The S&P 500 and the Dow Jones Industrials finished the week down for the third straight week while it was the fourth straight week of losses for the NDX 100 and Nasdaq Composite. The S&P 500 (-1.64% over the last 4 weeks) has held up the best of these indices which is not unexpected since it led the recent rally up fueled by the commodity related stocks, particularly energy stocks. The S&P has given up relatively little of its gains from its explosive run off its 11 February bottom which bodes well for more gains in the future. The worst indices during this latest four week period have been the Nasdaq indices (-4.77% & -4.47%) which are much more technology oriented indices. Even the Russell 2000 (-2.52%) smallcap index has outperformed the Nasdaq indices over this same period. The much maligned banking sector has held up even better than the broader indices and is down only -1.05 over the last month. The major U.S. banks led off the earnings season with terrible earnings reports but were nonetheless well received by the market and their stocks performed surprisingly well over their two week reporting period in mid-April.
S&P 500 earnings decreased for the fourth consecutive quarter which has not been seen since Q4 2008 through Q3 2009, which was the tail end of the 2008 financial crisis and the first several months of the current bull market that started in March 2009. Comparing the U.S. stock markets over these two periods just further confirms my suspicions that TPTB are doing everything they can to hold the U.S. financial markets together because they know this is the endgame for this debt fueled, U.S. dollar-based Ponzi scheme. The financial crash should have arrived by now under more normal circumstances as no one in their right minds would be buying stocks at these high prices with earnings on such a sustained downtrend over the last year.
The smartest, big money usually sells before it becomes obvious from company earnings reports that the economy is tanking. But this time you have the buyer of last resort stepping in, the central banks. Zero Hedge has been publishing reports for quite some time that hedge funds has been big sellers during this recent market rally. Zero Hedge also published a recent report that as Carl Icahn has now sold all his Apple shares, the Swiss National Bank has greatly enlarged their holdings of Apple over similar time periods.
The major central banks, for the most part, are still aligned with the U.S. based system although China started to show significant independence when they de-pegged their currency, the Yuan, from the dollar in August 2015. The central banks are the last line of defense for this fascist system that protects the status quo as they have already hollowed out the meat of their economies and not allowed many new companies to start, grow, and replace the deadwood as well as start new areas of growth. Paper money is what built this rapidly deteriorating and ultimately destructive system. The ability to create money out of thin air and to have that ability monopolized in the hands of the central banks and fractional reserve banks have increasingly concentrated the power and wealth into the hands of the few, many of whom are very willing to doing anything to keep this system in place despite the increasingly obvious destructive tendencies of this system.
Many in the U.S. government have purposely designed and implemented destructive programs and methods to intentionally oppress and suppress its own citizens as well as those of other nations to rule over us as a dictator who can do anything it wants. Some of its main weapons include secrecy, deception, covert activities, and deceit to hide the real intent as well as the true perpetrator of its many criminal and destructive actions. The government spends huge amounts of money not only to develop and implement these criminal actions but huge amounts of money to propagandize and control the message that is given to its own citizens. The government wants to maintain its image as the good guy looking out for its citizens and the world when nothing could be further from the truth. The ability to give its citizens a lot of freebies is also an effective tool to buy the loyalty and votes of many in the public. The only way the government and its cronies can get away with all of this is with huge amounts of paper money created by its central banks and fractional reserve banking.
The U.S. government has run up too much debt and is continuing to do so in a futile effort to maintain this criminal, corrupt system that has given them and their cronies way too much power and profit. The authorities in power know that the next financial crash is the end of the U.S. dollar as the world’s primary reserve currency. The almighty dollar is all that remains of the former greatness of the U.S. as a country whose government and much of the leadership in the major banks/corporations have morphed into an extremely corrupt, criminal gang that will do anything to maintain the status quo including destroying its own country.
Back to the markets. The most likely course over the next two to three weeks is slightly down with choppiness. The S&P 500 looks like it will continue to hold its position as market leader going forward and thus probably continue to hold onto its gains better that the Nasdaq 100 type of stocks. I would not expect the market to turn back up until sometime in June.
The U.S. dollar continued to bounce back up for the second week in a row. I think it is likely to continue to rise in a choppy fashion for another week or two but there is not the look of a sustainable rise at this point. Some are expecting the dollar to break out to new highs in the future as it is still considered as the safe haven currency by many. I am not one of those who think that (at least not yet) as many things have happened in recent years to suggest things are not going to go in the dollar’s favor this time around. I have explained those things many times in past posts so I will not repeat them again here. If the dollar continues to decline as I think is the most likely intermediate and longer term courses, then commodity related stocks will continue to outperform the general market.
Gold has continued to trade in a range for the 13th consecutive week. Although gold set a new market high about three weeks ago, it never fully broke out of its trading range and is back within that range now. I still think the most likely direction is down and once it starts in that direction, then the trend is likely to carry it below $1000. As long as the U.S. dollar is in pretty good shape from a market price aspect, then I expect the gold price to be suppressed from here by the paper kings.
The energy markets are holding up very well over the last few weeks. Both oil and natural gas have not given up their gains off their February bottoms with both trading near recent highs. There will be a lot less future production due to the decreased capital expenditures for 2016 as a result of the prolonged low price environment before entering this recent rally. Two more shale oil companies went bankrupt this week, Penn Virginia and Linn Energy so supply is dwindling from that respect as well. Exco Resources, another shale producer is exploring bankruptcy as reported this week. Financial Times reported in April that Venezuela, owner of the world’s largest oil reserves, has declining production that may get significantly worse due to infrastructure and power problems. Wall Street Journal reported this week that the global oil markets are moving much closer to balance in the second half of 2016 despite the strength of Iran’s rebound due to unexpected disruptions in production in Canada and Nigeria. Inventories are still high but the amount of oversupply to the market at this point is questionable and may be marginal.
Junk bonds look vulnerable at their current position are likely to start falling within the next few weeks.