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Friday’s action closed horribly in the U.S. with the Dow losing 530 for the day. This broke away from the support level of 17,200-17,300 which will now become overhead resistance. Global equity markets around the world are in crash mode as more than a dozen are already down 30-50% while the U.S. has just eclipsed the 10% correction zone. My guess is we will see a very weak opening with one or several rally attempts. An exhaustion bottom can be expected in the first half of the week with nervous strength later in the week. This scenario I believe is our best case.
No matter how the week plays out, the credit bubble has been identified, recognized and “pricked”, the equity markets are only a symptom. Do not be fooled by any strength this coming week, it should be used to raise cash. As September moves in, the September-October timeframe looks like a disaster. What may start out as circuit breakers being hit now, will ultimately be the plugs yanked out over the next couple of months. I believe a market closure is in our near term future.
As for gold and silver, these markets are both REALLY tight if you want the physical metal. If you are trading paper metal …oh well, can’t help you. This is the Great Credit Unwind and as such, currencies of all sorts (including the dollar) will take turns crashing. Watch the various sovereign treasury prices and yields (also CDS credit default swaps) as a clue to which country is experiencing an “attack du jour”.
The most likely US/Fed response will be some sort of QE whether they call it QE4 or not, who knows? The Fed will be forced again into further monetization, any talk of a rate hike from here is a complete joke. The real danger lies in what or how the world responds to another QE. Do they hit the Fed’s bid with full force? If I were a foreigner, I would certainly use the Fed as my “exit door” but this remains to be seen. Should foreign central banks (ie. China) sell into the Fed, game over and market closure could be quite rapid as in same or next day.
This is much speculation on my part as to “timing and how” this might all play out. The fact that credit is now unwinding means there is only one question of importance, “when”. Even this has become of less importance as “SOON” has jumped up as the answer. Gold and silver will be your only lifeboats as they are no one’s liability in a world where everything including the money in your pocket is someone else’s liability. IT’S OVER FOLKS! Please do not get caught up in what is mathematically coming!
Standing watch,
Bill Holter
Holter-Sinclair collaboration