The horrible jobs report just released this morning showed what we've been saying all along. There is NO recovery. Interesting that economic adviser Christine Romer announced her resignation last night. Could she be a regular reader of "Marko's Take"? Could she have known that the jobs report was going to be so damn bad?
More important to investors is the very, very likely occurrence of another Hindenburg Omen in today's trading. For more information on the significance of this, click here: http://markostake.blogspot.com/2010/07/hindenburg-omen-foretells-coming-market.html.
Another relevant item is the calendar. The 3 major NYSE crashes occurred within a 6 week window of the equinox, which is typically September 22. That would suggest that after August 10th, the market will be within this time frame. Tuesday is August 10th. It may occur anytime thereafter. Crashes also occur WELL below the level of the preceeding market peak. In general, the largest down days in history followed a rapid drop of 20-25% off the peak. If history repeats, the coming crash should commence from BELOW Dow 9000!
If one goes back just to the crashes in the NYSE, we had the meltdowns of 2008, 1987 and 1929 as examples. All were late summer, early fall events. Don't ask me why. I'm still trying to understand what solar eclipses and full moons have to do with anything financial.
During the lead-in period to a crash, the market experiences what technicians refer to as "90%" days. These refer to a preponderance of trading volume to either advancing or declining issues. During the sizzling advance of the last 3 weeks, we experienced several of these days. And, during the decline that just preceeded it, we had a number of 90% downside days. This schizophrenia is what the Hindenburg Omen measures: an emotional dis-jointedness that is conducive to a sudden shift from euphoria to panic.
A key question for investors is what they should do now. If, as I believe, we are in another deflation scare, the only safe places are likely to be ultra-high quality bonds, and probably the U.S. Dollar.
What about Gold? In the near term, it's hard to be definitive. On the one hand, it will undoubtedly benefit from a "flight-to-safety" bid. On the other hand, the temporary deflation scare will put pressure on all hard assets. Under just about any forseeable scenario, Gold ought to hold up better than virtually any other asset. However, there MAY be a better entry point. I'd prefer to wait and see on this one.
In the intermediate to longer term, Gold remains in a very powerful bull market. With the inevitability of the introduction of "Quantitative Easing 2", and more stimulus spending in the offing, the seeds of hyper-inflation are being sown. Once we succeed in completely debasing the currency, where can investors protect their wealth except by owning Gold? In addition, the long underperforming junior miners should finally see those magnificent parabolic advances that have been long anticipated. Again, there should be better entry points.
This is no time to put your head in the sand.