Armageddon!

Not too bad is it so far? Highways are buzzing. People are still shopping. They aren’t buying much but they’re out and buying some. Seems fairly normal to the casual observer. However when one looks at the recent market convulsions a different picture emerges. Up until Monday a case could have been made that we were still engaged in perpetuating a market up trend that relied upon the Fed induced liquidity to pump more stardust into the CONfidence model that I have constantly harped on and I believe is/was central to the Political/Central Bankers plan to reinvigorate the economy. Rather than address the unwinding the debt leverage they have just added more debt. Rather than address the structural economic/employment issues they have depended upon monetization to ramp the stock market and the commecial/IB banks. Pure INSANITY…. Apparently I’m not alone in my CONfidence model….read Marti’s most recent essay.

http://www.10sigma.com/files/Foundation%20Stones%2008-11-2011.pdf

What is next on the horizon? To answer this question one must look at this week. This week was significant. It completely broke the CONfidence model. Does that mean I am advocating an all short full court press here. NO WAY….a wounded lion can inflict a lot of damage. Just look at the last four days of candles…….NUTS!…NUTS I tell you…NUTS! What kind of healthy market pulls that off. The answer is a very unhealthy market manipulated and full of moral hazard. This creates fear. Fear begets fear and investors right now are scared stiff. The redemptions in the hedge fund world are horrendus and the money is going into the asset that was just downgraded by Standard and Poor’s….US debt. How ironic… This is a classic meltdown with the chickens coming home to roost from all the moral hazards created by decades of leverage and most recently the obvious finacial takeover of the world governments. They always owned the politicians but now its not even hidden. When any consequential decision on our economic future is made it is even PUBLICLY deferred to the Central Bankers for the decision.

So what’s next? Look for an all out effort this weekend to show a unified European answer to stem the Eurozone. At least to kick the can until Ben can make his grand announcement in Jackson Hole. The pomp and circumstance hopefully will give us the opportunity to come off of a great panicky low…..1050?? maybe… stay tuned ..this game has some blood ahead IMO.

Watch that $XEU descending triangle for the 140 base level break……or not. Right now anything is possible so don’t bet the farm. If you are scared just stay in cash. Miners remain in a nice monster move off the last low in an accelerated channel and I like a core. hmmmmmmmmm surely not….

Anyway you can all rest assured….by the end of the year we’ll know if I was right.gl

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