“The Status Quo is Saved” Rally in the Stock Market

“We can anticipate another rally once the political charade plays out, but what happens after that?

We can safely predict the inevitable budget-debt ceiling deal will spark yet another “the Status Quo is saved” rally in the stock market. But what happens after that?

Here is a three-year chart of the S&P 500 (SPX). The potential for another spike higher is reflected in the rising stochastics.

But overall, the chart is showing weakness and the potential for a serious decline. The negatives include:

1. A number of indicators (MACD and relative strength) are negatively divergent, i.e. they are declining as price moves higher

2. The 20-week moving average (MA) is stretched above the 50-week MA (i.e. the market has reached a point where the 20-week tends to converge with the 50-week MA)

3. The upper Bollinger band is flattening, showing loss of momentum.

Some similarities with 2011 are discernible. In 2011, a multi-month topping process traced out a classic head-and-shoulders pattern…..”

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[youtube://http://www.youtube.com/watch?v=NokZdFXy6RU&feature 450 300]

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[youtube://http://www.youtube.com/watch?v=6K-M4qg6Mzw 450 300]

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“In his latest note to clients, Morgan Stanley head of global economics Joachim Fels relays an idea he says has him increasingly worried these days, even though, in his words, it is “no more than a tentative thesis that still needs to be fleshed out and checked for robustness.”

“In short, I wonder whether just as 1913 marked the end of first Golden Age of globalisation that had begun in 1870, 2013 may mark the end of our age of globalisation, which accelerated since the 1980s and 1990s after many emerging markets opened up to international trade and capital flows,” says Fels. “To be sure, I’m not predicting the world wars, mass sufferings and economic depressions of the three dark decades following 1913, but I do worry about a creeping trend towards a de-globalisation of economic activity and capital flows.”

Fels points to the Federal Reserve’s easy-money policies following the financial crisis, which caused investors to scramble into investments in emerging markets, a trend that is now reversing.

The economist envisions problems down the road as a result, as he explains in his note….”

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Part two talks about the seven stages of an empire along with the process of the debasement of currency. If your interested you may watch here: Part 2

Otherwise the value can be found in part 3:

[youtube://http://www.youtube.com/watch?v=y-IemeM-Ado 450 300]

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“Morgan Stanley’s chief U.S. economist Vincent Reinhart published a brief note minutes after the U.S. government shutdown went into effect.

“Dysfunction is not new, in that this marks the seventeenth shutdown in the past forty years,” wrote Reinhart. “About 800,000 government workers will stay home, as federal employees who cannot be paid should not work.”

Here’s the key takeaway from the note:

In addition to finger pointing to assign blame, expect:

• A 15 basis point drag on fourth-quarter real GDP growth, at an annual rate, for every week of shutdown as those furloughed workers do not put in their usual hours;
• Most data releases to be delayed…”

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