Macro Economic Collapse
Of course my over-arching premise is one of inevitable economic collapse - now occurring in real-time, albeit entirely ignored by the lamestream media and policy-makers; a collapse merely delayed and obscured by HFT bots using cheap leverage supplied by Central Banks attempting to levitate global asset markets with a valuation north of $200 trillion, indefinitely. Just yesterday, Walmart, grand purveyor of cheap junk, indicated that monthly sales for February are off to the worst start since "2006". They blamed the shortfall on the payroll tax increase which reduced pay by $15 per week for a worker making $40k/year. Suffice to say that if the solvency of the economy can be impacted by a $15 pay reduction, then this system is not what we might call systemically resilient. We used to say that the average American was one paycheck away from bankruptcy, now it appears they are one work hour away...
Volume Collapse
Recently, I showed several posts indicating that as we would expect in a dying bull market, stock market volumes are dwindling to nothing as real buyers are pushed out of the market due to 1) over-valuation 2) recurring short squeezes 3) depleted capital, as mutual fund cash balances reach multi-year lows.
Portends Market Collapse...
As we would expect, in a liquidity sponsored market, one by one, various asset classes around the globe will begin to peel away from the liquidity love-fest and recouple downward with economic reality, putting ever more pressure on the remaining asset classes and markets to sustain the illusion of global market solvency. Which is exactly what is happening...
European Aggregate Stock Market Index: (STOX 50). Now having had its first leg down, a retracement and now rolling over again...
The all important Nasdaq 100, which peaked this past September, but since can't get out of its own way...
Gold and Gold Stocks - Not a good week...
Divergence In One Picture, - the S&P 500 v.s. new highs - new lows (black line)
The most important point I wanted to make is that as more and more asset classes diverge lower, leaving fewer markets still holding up, then the more tenuous becomes the global house of cards. Even within the strongest indices, many if not most individual stocks have already had their first decline and retracement, similar to the European Stox chart shown above. That means they are entering what is known as the "third wave" down which is always the strongest. Meanwhile, the few remaining assets still near their peak, are trading on miniscule volumes. Entering a global markets decline with the majority of assets already disposed for a third wave down and the rest held up by a mere thread, sets up for a very interesting dynamic indeed. Basically what I am saying is that on the way up there was very low volume and most of that volume flowed into advancing issues, hence levitating the indices. On the way down, the markets face the exact opposite situation, high volumes, with most of the volume flowing into the declining issues. It will be interesting to see how effectively the HFT bots maintain orderly markets when they are being force fed ever-larger blocks in an increasingly illiquid market...
