Monday, June 08, 2009

Our years of living dangerously

Let's start off with today's update of the SPX weekly chart.

A red SELL bar will be generated if this week closes at or below 859.14. I expect to be heavily SHORT well before that level is breached by using shorter-term tools and techniques. Since expectations are for several hundred SPX points lower, entry will be less important then taking and staying with the trade.


In lieu of other supportive technical analysis, I ran across this interview with Gerald Celente published by Human This is for those who seek the "why's" that will underlie the next major phase of market behavior.

Exclusive Interview with Future Prediction Expert Gerald Celente
by Terry Easton (more by this author)
Posted 06/05/2009 ET
Updated 06/07/2009 ET

It’s the end of the world as the Greater Depression hits after 2010’s failed “W-recovery”

Human Events had the opportunity to interview forecaster extraordinaire Gerald Celente, President of Trends Research Institute, several days ago -- and the future he predicts looks bleak indeed. In fact, as Mr. Celente sees it, the Great Depression will seem like a mild recession as what waits for us in 2011 hits with the force of a Katrina financial hurricane.

In case you’re wondering who Mr. Celente is (if this is still possible), he’s appeared -- along with his predictions -- on Oprah, CNBC, Reuters, NBC, PBS, BBC, the Glenn Beck Show -- the list goes on an on. His Trends Report has been successfully predicting the major future trends impacting our lives for 3 decades, including calling the dot com crash back in the 1990's.

Mr. Celente's forecast on our impending future is based on his study of history. He says we are bent on destroying our currency, bankrupting our government, and unleashing a violent citizen-against-citizen eruption as the economy collapses into chaos and martial law fascism.

Quite a claim. And God help us if he is right -- again.

“We’re sounding the alarm about the ongoing downward economic cycle”, Gerald told Human Events. “In 2002, we predicted that the collapse of the American empire would fall like the World Trade Center in a thunderous crash -- in slow motion before our eyes. And now it’s happening.”

Mr. Celente follows over 300 trends: family, crime, war, education, consumer & business patterns which TRI synthesizes to predict the future.

“The US is becoming a shadow of what it used to be. Take education for example. The OECD group of developed countries ranks quality of life, education, health care of its member nations. The US is now falling down the table as one piece of data after another shows America is in decline. We’re no longer Win, Place or Show in quality of life, education, longevity… all the essentials where we used to be #1. And our economic underpinnings are failing.”

Mr. Celente puts part of the blame squarely on the federal government, and especially FED Chairman Bernanke and Treasury Secretary Geithner, and warns us not to believe a word they say “They’re the same people who didn't see it coming - are now telling us the worst is over, that ‘green shoots are spouting upwards’. But they were wrong before. They’re wrong on this too”.

“When you pump out tons of money manure into this system based on nothing – printing press paper, it’s like giving a patient with a chronic disease a pain killer -- it won’t cure the patient.”

“But let’s go beyond the economics. Our whole Constitution has been abrogated. The president simply writes an Executive Order to do whatever he wants. Nationalize the banks, take over the insurance industry, automobile industry, health care industry…
None of it is constitutional.”

When did the problem begin?

“After Dwight Eisenhower -- our last great president -- the Allied Supreme Commander in WWII – who warned us of the dangers of the military-industrial complex. We've become completely corrupted.”

“We became enmeshed in foreign entanglements. We forgot the lesson of England - and how their global imperial overreach destroyed their empire.”

Of course, the average American doesn’t think that we’re an empire. We’re not like the classical empires of old - raping, pillaging and stealing the wealth of invaded peoples. What does Mr. Celente have to say about this?

“What we’re doing is squandering our wealth, our resources, the genius of our scientists and the future of our children. We’re over-consuming in every way -- but under consuming our education and focusing on the quantity, not the quality, of what we’ve built. So much of today’s culture is counter-productive to what American built it’s foundation on -- a high-quality producing nation building things, not pushing paper.

"And we’ve become not only a consumer society but a low-quality consumer, as well as the most obese society in the world, eating low-quality high-carb, high-fat processed foods.”

“We’re now focused on the lowest cost, the lowest common denominator. Not the best and highest quality. We advertise buying cheapest as the most important thing.”

Mr. Celente argues that we’ve socially destroyed our productivity and have abandoned it to other countries.

“And we have fallen into a moral vacuum. Look at how people used to dress. Smartly. Not like the cheap hoods of today. Fashion now copies the lowest common denominator. Our children wear clothes without belts, and shoes without shoelaces, to copy the styles of the violent criminals -- who have these items removed by the police in prison so they can’t be used as weapons. That’s become the fashion statement of today’s youth. Like rap music from the ghetto. We’ve become an underdeveloped nation.”

Mr. Celente observes that "people used to think of America as that shining beacon on the hill with 'liberty and justice for all…' ." So what happened?

"Morality is missing from our American public consciousness. Start with Wall Street. It’s run by a criminal gang. The only question is ‘how much can you make, how much can you steal?’ At the bottom, the welfare recipient says ‘how much can I take?’ And the government is in on the take."

“Morality is absolutely the issue. We had a government where we were taught all our lives that we are a free enterprise system -- so we depend on our own strength, our entrepreneurial ideas. The world used to look to us for our innovative spirit.”

“This is being destroyed before our eyes. And our government has become more interventionist than any of the old empires could imagine.”

"Our society is now based on consumption -- 70% of the GDP. This is more than we produce. So to pay our bills, we use funny money invented in 1913 with the creation of the Federal Reserve and the fiat dollar based on credit (debt) -- the fractional reserve system. In 1930's you bought what you could afford. You saved up to buy your home. The easy credit of the 90's has destroyed the country. Now you borrow what you can’t afford - and the nation’s done the same."

Mr. Celente predicts the use of printing press money will cause the "greater depression".

"I predict continuing deflation of real estate, followed by extreme currency inflation -- ultimately becoming worthless. This is why gold is the only honest money -- the government can't counterfeit it. Look for it to top at least $2000 an ounce"

"Our unemployment numbers are also bogus. For example, the construction industry is really above 20% , and the government is creating low-level jobs, not real jobs. The US total real unemployment is more like 16%. Before the crisis is over, it will reach 25% - great depression numbers."

"When people have lost everything they have nothing to lose. Violence and crime will explode. Look at the OECD figures. The number of people not graduating from high school is exploding -- they're wacked out on drugs. New York City will look like Mexico City in a few years. The collapse of morality from top down -- and especially in the government -- makes it inevitable."

"What can we expect in the coming future", we asked.

"Washington has declared 'Economic Martial Law'. Wall Street is putting Main Street out of business. The key to watch is Christmas sales. They’ll fail. Christmas will be when reality sets in."

"Another trend we wrote about over 2 years ago was the tax revolt. What’s happened? Tax revenues have collapsed by 33%. And the wealthy people are leaving."

"We predict state secessionist movements will rival the breakup of the Soviet Union."

"The only way we can ever recover is to return to individual community, personal responsibility, local government. Next, average will disappear, Quality will return. Look at GM. Junk cars financed by junk bonds. Now owned by a junk government. As a consumer, don’t consume quantity -- consume quality."

"How will it all end?", we queried. Will the dollar survive?

"The dot com bubble should have burst and gone away in a short sharp recession. But the boys at the Fed re-inflated the economy by lowering interest rates to a 46 year low -- and in turn created the real estate bubble -- much bigger than the dot com bubble. "

"Now they’re creating the bailout bubble -- which will ultimately dwarf the real estate bubble. It will cause the implosion of the global economy world wide -- which will not be able to be repaired by creating yet another bubble. Every time the government fails, it tells a bigger lie and then a still bigger lie."

"These previous bubbles were not allowed to pop -- but they didn’t destroy the infrastructure of the country. This bailout bubble will."

"But this bubble will be the last one. After the final blowout of the bailout bubble, we are concerned that the government will take the nation into war. This is a historical precedent that’s been done over and over again."

"So, it’s not that the dollar that will survive. We may not even survive. Look at the German mess after WWI. It gave rise to Fascism and WWII. The next war will be fought with weapons of mass destruction."

American 'Liberal Fascism' ? Is it possible? Jonah Goldberg's bestseller raised the alarm two years ago.


Anonymous said...

Please pass the razor blade.

Pivot Trend said...


What made you think it is time to heavily short? Because it reaches the upside the channel on the weekly chart? Could you elaborate it a bit? Thanks!

Allan said...

PT: I did not say it is time to heavily short the market. Please re-read my post.

Anonymous said...


**Since expectations are for several hundred SPX points lower**

from what do you come to this expectation ???
I am a newbie so I am just trying to figure out what are the things I should look for

thanks, Allan

Anonymous said...

You wrote that you expect to be HEAVILY short well before SPX breaches 859.14. That implies you will be shorting this week. Of course, that is the art of inuendo and fortune telling. Never saying anything but saying everything. You are a master. Can't wait for my short positions to start making me money.

Anonymous said...

I shorted since SPY 700, I am so hosed ...

Allan said...

There are a couple of important structural levels that if give way, could initiate a deluge down. One level is 920 and another level is 900. So there are signposts to get short well above the 859 confirmation. If you want to know how those figures were determined read The Elliott Wave Principle and Mastering Elliott Wave. Otherwise, take my word for it.

Anonymous said...

Allan based on your posts I believe that you are a chaser. You chase the markets just as you chase life, always grappling for something. Just sit in silence. Feel the wonder of life around you. See that money has not made you happy and has in fact taken happiness from you. Don't you see the blue wave and Elliot wave are actually tools of misery for you? So what if the market goes to zero from here. That won't validate a lost soul. I am here for you.


Anonymous said...

This is a tough market to forcast. The government is the biggest player, and they aren't telling about all they are privately doing, and certaintly aren't telling the truth about what they are publicly doing. I think that last leg down might take longer than we expect. Maybe Bob Precter didn't learn his lesson in the 90s about how long they can keep the party going.

Don't get me wrong, I believe in Elliot Wave, but Elliot Wave was developed by observing historical price action. There has been almost no historical price action to observe which resembles our current situation. There has only been one other period in history when the government intervened in the market to nearly this extent, and the result was disaster.

For a good example of what is happening, pull up the Nikkei for the decade of the 90s. They had a tremendous plunge off of the 1989 highs. Each time the government "stimulated" the economy, the rallys were tremendous, but they eventually plunged anyway and got down to the pre bubble levels. How far they retraced depended in part on their "stimulus."

What I am saying is that the government created this super rally through stimulus, and it is now scrambling to accelerate the stimulus to avoid the inevitable failure of the rally. I agree with Allan that they will probably fail, but I would wait to see that failure confirmed before I plunked my money down because of the unusual forces at work. Also, anything they have up their sleeve that hasn't been used yet will be employed during the failure of this first rally. Any scientific timing of this craziness is more risky. You can't explain the eye of the storm if you've never seen a hurricane.

I also agree with Gerald that the country is doomed, but I disagree with his timing. I know that the people are ignorant of the Constitution, that we don't share a common blood, or a common religion, or even like each other all that much. However, we still have a common culture in America, and despite the fact that we have turned our backs on the only thing that makes this country unique, the Constitution, a common culture is enough to hold us together for a good long time. Gerald is wrong about a short term break up of the country. Identifying with one's state is no longer the norm, and unlike mid 19th century America, I have family spread throughout the country. Ideology created the civil war. Our problem is our people have no ideology. There will be no civil war, for now.

Bottom Line: Get ready for the shorts, but don't try to time them too close. These waves are huge, and you can give up the first 20% of the move and still make huge profits.


Anonymous said...


Having had almost no money in the past, I can confirm that poverty makes everything worse. Better to grappel with deamons using what you have than to face them empty handed.

LOL, misery loves company, give me your money.


Anonymous said...

nice post smiddywesson

rob g

Allan said...

I would wait to see that failure confirmed before I plunked my money down because of the unusual forces at work

This is exactly what I have been trying to get across, so when I hear of from folks losing on their short trades, I cringe at my failure to communicate. Yet, some do get it. Thanks for your Comment.

Anonymous said...

Agreed, people are just looking for an easy tip so they don't have to go through the hard work of employing a methodology. But that hard work is the job of the trader, not just fastening upon a particular methodology.

Even though I'm an Elliot Wave guy, I don't blindly trust. Here's an analogy for your readers who don't get it. Suppose Elliot, rather than studying the markets, decided to dicipher the secret language of trees. We all believe that trees don't talk, but if they did, they would converse extremely slowly and it would take decades to gather enough conversations to even begin the translations. But what if the trees were not all speaking the same language? What if they were speaking different dialects, or sometimes they spoke in slang, or excitedly? Then you would need decades and decades more to put it all together.

Enough with the trees. The market speaks to us too, and it takes a long, long time to gather enough information to hear everything it has to say in all its different dialects. Elliot Wave is a scientific approach to disciphering what is going on. It can tell you what is going to happen, but it can't always tell you when. In those instances where EW is wrong about the timing, it is because it hasn't gathered enough market speech yet, not because it is bad science. If you lose all your money trading EW, it is because of how you employed it, not because it has nothing to offer. It is a science, but it is not an exact science (yet).


Allan said...


Well said, again, another well written and thought out view of the trading process. Perhaps I can entice you to write a Guest Blog on any trading related topic of your choice? Email me if you are interested -

Anonymous said...

"top at least $2,000 an ounce"
"gold is the only honest money"
There it is! Straight from Gerry the Guru. Pennies for Gold or GNMT (General Metals Corp) got news! She's looking alot like Mother as in Mother Lode. If I could have underlined ounces in the word announces for you Allan I would have.

Mike said...

here's my Lawrence Summers imitation:


Anonymous said...

Is the gold ETF a bloated, manipulated and unreliable market like the USO?

Anonymous said...

okay, raise your hands if you can taste feces in your mouths from sucking on Allan's ***.

Anonymous said...

GLD ETF: Bloated? Naw, just not cost effective. I bought some Jan. at $80, road it up to $99, then back to $92, and sold! My $1600 @ $80 only got me 20 units = $240 profit minus trade costs. I needed 200 units.

Anonymous said...

Come on...

NNVC.... is Dog shit...It was going through the roof last month on swine flu according to Alan....How'd that work out??
Back down to 50 cents.

Crash warning after crash warning and this market just keeps driving higher.

Wave 5......Wave 5 my ass

Look around you....People are starting to venture back into real estate again. Realtors phones are ringing. Unemployment has been showing signs of improvement.

Now how would a Goverment re-inflate a busted, housing wrecked economy????

Maybe, just maybe.....By re-inflating the blown out stock market! It's a hell of a lot easier and quicker than re-inflating the housing market after a credit bubble that destroyed peoples credit. They dumped interest rates to rock bottom and housing is just starting to show some signs of a pulse. The stock market on the other hand is up 50% off the March lows. That was easy!!! Barely 4 months and a nice big feel good rally.

One bubble leads directly to another. I wouldn't hold my breath waiting for that 500 point S&P drop.

Anonymous said...

Crazy guy above:

Why would you intentionally bash someone who provides his "opinion" on markets to all who "want" to hear for FREE. Come on, is it really necessary to rage about how you feel, wouldn't it be better to start your own blog and commit 100s or 1000s of hours educating people for free and see if your results come close to stacking up to the results seen here?

Everything is market timing and somethings don't develop, that is why everything is opinion but Allan's opinion is based on hours and hours of research and past market experience.

Please, if you just want to gripe, start your own blog or simply find another place to read and learn.

Dave, Portugal
(Currently deployed in Iraq)

Anonymous said...

Hey, I have to admit that flamer guy's opinion that the rally will continue is POSSIBLE. The market was reinflated after the tech stock bubble, so anything's possible when the government will do everything it can to keep the party going. I just don't believe it is very probable that it can continue.

Each successive bubble makes things worse and increases the pressure to the downside. Does anyone really think things are better now that we have spent all this money and bailed out all of these disfunctional industries? If stimulus spending works, why wasn't the money spent on the Iraq War considered "stimulus" too? Peace time stimulus and War spending was portrayed as a success when FDR (and Hoover) did it, but even if it did work, it took over a decade to do so. It took the market 16 years to recover from that little bout of stimulus. This time it's for real.

As for the employment numbers, please spare me. Those numbers have been gerymandered for decades. The game is to adjust them in later quarters. Additionally, they just changed their methodology yet again to pad the estimates of small business jobs. The changes they made are estimated to have taken as much as 4% off the unemployment rate. That would give us a "true" unemployment rate of around 13%. Shadowstats puts the number around 15%! Combine that with the fact that more of the "fully employed" are working less than a 40 hour week than at any time in U.S. history, and a lot of the new jobs created are not long term positions, like those with the US Census, I would say the employment numbers look pretty bleak. On top of all this, employment numbers don't capture all the people who have been living off of the overtime they formerly were able to get. (Remember when the news casts were concerned with too many people being forced to work more than 40 hours?) Faced with laying off workers, guess what is happening to that overtime now?

That brings us right back to real estate. Despite the government's desperate efforts, they can't seem to keep interest rates down. What is going to happen to the housing market when people can't get a loan because interest rates are too high, they have no equity in their home, or they just can't show enough income without that overtime? What happens when the next wave of adjustable mortgages hits? Jobless numbers don't tell the whole story. You have to look behind the numbers.

If you think we can pull out of a severe recession with 70% of our economy relying on consumer spending, and with people in hock up to their eyeballs even if they have a job, then good luck to you in the markets.

Real estate and jobs alone are enough to pull us down. All of this says nothing about credit default swaps, commercial real estate, the looming state and municipal budget crises, the collapse of the insurance industry, destruction of pension funds, expanion of government programs, deficit spending and foreign investors jumping ship because of government debt, erosion of propery rights, and a weakening dollar, etc. The CNBC rah rah crowd are in denial. They are choosing their fundamental data to paint a rosy picture of green shoots. We don't even have to argue fundamentals, the charts tell the whole grim story too. Yes this is a really nice rally, but the only green shoots I see are growing out of a steaming pile of manure.


Anonymous said...

I don't know Dave, Crazy Guy made some good points. I agree with him that the USG tried to get us out of this problem by dropping interest rates and working towards another stock rally, with the ultimate goal of fixing the housing problem. That would lure in an unsuspecting retail crowd to buy new shares in banks, auto companys, you name it, and bail everyone out. I just don't agree that it has worked. Did it ever occur to anyone that the reason housing looks like it is starting to wake up is that rising interest rates have spurred the bottom fishers into action? Until recently, they have been content to wait like buzzards on a tree for housing to bottom. They are making their move now because they have to. They see interest rates rising with no end in sight. The next unsettling question is whether this will make any difference at all in the long term for the housing market. I say it won't. Nobody has any money to buy. And far too many owe too much on their houses to sell.


Michael Lomker said...

One level is 920

Indeed it is and there is only a day or two remaining for this to play out.