Signs of The Times
Perspective
For some years, we have described Brussels as "Moscow on the Maastricht,
without the privilege of state murder".
Clearly, the above FT comment is not written by an impartial journalist, but
by a polemicist for authoritarian government. Had the EU been based upon
each country declaring free trade the union would have worked. But as with
NAFTA, an intrusive bureaucracy became involved and it became a "managed" trade
agreement, with the cheat of currency depreciation.
In 1989, the year ordinary "volk" ended Communism in Eastern Europe, most
Western economists were admiring the wonders of the Soviet economy. There
was little real information about the Communist economy, but the economists
knew that with a full-command economy it had to be good. Best-selling economics
textbooks were full of it.
The "volk" knew otherwise and shut down authoritarian central planners. Venezuelans
may soon have do something similar.
The EU is not a "liberal democratic international order", but a big step towards
order imposed by one-world-government. In England, the main issue is the
supremacy of parliament. And it is worth throwing in - the sovereignty of
the individual.
It has been ironical that after defeating Europe's dreadful experiments in
authoritarian government, England should surrender to yet another utopian
delusion.
Contrary to the Financial Times, Brexit is an important step to restoring
freedoms that go with democracy.
Stock Markets
Has the Brexit hit cleared the financial markets of all the problems? A big
German bank fell by 20% just on Friday. Or should it be considered as a warning
of developing financial distress?
Tuesday's Special noted that the rally and the reversal satisfied our technical
objectives. The reversal was at an appropriate level at the appropriate moving
average and within the appropriate season.
In looking at the broad market, the NYA set its big high at 11255 in May last
year. The failure was taking out the 65-Week ma in August. This was equivalent
to the failure at the end of 2007.
Out of the panic into January, we recognized the second big rally in the bear.
It would likely be limited by the 65-Week ma, which had halted the November
rebound. The line was exceeded at 10648 two weeks ago. That was the high
for the year and we noted that taking out the May low of 10119 would be a
failure.
Monday's low was 9918, which took out the 50-Day at the 10400 level and the
200-Day at 10112. This is important.
The rebound is approaching the 50-Day at 10391. There is considerable resistance
at this level.
As sectors leading market turns, Tuesday's piece covered the financials, which
were robust on the way down and not so robust on the way up.
Transports have been doing a yeoman's job in leading the train of events.
Particularly in May last year when it signaled the end of the bull. Then
again in June in not confirming the robust rally in the S&P.
TRAN did much the same as the financials. Up to the 65-Week ma at 8114 in
March. Then testing the ma at 7951 at the first of June. The Brexit low was
7029, which took out the May low of 7470.
At 7425 now, there is considerable resistance at the 7600 level.
Financials and Transports remain negative.
The European STOXX is interesting.
The plunge was down to 2678 on Monday, which compares to 2672 reached in the
troubles of February. The chart follows and shows that the STOXX accomplished
the second rally in its bear. In this case, as in 2002, it made it to the
40-Week ema and has failed.
Still elevated by the most reckless central bankers in history, financial
markets and the US economy remain precarious. Europe has become even more
precarious.
Euro Stoxx 50
- The decline in 2008 was rapid.
- The second rally of the 2002 bear reached the 40-Week exponential moving
average and failed.
- Much the same attends this, the second rally in Europe's current bear.
- On the Weekly RSI, the plunge did not get oversold.
