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Saturday, February 6, 2016

Another long term top reversal signal


I saw this moving average indicator from Bloomberg on Zero Hedge. It is a 200 day MA and 320 day MA cross. Every time this has appeared in the past it signalled a major reversal. We basically have a situation now where the only thing that will stop this market reversal is central bank intervention.

We saw the tech bubble burst when everyone thought that tech stocks would never go down.

We saw the GFC when people thought housing was a good investment because nobody had ever just stopped making their mortgage repayments in history. If you saw the movie The Big Short, a housing default crisis was seen as being so unlikely, that there was no instrument to bet against a housing collapse. One had to be created.

We now have the central bank bubble where easy monetary policy has caused distortions in every asset class. The price of stocks went up without the earnings to underpin it because the companies were using money at near zero interest to buy back stocks to artificially massage the bottom line. According to Jim Rickards if the Federal Reserve was mark-to-market it would be inslovent. We have subprime energy with at least 400 companies in the sector in distress. Some say $25.00 oil is the breaking point, some say the breaking point is already here and the defaults are being covered up. China's financial system is a disater.This bust will be known as the great central bank collapse. The belief that a central bank could be the cure all is over and the reality of this will start to show over the coming months/years.


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