Stocks are on the edge of a cliff.
As you can see, the S&P 500 has failed to breakout to the upside and is now sitting on support. If we take out 1650 we could easily to for 1600 in short order. And if we do indeed break down through the rising wedge pattern (indicating that the move to the record highs was a false breakout) we could see a drop down to the mid 1400s.
Other asset classes are already predicting this. Check out the divergence between high yield bonds and the S&P 500:
The same is true of emerging markets which have lead stocks in the post-2009 period.
Double Top in the NYSE now in place, with Margin debt sky high?
CLICK ON CHART TO ENLARGE
The NYSE made an important high 5 years ago this month and then proceed to waterfall in price. Now the rally in the NYSE has it back to that important high, in the same month, 5 years later.
At the same time several key emotional highs and lows over the past few years have formed resistance lines, that meet at the same price as the potential double top!
A breakout of these resistance lines would make this chart worthless….Is the market peaks here and turns down, hard to put a price on what this price point could mean for the broad markets.
Why could this pattern take on a little more importance? See below….
CLICK ON CHART TO ENLARGE
The great chart above was created by Doug Short, it reflects that margin debt is reaching levels where the S&P 500 ended up creating two major peaks over the past 13-years. The high debt situation could increase the odds of how important this technical pattern could be.
Is ole Scooby concerned about a “Danger Zone” when he shouldn’t be? Stay tuned!!!
Last time this happened, S&P 500 declined over 15%!
CLICK ON CHART TO ENLARGE
European meltdown: austerity, summer riots, and record unemployment plagues EU nations
May 31, 2013 – EUROPE – Unemployment has reached a new high in the euro zone and inflation remains well below the European Central Bank’s target, stepping up pressure on EU leaders and the ECB for action to revive the bloc’s sickly economy. Joblessness in the 17-nation currency area rose to 12.2 percent in April, EU statistics office Eurostat said on Friday, marking a new record since the data series began in 1995. With the euro zone in its longest recession since its creation in 1999, consumer price inflation was far below the ECB’s target of just below 2 percent, coming in at 1.4 percent in May, slightly above April’s 1.2 percent rate. That rise may rising concerns about deflation, but the deepening unemployment crisis is a threat to the social fabric of the euro zone. Almost two-thirds of young Greeks are unable to find work, exemplifying southern Europe’s ‘lost generation.’ Economists and policymakers including Germany’s finance minister, Wolfgang Schaeuble, have said the greatest menace to the unity of the euro zone is now social breakdown from the crisis, rather than market-driven factors. In France, Europe’s second largest economy, the number of jobless rose to a record in April, while in Italy, the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work.
Smart Money Suddenly Getting Out Of Stocks And Real Estate?
If wonderful times are ahead for U.S. financial markets, then why is so much of the smart money heading for the exits? Does it make sense for insiders to be getting out of stocks and real estate if prices are just going to continue to go up? The Dow is up about 17 percent so far this year, and it just keeps setting new record high after new record high. U.S. home prices have risen about 11 percent from a year ago, and some analysts are projecting that we are on the verge of a brand new housing boom. Why would the smart money want to leave the party when it is just getting started? Well, of course the truth is that the “smart money” is regarded as being smart because they usually make better decisions than other people do. And right now the smart money is screaming that it is time to get out of the markets. For example, the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years. The smart money is busy selling even as the dumb money is busy buying. So precisely what does the smart money expect to happen? Are they anticipating a market “correction” or something bigger than that?
ACHUTHAN: ‘The Explanation Is Simple: Recession Kills Inflation’
He writes his latest commentary in the wake of today’s disappointing personal income and spending report.
“Despite surging prices for homes and equities, consumer spending is contracting,” writes Achuthan. “Quite simply, the wealth effect is rendered moot by languishing incomes.
“No wonder yoy U.S. imports growth has also plunged into negative territory. In the past, this has happened only during U.S. recessions.”
He also thinks all this explains why inflation measures continue to come in lower than expected.
“Some are surprised that inflation has failed to take off despite massive amounts of quantitative easing,” he writes. “The explanation is simple: recession kills inflation.”
Read more: http://www.businessinsider.com/achuthan-explanation-is-simple-recession-kills-inflation-2013-5#ixzz2Utiv8phb
The Student Loan Delinquency Rate In The United States Has Hit A Brand New Record High
37 million Americans currently have outstanding student loans, and the delinquency rate on those student loans has now reached a level never seen before. According to a new report that was just released by the U.S. Department of Education, 11 percent of all student loans are at least 90 days delinquent. That is a brand new record high, and it is almost double the rate of a decade ago. Total student loan debt exceeds a trillion dollars, and it is now the second largest category of consumer debt after home mortgages. The student loan debt bubble has been growing particularly rapidly in recent years. According to the Federal Reserve, the total amount of student loan debt has risen by 275 percent since 2003. That is a staggering figure. Millions upon millions of young college graduates are entering the “real world” only to discover that they are already financially crippled for decades to come by oppressive student loan debt burdens. Large numbers of young people are even putting off buying homes or getting married simply because of student loan debt.
Macro View in 10 Bullet Points
1. The market is getting ahead of itself ideas the Fed will soon taper its asset purchases.
2. A serious tapering discussion cannot take place until September and even then, depending on the data for early Q3, the discussion need not lead to immediate action. Talk of tapering serves Fed’s purposes and has seen the markets re-price risk.
3. It is not just about the real economy; price pressures are low and, when adjusted for the borrowing associated with corporate share buy-backs, the credit growth is on par with Europe.
4. The ECB is very unlikely to cut the deposit rate below zero. It is like the OMT, where the effectiveness may lie more in the lack of use. It is part of the forward guidance to remind the market that there are other measures the ECB is prepared to take if necessary.
5. An refi rate cut is largely irrelevant when key overnight rates are hovering just above zero.
6. The shift away from austerity in Europe suits most, even Merkel who is maneuvering to outflank her domestic critics ahead of the September election. However, the subtext may prove more vital in the next phase, and that is the emphasis on structural reforms, which may prove as onerous as recent austerity measures.
Michael Pento – This Entire House Of Cards Will Collapse
Today one of the top economists in the world sent King World News an exclusive piece which illustrates how close the West is to collapse, despite the recent stock market action. Michael Pento, who heads Pento Portfolio Strategies, also believes it is essential to own precious metals in order to survive the coming economic storm.
Pento: “It is amazing so many investors are oblivious to the fact that the developed world is completely addicted to artificially-produced low interest rates. Perhaps that is why there is still a debate over whether the ending of QE will adversely affect the economy, and if rising rates can occur within the context of a healthy economy.
It isn’t so much about whether or not QE is about to end, or even if growth is now causing interest rates to become unglued. The truth is the end of QE and the normalization of interest rates—for whatever reason–means it will be the end of this anemic and unsustainable recovery in both Japan and the U. S. economies.
This is because you cannot separate the central banks’ influence on markets from their effect on economies. The BOJ and Fed have dramatically supported equity and real estate prices by taking interest rates to record lows. Therefore, it is simply illogical to then assume that rates can increase without negative ramifications….