Financial Markets 2nd Shoe About To Drop?

Nov 15, 2012 – 05:48 AM

By: Brian_Bloom

The first shoe dropped to the floor in September 2008. With heroic obtuseness regarding the causes, the world’s central bankers flooded the financial markets with liquidity. Arguably, all that this achieved was a type of Indian summer. It seems that we are about to experience the consequences of that misguided behaviour. There is no such thing as a free lunch. One cannot create wealth out of thin air by printing money.

The four charts below seem to be pointing to an important inflexion point. The financial markets appear to be on the verge of panic.

Chart 1 is of the S&P 1200 global industrial index. It is just peeping below its 40 week MA and its rising trendline

Chart #1 – S&P 1200 Global Industrial Index

Chart #2 is of the US SPX. It broke down today. The Israeli attack on Hamas was probably the catalyst – but the direction of the break was informative. Clearly, the markets are predisposed to be bearish

Chart #2 – Standard & Poor 500 Industrial Index

Chart #3 is of the gold price, but with Fibonacci support and resistance lines drawn in

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