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Monday, September 12, 2016

Financial: Dohmen special report

Financial: Dohmen special report
Submitted by Sean M.
 On Friday, the DJI plunged 394 points. It was the biggest one day plunge in several months. The S&P 500 and the NASDAQ lost even more percentage wise, 2.5%. Technically, this was severe. The ratio of declining-to-advancing volume was an amazing and rare 27:1. We haven’t seen that for a long time. It is means that buyers were totally absent. All the markets declined, from stocks, bonds, and commodities. That is rare and suggests that it was a flight to cash from overleveraged trading outfits. 

The Volatility Index (VIX), which is viewed as the “fear gauge”, was up a massive 40% on Friday to close at $17.50. Investors are starting to worry about their long exposure as this sell-off starts picking up steam and are now rushing to buy protection for their portfolios. What triggered it? According to the media, it was the statement by Boston Fed President Eric Rosengren Friday morning saying that if the Fed failed to raise interest rates this month (meeting is Sept. 21-22) it could risk “overheating” the U.S. economy. What is he smoking? He can’t honestly believe that the economy is overheating. So, we have to look for the true reason for his statement. We don’t see how the Fed can justify hiking rates. But that doesn’t mean they won’t. The excuse is the Fed wants rates higher so that when a recession threat arrives, they can cut rates. In other words, create a recession now in order to avoid one later. Does that make sense? Always remember what we consider to be the ‘agenda.’ More on that below. We gave a number of short sale recommendations for SMARTE TRADER subs on Thursday. That was perfect timing. They had big profits on Friday. After the dull summer, this will now be a great market for traders. 


In our opinion, there is much more to this drop than just a statement from a regional Federal Reserve president. . Statistics show that since the bottom last February, the US stock market has seen virtually no long-term investment buying. This summer, only the Fed’s PPT in combination with HFT kept the major indices from declining. Money managers are not buying, but they aren’t selling either. We are seeing complacency measures at levels seen just ahead of the 2008 crisis. Almost the entire six month rally was caused by stock buybacks and short covering. The shorts have been significantly reduced. That means less support. As we have written many times, the apparent ‘agenda’ is to have everything wonderful going into the election. The primary goal of these people is to retain the powerful positions achieved everywhere over the past 40 years. They won’t give that up. Our view is that the way to prolong the stock market rally until November, new short selling has to be generated so that they can be squeezed in October, helping to generate another rally. Thus the agenda has to be to give short sellers another reason to sell short. A drop as on Friday, and the probable followthrough this week, will produce that. Therefore, the bears should still be cautious, although short-term traders will have great opportunities on both sides of the market under this scenario. The global economies are now in recession mode. The strongest European economy, Germany, shows plummeting exports. Exports fell 2.6% from the previous month and were down a staggering 10% from levels back in July 2015. A double-digit decline in exports is alarming. Here are the big immediate problems on the horizon as we see them:
 1. Fears of a Fed rate hike 
2. The bankruptcy of Hanjin Shipping, one of the largest container carriers in the world, and its negative effect on trade and higher prices on freight rates 
3. Severe and escalating banking problems in Europe 
4. The new regulations on Money Market Funds that take effect in October You can see, in the current environment, where everything is phony, where 5,000 employees of Wells Fargo conducted what we consider criminal activities of putting a myriad of fees into customer accounts, and true market fundamentals have been replaced by manipulations. We don’t like it, but we can’t change it. We can be aware of it, and act accordingly by keeping you in the right sectors and on the right side of the market. 
Conclusion: A good scenario now would be a sharp market drop going into the Fed meeting. Then the Fed does nothing, the markets are boosted by the HFT, algo-trading operations, and the Fed’s PPT to squeeze the shorts. A strong rally will erase the losses of the prior 10 days.

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