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Track Record of Stock Market & Macro Economic Predictions & What is Different Now

A decade chart of Dow crashes

I’ll let the chart speak for itself. During the first part of the chart, I did all my writing in newspaper articles, so you won’t find support here on this blog or those early years. I began the blog in 2012. The rest is history.

As for the Trump Rally at the end, I didn’t predict it (any more than anyone did), but only declared it the typical euphoric rally (period of irrational exuberance) that comes before a crash, and you can see that it is far more exuberant than any period in the past.

 

What has changed, making it all different this time

 

We have learned this year just how much central banks are directly buying stocks, which has not been the case in the past. It was, in fact, considered extraordinary when, during the start of the Great Recession, the Fed bought corporate stocks of failing companies as a way of bailing them out. It was practically unheard of for them to jump in and stop the naturally selective process of bankruptcy in that way.

Now, however, the Fed has its colleagues in other countries buy huge amounts of healthy corporations (such as Facebook and Apple), not to bail out failing companies but to bail out a stock market that would, otherwise, be crashing badly. (For instance, we’ve learned recently that Switzerland’s central bank suddenly owns more Facebook stock than Mark Zuckerberg does. That one bank alone bought $8o billion worth of US stocks in recent months.)

Since central banks can create infinite amounts of fiat money out of thin air, their new path of buying stocks directly in order to shore up entire markets means they can pretty much prop the market up until economic wreckage in the general economy is so bad that it makes no sense to continue the farce or until they want to crash it in order to bring on a new economic era (or perhaps to get rid of a president they don’t want?). Whatever their reason, it will probably only crash when they decide to start unwinding their balance sheets or, in the very least, to stop propping it up with additional purchases (as China and Japan have done to save their dying stock markets).

So, the market is completely useless as a gauge of how the economy is doing because it is now entirely rigged by central banks and algorithm-based trading machines. In fact, the algos actually jockey the market in one direction with tiny trades just to suddenly make a surprise trade the other way. (More on that in an upcoming article.) I am, however, a person who writes on macro economics, not on stock markets; and the stock market no longer serves any purpose in terms of writing on the overall economy. It will likely follow the economy down reluctantly, not lead it, and not accurately reflect it. It is a central-banking mirage of wealth.

  • Spatial Memory

    Futures sinking after giving back 30%+ of yesterdays intraday gains on closing basis – price weighted DJIA best tell. QQQ – NASDAQ minus financials heavy tape – violation of 139.46 – (16 ta confluences) sure seems significant IMHO. Maybe VIX and UVXY scream today through the close – as hidden divergence becomes classic divergence. Looking like qtrly and prolly cyclical highs are behind. Jmho

  • Spatial Memory

    Price action never lies. VIX – UVXY gonna tell

    • Kim

      They manipulate that too.

      • Spatial Memory

        Who are they?

  • Don_in_Odessa

    Something you may be interested in David is the QQQ always bottoms on high volume it never tops on high volume. Tried to put up a weekly chart, but your comment section won’t allow for me. Anyhow, pull up a weekly and take a look for yourself. Note last week. Doesn’t mean it can’t be the exception to the rule. But it is at least one more support in favor of more highs to come.

    • Spatial Memory

      Low volume is bullish. πŸ™‚

      • Don_in_Odessa

        Didn’t say that yoyo. Actually, for the QQQ it’s high volume at the lows that seem to be the rule. And demand wanes at the top. Looks like even an “expert” like good ol’ Spatial still doesn’t know it all, after all his blustering to the contrary. Grins… Take a look for yourself if you don’t believe it.

        • Spatial Memory

          I know you did not say that however it is correct. Low volume is bullish – never short a dull issue. Now you learned something. πŸ™‚

          • Don_in_Odessa

            Was only speaking of the QQQs in my comment dude/(dudess?). You assumed too much.

            • Spatial Memory

              You can apply that technical analysis adage to any issue you’d like including QQQ – you’ll quickly see your guesswork is inaccurate dude. ROFL

            • Don_in_Odessa

              Whatever… bye bye…got grown up stuff to do and money to make using my inaccurate technical stuff.

            • Spatial Memory

              I’m sure you’re knocking the cover off the ball with such brilliant business acumen and keen market insights. Not.
              Just busting your chops – cause you’re the only one awake on the entire www this early. Have a great day don. πŸ™‚

          • Kim

            Serious question. Do you deny central banks are buying up stocks at a rate of billions per month?

  • Spatial Memory

    Spatial Memory
    5 hours ago
    SPX vulnerable to 2435.8 eight confluences, 2398.4 ten confluences
    QQQ to 139.63, 12 confluences
    Still all about Russell rebalancing then window dressing.
    July- August bears get some fun then back to biz with SPX rebalance in September. Watch and learn.

    • Kim

      Should the central banks get involved in this SPX rebalance? Hmm?

  • Kim

    NASDAQ in the red today. Should central banks print some money buy tech stocks?

  • Spatial Memory

    SPX vulnerable to 2435.8 eight confluences, 2398.4 ten confluences
    QQQ to 139.63, 12 confluences
    Still all about Russell rebalancing then window dressing.
    July- August bears get some fun then back to biz with SPX rebalance in September. Watch and learn.

  • Spatial Memory

    No telling why you haven’t checked the facts on Facebook shareholders and percentage ownership as you’d clearly see your article is inaccurate. Perhaps maybe accurate by qualifying the sentence with “owns more free trading shares” -as officers, directors, control persons and affiliated persons may be restricted to resales pursuant to SEC Rule 144, not limited to.

    • Don_in_Odessa
      • Spatial Memory

        Meanwhile the article was factually incorrect regarding Facebook ownership. If perpetuating inaccurate information is acceptable then carry on.

        As for equities and equity markets no longer serving any functions toward macroeconomic data, that notion is equally as ABSURD. Depending on sectors, as always, plenty of leading, lagging and coincident macroeconomic data can be gleaned from data and price action.

        • Don_in_Odessa

          Once again, obfuscation. Data yes, market direction no. Which was the point. Or are you just deliberately playing the idiot?

          • Spatial Memory

            Suggesting he accurately forecasted the market direction is more absurd than the absolute ignorance regarding fomc open market operations and all aspects of the bulge bracket before zerohedge or some other obscure carnival barkers introduced those century old necessary measures. Put your head back in the sand or try and try to get an education- you’ll quickly realize how HORRENDOUSLY misinformed and disingenuous such musings are.

            • Don_in_Odessa

              LOL! Who ever “he” is. As for head in sand, I am quite successful at trading. And that BTW … wait for it … by predicting short term market direction. Education? It took me years to get to this point. You err to not listen to many voices, including David’s and picking out the information, both long term and short term that is important to your own decision making. The more points of agreement you can find for your own analysis the better off you are. And, I’m not just talking people’s opinion. Rather, the indicators they use to support their expectations. No one is always on target an I don’t think David has ever claimed to be.

              The truth is David’s expectation of a big market correction if not a long term bear market is supported in the data. Based on previous market cycles and technical indicators, he is historically accurate. Timing of course is a matter of interpretation, and is impossible to know for sure. Everything I have read by him is careful to not be emphatic about timing. But the facts and data say we are due, better to hedge and buy insurance, or get out all together. But, picking on minutia, while ignoring the big picture, is just ignorance consummated.

              Personally, I am waiting for one more drive to the top. It may be an extraordinary exponential blow off top or not, but my own work says we may be at the start of that point now.

            • Spatial Memory

              I believe knave means well so I’ve tried to add some of my ignorance and minutiae- discount it as just another idiot trolling if you’d like- or try the other side of my trades- see how well that works. πŸ™‚

            • Don_in_Odessa

              Giggles back at you. Time … will tell…

              Signed: “Always Hedging These Days”

            • Thanks, Don. And this latest uptick looks like you could be right.

            • Don_in_Odessa

              I think we should know something in the next couple of days or at least by Friday. The Russell is due to complete rebalancing this Friday.

            • Spatial Memory

              Rotflmao

            • Don_in_Odessa

              Please explain to mitigate what may be my own ignorance. Easy to laugh off posterior parts, but I am interested to know what makes you so convinced I am wrong. Like I said, differing opinions and indicators are a value to me.

            • Spatial Memory

              Spatial Memory Spatial Memory 8 days ago
              …approximately $6.6 trillion tracking the Russell US indexes as of December 31, 2015, Russell reconstitution is a notable event for US equity investors. The 2017 Russell US Index reconstitution schedule is as follows:
              May 12 – β€œrank day” – Russell US Index membership eligibility for 2017 reconstitution determined from constituent market capitalization at market close.
              June 9 – preliminary US index add & delete lists posted to the FTSE Russell website after 6:00 PM US eastern time.
              June 16 & 23 – updated US index add & delete lists posted to the FTSE Russell website after 6:00 PM US eastern time.
              June 23 – reconstitution is final after equity markets close
              June 26 – equity markets open with newly reconstituted Russell US Indexes
              FTSE Russell has made a number of updates to its Russell US and Global Index reconstitution process this year. These updates are part of an ongoing effort to align FTSE Russell indexes since the combination of the two leading index families in 2015, bringing greater consistency and efficiency to clients:
              Shares outstanding and free floats will converge across all FTSE Russell Indexes effective at this year’s reconstitution and will be maintained similarly going forward. Changes to shares outstanding and free floats for all Russell indexes will now be implemented quarterly rather than the current monthly cycle, with intra-quarter changes implemented for certain defined events in accordance with set guidelines.
              Rank date, the date used to determine Russell US Index membership, usually in late May, will be on Friday, May 12 to facilitate the scheduled June alignment of shares outstanding and free float across the FTSE and Russell indexes. Fundamental data used to determine index constituent characteristics such as style and stability will still continue to be based on May month-end data.
              Russell Global ex-US Indexes will now be fully reconstituted in September to align with the FTSE indexes annual country classification cycle.
              Other methodology enhancements are being introduced this year at reconstitution:
              Eligibility of new market exchanges: As of reconstitution 2017, the IEX and BATS market exchanges will be eligible for membership in the Russell US Indexes.
              Free float restrictions: FTSE Russell has clarified the treatment of shares held by investment funds or investment companies. Notably, shares held by an investor, investment company or investment fund that is actively participating in the management of a company, owns shares in a company for strategic reasons, or has successfully placed a current member to the board of directors of a company will be restricted.
              Dummy lines/Placeholders: The Russell US Indexes will now utilize dummy lines and placeholders to facilitate replication of certain market events.
              FTSE Russell index expertise and products are used by institutional and retail investors globally and approximately $10 trillion is currently benchmarked to its indexes. Other examples of leading edge index reconstitution methodology for FTSE Russell include the FTSE Global Equity Index Series and FTSE UK Index Series quarterly reviews, which happened earlier this week, and the FTSE Annual Country Classification Review for global markets, which concludes each year in September.
              A full summary of planned updates along with background information on reconstitution can be found…

            • Don_in_Odessa

              Wow! Thanks! Because clearly, we can deduce no info about market direction based on Russell reconstitution by Friday’s close. Did I get that about right?

            • Spatial Memory

              Although all data is relevant, that backwards looking nonsense is beyond reductio ad absurdum.

            • Don_in_Odessa

              OK. I accept your opinion for what it is, an opinion. There are plenty of other “experts” who disagree with you. Here is one: http://www.marketwatch.com/story/june-is-when-the-russell-indexes-are-reconstituted Friday, I will be looking at the close and evaluating block trades based on the assumption that someone always knows something. The clues can be subtle or in your face. We will see.

            • Spatial Memory

              Rotflmao

            • Those that refuse to learn from history …

              We all know how that ends.

            • Don_in_Odessa

              Hmm… cat got your tongue?

            • Spatial Memory

              Always great comedy watching rookies and wannabes cling together for support or validation- especially great comedy after bearish rants for previous 15,000+ DJIA point advance – turning bearish at high inflection point – ABSOLUTE proof for GREATER – GREATEST FOOL Theory. Roflmao

            • Kim

              If central banks didn’t regularly purchase billions of (fill in the blank) public stock, if central banks didn’t loan money to member banks that in turn fund stock repurchase programs at zero interest, without central banks ability to create money from nothing with impunity, what would your beloved stock market indexes look like? It’s highly unlikely that without central bank intervention these stock prices would be where they are today, and this stifles real productivity.

              You denigrate those that can see it for what it is: phony, propped up, algo-driven, RIGGED, devoid of honest price discovery, counter-productive, fake, and otherwise counterfeit in every conceivable way.

              I feel sorry for you because you are at the mercy of Janet Yellen’s belly button lint overflow. How does it feel to be the central bank’s lap bitch? Sniff! Yum yellenbutton!

            • Auldenemy

              Brilliant response Kim!

            • Spatial Memory

              brilliant as a coyote howling – at cost of light

            • Spatial Memory

              One more drive to the top…at the start point now? What the heck kind of work is that??? Rotflmao

            • Kim

              Do you deny that the central banks print money with impunity and buy stocks at the rate of billions per month?

            • Auldenemy

              LOL. He is a COMPLETE troll. Even a former Fed official came out in 2015 and admitted that QE and ZIRP had, quote, ‘Front loaded the S&P500, like a form of heroin for the stock market’. Again it is all documented. It is now a proven fact that Banksterville have been front running everything. That is why they keep getting hand slap fines.

        • Kim

          How about asking Janet Yellen to fire up that printing press and send some money to Illinois because it’s in “massive fiscal crisis”. Or maybe Illinois can issue some of those 100 year bonds that everyone loves these days and Yellen can buy them up, ya know, because the economy is sooo strong because DJIA and the NASDAQ thayth tho! LMAO!

          • Auldenemy

            Spacial the Troll flea has an amazing capacity to post out right lies. The Swiss purchase of FB shares is a well known and PROVEN fact.

      • Auldenemy

        Well said. We got ourselves a little flea on this site, sadly born of the Internet age. The Troll flea attempts to suck the life blood out of proven facts by continually dismissing them or if pushed it attempts to pretend such facts are irrelevant. The Troll flea also wants to infect its host with a parasite known as, ‘Don’tFightBack’. This parasite was invented by the bankster lead Corporatocracy of the West a long time ago, and has been injected by governments and most of the MSM into the general public for decades. It has evolved to the point where it has successfully dumbed down most of the population. The little Troll flea buzzes around spreading this

    • Kim

      WTI testing $42 handle today.

      Should Yellen start buying up oil stocks with all that central bank special money? Ya know, because the demand for oil is sooo strong and the economy is so strong (because the DJIA says so) that it doesn’t need any central bank intervention! LMAO.

      • Spatial Memory

        All about South China Sea and methyl hydrate policies. Watch and learn. πŸ™‚

        • Kim

          Too hard to get to, too unstable, storage issues. Nope.