Preparing for the Crash as Earnings Crumble and Buybacks Exhaust Themselves
By: Clive Maund
GoldSeek.com
Friday, 6 March 2015
As you know I am primarily a chart analyst, so when I come across fundamental analysis that really gets to the bottom of what is going on I like to share it with you. It is of the utmost importance that such analysis and the info therein is either not known to the market at large or its significance is not appreciated – by the time most fundamental information becomes known it is too late – it has already been factored into prices, which is a big reason for using charts. The two key points not grasped by the market right now that are set out in the excellent article The Return of the Business Cycle by Phoenix Capital Research are firstly that stock prices in the US have been artificially inflated by large scale stock buybacks, motivated by greed on the part of senior executives who are trying to drive the stock price up because they are paid in options, with corporate coffers being emptied to engage in these buybacks and debt being used to amplify the buybacks even more. The second point is that the strong dollar is now having a huge impact on corporate profits, which are deteriorating at an alarming rate, and if we see another strong dollar upleg, which the writer of this fundamental article expects, it will make the situation even worse and should prove to be the last straw for the stockmarket.
Thus it is interesting for us to observe that various markets are at a critical juncture. You may recall us looking at the London FTSE index, where a giant epochal Triple Top has formed. In recent weeks this index has crept higher and has started to make new highs, but so far these new highs are marginal, and it still hasn’t escaped the gravitational pull (resistance) of the 3 huge peaks. However, the current uptrend may be the harbinger of an imminent collapse, because it is a quite strongly converging bearish Rising Wedge, with its occurrence at the 3rd peak of a giant Triple Top pattern making it all the more ominous. FTSE must get on with it and advance smartly away from the danger zone, to avert the risk of a reversal here that would be expected to lead to a severe decline, which doubtless would involve most markets, including and especially the over-inflated US markets. If that happens a later consequence will be that the insanely inflated London property (and others) will CRATER.
The Rest…HERE
