Wednesday, 31 August 2011

We’ve Seen How This Game Ends Before: In Misery

“The bottom is in! Stocks are in a new bull market. QE 3 is just seconds away!”

These are the taglines being tossed around by the mainstream financial media as stocks get rammed higher into month’s end. As usual these folks are both clueless and wrong.

We had the exact same move at the end of June when the market exploded over 8% due to end of the month (and quarter) performance gaming and start of the month/ quarter buying.

Here’s what followed:

So here we are again… it’s the end of the month, volume is extremely light because of the upcoming weekend… and SURPRISE! Stocks are exploding higher again. In fact, we’re up 9%, quite similar to the 8% rally at the end of June.

Folks, this current move is just another trader game occurring on next to no volume. It will end precisely as the end of June rally did: in misery.

Indeed, the credit markets haven’t budged from being on DEFCON 1 throughout this rally. The European banking system continues to implode with Germany and France now being drawn into the mess. And the US economy is an absolute disaster no matter what the fudged data says.

QE 3 won’t solve this mess (assuming it even arrives). Neither will the European bailout fund. We’re already in the Second Round of the Great Crisis which will see the EU broken up, the US economy implode, and a market collapse that will make 2008 look like a joke.

by: Graham Summers


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