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Friday Fizzle – Low Volume Rally Tops Out Again

Posted on the 23 May 2014 by Phil's Stock World @philstockworld

SPX WEEKLYWhat a week!  

As you can see from Dave Fry's S&P chart, the volume, so far, is just over 5Bn vs. 10Bn+ in a normal week.  It's just a bigger version of the pattern we've been in since we first tagged these highs in March (and we cashed out at the time) – rising on low volume and falling on high volume – a sure sign that the "smart money" is dumping shares on the foolish retailers.  

Fortunately, for the Banksters, you really can fool some of the people all of the time – so there's always a few suckers around willing to buy stocks – even when they hit their all-time highs after mediocre earnings.  

Perhaps this time is different.  After all, we had a little dip in January but, with May winding down, no one is really selling – are they?  

Friday Fizzle – Low Volume Rally Tops Out AgainThe nice thing about writing a blog is that it helps improve my memory and I do remember another May when we were drifting along at all-time market highs and we were going up on low volume and dipping on high volume – but never far enough to call it a sell-off.  I was warning people to get to cash back then as well – but no one wanted to listen as we were in the midst of a huge market run and no one wanted to "miss it."

Friday Fizzle – Low Volume Rally Tops Out Again

On the Friday before Memorial Day, 2008 (5/23), I warned:

Is George Bush destroying the his core base of support?  Well, maybe not Texas but here’s a red and blue state map from the Philly Fed (thanks Barry for pointing this out!) not of Democratic and Republican strongholds but of the Fed’s Coincident Index, which is an index of economic indicators whose movements closely coincide with the overall cycle of economic activity. Along with lagging and leading indicators, this index highlights the speed and size of growth or shrinkage in an economy.  Texas is doing just great on the oil boom but many other Republican strongholds are suffering deeply while the "blue states" are mainly blue, indicating growth despite all the economic turmoil:

Friday Fizzle – Low Volume Rally Tops Out Again

I put up the current map and the link goes to all the historical maps (they changed blue to green since then).  The key takeaway from this map is that NONE of the states were red in January and more of them were dark green as well.  In the past three months, the US economy has SLIPPED, not improved – things are getting worse, not better.  

Friday Fizzle – Low Volume Rally Tops Out AgainOf course, as we noted yesterday, this doesn't necessarily matter to our Corporate Masters, where the US is now just one of their markets.  Over 50% of S&P revenues come from overseas and the Dollar was 88 in 2008 and now it's barely 80 so of course foreign revenues are up 10% – that's just a function of currency fluctuations over the past 6 years.  

It's also a good reason for the markets to be up 10% since we buy stocks with Dollars too.  Despite the "drop" in gold from its 2011 peak at $1,800, at $1,300 gold is still double where it was in 2007 – I know it's popular to tell you gold isn't an inflation hedge these days – but that's done by con men who assume the average investor has a very limited memory and is incapabale of having a big picture perspective.  

Friday Fizzle – Low Volume Rally Tops Out AgainI'm no gold bug, we were shorting the hell out of gold in 2011 but now it's reasonably priced and we're long at $1,250.  The point is, when GM sells a car in Germany for 30,000 Euros this year, they get $39,000 but, when they sold the same car in 2008, they got $35,000.  

The costs of making the cars are the same (in fact they are less now as we screw over the workers in the name of cost-cutting), but the profits go up – even if sales decline.  This all works even better for companies that pay their workers in Dollars but sell stuff in more valuable currencies.  

It's just another way the Fed is engineering "apparent" prosperity while what's really going on is the single biggest transfer of wealth from the poor to the rich in the history of mankind.  This has been going on since Bush took power in 2001 – as you can see on the chart.  Don't be fooled by the glitch that took down Corporate profits in 2008 and 2009, that was simply a result of all the crimes Corporate America had committed over the past 7 years coming back to haunt them – but we bailed them out and now they are right back on track to destroy the bottom 90%.

Friday Fizzle – Low Volume Rally Tops Out Again

Most of us grew up in the 60s and 70s, when labor was strong and wages were up.  That's the America we hold in our heads but it's not the America we're living in today by a long shot.  It's not just America, of course, there is a Global Oligarchy that is taking control, writing all the rules and then instructing their pet media to tell you how good this is for you.  America hardly matters anymore – that's why the Corporations have moved on – but not before they emptied the vaults and left the country in massive debt, of course.   

Friday Fizzle – Low Volume Rally Tops Out Again

World Trade flows were down 0.8% in Q1 – that was another strong indicator of trouble in 2008 that people chose to ignore!  As you can see from the chart above, the US market has shrunk significantly in global trade, now half the size of Europe and just 60% of Asia.  

Friday Fizzle – Low Volume Rally Tops Out AgainLike a frog in hot water, we don't even see it's happening until we're already dead but, if you want to understand how "THEY" can do this to America – it's because we just don't matter anymore – not to our Corporate Citizens.  

America is just another market to exploit and the Federal Reserve isn't there to help you either – just look at the Trillions in bailouts they gave to foreign banks – money has no country, it goes where the action is and that action is moving back East, after 100 years of heading West.  That's why we're losing our middle class and why parts of this country are starting to look like Third World nations – no one is trying to "fix" what's wrong with this country – they people in power are simply moving on to greener pastures.  

Anyway, I didn't mean to be a downer on the holiday weekend but we've been talking economic macros this week and, unfortunately, this is the conclusion.  What I can't decide, however, is whether this should make us more bearish or whether we should have faith in our Multi-National Corporate Masters to masterfully weather the economic storm that's hitting our country and head for more prosperous waters overseas.   

After all, we certainly know we can't beat them – so we may as well join them!  

Have a great holiday,

- Phil

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