Thursday, April 8, 2010

The Engineering of a Financial Crisis

Nothing is more common on earth than to deceive and be deceived.
Johann G. Seume, 1763-1810, German Theologist.

The Dow continues to put in new highs but our 3 moving averages of new highs are trading well off the highs they put in last year. The 20 day moving average (current reading = 640) of new highs would have to surge past the 2500 mark to have a chance of putting in a new high. Based on this week’s readings it would have to surge 400% from its current reading. It is very strange and disturbing that a market that appears to be strong is actually not as strong as it appears to be when one examines its internal structure.

V readings (our proprietary indicator that measures market volatility) have surged to yet another new high, we are now striking distance from hitting the 1600 mark. We cannot remember the last time when V readings put in 4 back to back new highs. In fact it appears that the surge (over 5.6%) in the past 4 weeks has set a new 4 week record.

Given the fact that the Dow has now put in a stunning 29 new highs and the volume has not once touched the 6.8 billion mark leads us to believe that some form of extreme manipulation is taking place. It is statistically impossible for a market to put in so many new highs on such low volume without something being amiss.

If one examines the history of the Dow (we have more than 100 years of history there), one will find that at any given point in time, the Dow trended higher on higher volume especially if it was putting in a series of new highs.

Before we proceed, we would like to list a few very important quotes.

The budget should be balanced, the treasury should be refilled and the public debt should be reduced. The arrogance of Public officialdom should be tempered and controlled. And the assistance to foreign Lands should be curtailed, lest we become bankrupt.” CICERO, 63 B.C.

Thomas Jefferson the 3rd president of the United States made the following quotes and did his level best to curtail the power of banks

The Truth is that we can never satisfy their (bankers) appetite for money

Banks of issue were more dangerous to the liberties of the people than standing armies and the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale

The power to issue money should be taken from the banks and restored to congress and the people

President Jackson made the following statement in his farewell address “the banks of the United states waged war upon the people”

"It is one of the serious evils of our present system of banking that it enables one class of society - and that by no means a numerous one - by its control over the currency, to act injuriously upon the interests of all the others and to exercise more than its just proportion of influence in political affairs."

President Jackson killed the banks and restored the power to create money to congress. In his farewell speech (1837) he very clearly and openly stated the consequences that could befall a nation if the banks were allowed to take over? To read the full excerpt of President Jackson's farewell address click here

It is no secret that central bankers under the guise of trying to provide financial stability have been plundering every nation and manipulating the system to their benefit and to the detriment of the majority. However, things have now gone out of control. The following two facts should help provide support for this hypothesis.

The top 6 American banks have assets that are equal to 63% of U.S. GDP; let that figure sink in. Imagine that 6 banks have assets that are equal to 63% of the world’s largest economy. Effectively they can manipulate any system. If one were to treat these banks as a nation they would be in the top 5 nations of the world. Power corrupts and absolute power corrupts absolutely. These banks will seek to gain even more control and will stop and nothing, unless their legs are chopped off.

The Top 6 banks are engaged in over 80% of all over the counter derivative trades.

Were not banks created to lend money and help business grow? So why are they using this money to trade the markets. When you combine these two pieces of data, it’s all but obvious that the banks have a free role to do as they see fit courtesy of the Feds. The Feds are providing these banks with virtually free money and instead of lending this money out, they are simply pumping into the markets, setting them up for another monumental correction. The function of a bank is to lend money, not to trade; new laws should be introduced striping banks of their status if they earn more from trading then from their traditional business operations. Better yet they should be banned from trading the financial markets.

One could go even as far as stating the financial crisis was engineered to help create a few super powerful banks. It appears that this is the case for the banks have not lost any power, but instead we have fewer players with triple the amount of power.

These facts could help explain why the markets have simply continued to rise on vapour thin volume and why the precious metal's sector (Gold, Silver, Palladium, etc.) has refused to mount a strong correction in the face of a stronger dollar. Precious metals are the ultimate stores of wealth for they provide a hedge against the inflationary tactics central bankers employ to defraud the masses of their hard earned wealth via the silent killer tax otherwise known as inflation.

The Dow has put in 29 new highs and not once has the volume surged above the 6.8 billion mark. Take, for example, the latest high (Monday April 5th) volume was only 4.26 billion shares, half of what it was last year when the markets were rallying strongly between the months of March and July.

So why push the markets you ask when they have already made a ton of money? That’s where power, greed and arrogance come to play. Remember the quotes we listed above. Why would they stop if they can push it to the limits, destroy the psyche of traders and set up what appears to be a perfect trap. What do we mean by a perfect trap?

There are billions of dollars in the bond markets and while long term rates are slowly rising they do not even come close to the potential gains many have locked in the past 1 year. Imagine if bond players were pushed to abandon the bond markets, how much money would flow into the equity markets. Once this occurred the bankers could start to bail out for the billions pouring from the bonds markets would sustain their selling into rallies. Once out they could then start to build up massive short positions and eventually trigger a monstrous correction/crash. This would in turn trigger a rush into the bond markets as traders looked for a safe place to park their money and so the vicious cycle would continue.

Read the book “The coming battle by Lorraine Walter”. It is over 100 years old, and it explains how every recession, depression is actually engineered in advance. This is not hearsay it actually provides quotes showing how the bankers have done this in the past. You can purchase this book from our Book Store or by just performing a simple search on Google.

Some other factors to consider

The PPT (Plunge protection team has openly acknowledged its existence after hiding in the shadows for decades). This article provides some info on this topic. Full Story

The Fed is using every bogus excuse in the book to maintain low interest rates; the primary beneficiaries of this move are the big banks. They borrow the money for next to nothing (the average Joe cannot take advantage of this lovely feature) and then use this money to trade.

Our smart money indicator has remained in the neutral zone for months now. It sensed something was wrong and just moved into the neutral zone as it has refused to issue a sell signal.

Volume has always been important for it indicates market participation. Volume is shockingly thin and if it occurred once, or twice we could ignore it, but one cannot ignore the fact that the Dow has put in 29 new highs on sub standard volume; statistically, it is impossible to state that something is not amiss. Perhaps this is why our smart money indicator refused to issue a sell signal. This indicator has always astounded us for its ability to keep one on the right side of the markets. It moved into neutral territory and has remained there for several months. This was the very same indicator that issued an extremely strong buy signal in Feb of 2009 after remaining in the sidelines of an extended period of time.

The Baltic Dry index another leading economy indicator is well of its Nov 2009 highs; another indication that something is wrong.

If the Dow trades within or above the 10,999- 11050 ranges for more than 3 days in a row or closes above 11100 on a weekly basis, it could potentially trade all the way to 11,800.


There are many signs that all is not well.

Additional factors that also support the extreme market manipulation theory

1) In March 2009, there were less than 6 sectors with a positive score; today every single sector (roughly 200) has a positive score and only 1 sector has a negative score. Even when the markets were crashing; there were at least 5 sectors that had a positive score, but today even the worst junk has moved up significantly, and we only have on sector with a negative score. This shows you how extreme the current environment is; even the worst Junk has rallied significantly from its March 2009 lows and yet not much has improved since March.

2) Another very strong reason to keep the markets up is due to politics. The incumbent party does not want to lose its majority stake and a badly performing stock market on top of a terrible job market will be the fastest way to lose the top dog position. And as we all know by now most politicians are willing to sell their souls and those of others if they can for a price.

3) Our special futures to equity indicator have moved even more in favour of the futures market. The current score is 67 for futures and 33 for the equity's markets. This is a risk to reward indicator, and it is now stating that the futures markets (which are very high risk markets) offer a better risk to reward ratio than the equity's markets. Generally, when it is in favour of the futures markets the difference has been very small, usually 1-4 points. This is the first time in decades where the point differential has moved past 15. This gives you an idea of the potential long term risk associated with the equity's markets now.

As we stated before power corrupts and absolute power corrupts absolutely. A few large banks now control almost everything (at least it where it matters the most for example the supply of money) and can at their whims generate another massive selling wave. In times such as these where inflation is on the rise, a massive currency crisis is just waiting to occur, and financial markets are racing to the extreme zones, the best way hedge/protection is to have a position in precious metals (Gold, Silver, etc.). Gold has stood the test of time, can one say the same for any paper currency. Let’s not forget that the US has declared bankruptcy twice before. Those who forget history are doomed to repeat the very same mistakes again.

We will end with two quotes from the ‘The coming battle” by Lorraine Walter

The greatest financial mistake of my life was in what I had to do with the passage of the present national bank act. It ought to be repelled; but before it can be done there will be such a contest between the banks on one side and the people on the other as has never been witnessed in this country”. Salmon P. Chase.

fifty men in these United States have it within their power, by reason of the wealth which they control, to come together within twenty-four hours and arrive at an understanding by which every wheel of trade and commerce may be stopped from revolving, every avenue of trade blocked, and every electric key struck dumb. Those fifty mean can paralyze the whole country, for they control the circulation of currency and can create a panic whenever they will”. Chauncey M. Depew.


Ultimate futures Timing System

Tactical Investor

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