The Decline and Fall continues .............................

Prior to the Presidential Election, I was of the convinced that the American people would have a rather easy choice to make. Logically - being fed up with unemployment flat-lined at or near 8% and the debt level rising  to astronomical levels ......... they would choose the guy who could fix the problems. What the hell happens ....... they chose a golfer who wants to spend like it's 1929. (That's not a mistake on my choice of years). 

But if you think nothing really important just happened you are dead wrong and you better start paying attention to what its going to mean to you and your money.  This assumes you have some money left after the coming tax onslaught.  More on the election phenomena in future posts.

Before we move to the market comments and the charts below, please read the the quotes that follow and try to put them into today's context. They are becoming more relevant each day.

"A great civilization is not conquered from without, until it has destroyed itself from within. The essential causes of Rome's decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars." ~ Will Durant, The Story Of Civilization III, Epilogue, 1944

 “They’re not going to tell you that a collapse is coming. You’re going to have to see it for yourself. The government’s never going to tell you that it’s going to happen. These guys are never going to tell you the truth, because they can’t tell you the truth. Their job is to promote confidence, not to tell you the truth.”    Kyle Bass 

I've exhausted my feelings about this market being broken but certainly the last several months should have given even the most ardent fans of Ben Bernanke a little twitch to itch. The market has been driven by only one thing ....... "The great fiscal cliff debate". Even if the market attempted a sell-off to correct its over bought conditions, the mere whisper of a possible rumor about an agreement in Washington, drove the market idiots to unleash the "Bots" to "buy only" no matter what the cost.

“Diminishing returns of ever-increasing complexity addressed with ever-more layers of complexity, larded with systematic lying based on mystifying, opaque jargon, sanctioned statistical misreporting, felonious cronyism, and scuttling of the rule of law. In short, the markets have been taken over in effect by a criminal racketeering syndicate. In doing this, so much resilience has been removed from these market structures that they are riddled with rot, like a mansion infested with carpenter ants.” – Jim Kunstler

OK, so now where are we? The sound of music was all the markets could hear after the quasi agreements over the Holiday week and the markets raced higher. Right now the SPX is once again nearing the resistance level between 1460-1470 where it was rebuffed in its last 3 attempts at moving higher. If the market can punch through the resistance zone, we could see a move to the 1558 area by late January or early February. If the resistance holds, we should be on our way to the 1270 area and lower. See the chart below:

A chart that is flashing a potential buy set up is GOLD. Gold seems to have a natural affinity for the 61.8% retracement level on its corrections. Note that we touched that area and so far the price level has held. Indicators suggest we may have exhausted the current corrective move lower and may try to attempt a rally going forward. In your portfolio you should have an allocation to the precious metals as a hedge against your other holdings.




Here's one of those tried and true indicators, the TRIN or Arms index, and it flashes pretty consistent signals at turning points. It called the move higher and is now approaching overbought territory and a possible correction. We should get a feel for the markets direction early next week. Because the markets have come way too far too fast, we may see a small correction before the final push to a higher high. The move higher should be over by early February and then the bear market should resume unless uncle Ben gets a new printing press for Christmas. (TRIN is an inverse indicator - so high value is a bottom, low is a top) 

Stay alert and you may want to lighten up on your stock positions.