U.S. federal government shutdown is pointing to, it is that Yellen is likely to face stiff opposition, and so might not make the grade. Given growing resistance to austerity generally, and Republican-led efforts to gut the social safety net specifically, the present government shutdown gambit certainly is opening a rift in the Republican party, splitting it and threatening to break it apart into competing factions. With Republican party opposition to Yellen already mounting, there is a good chance public resentment toward Wall Street might be played up venturing to mend the divide threatening to disintegrate the Republican party—bad feelings toward all things bailout run far deeper among Republicans than those underlying opposition to the Affordable Care Act. Yellen is no shoe in. This much is certain, particularly if the Republican push to gut the federal budget in the face of a weak Executive is foiled by Democrats in Congress who revolt against Obama's sellout to a clearly disintegrating Republican party. Indeed, these might be more inclined to join their Republican colleagues in the Senate rejecting Confetti clone Yellen when the time for her confirmation vote arrives.
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