“This Is A Big, Big Moment” – Gundlach Warns Yellen May Surprise Markets

t-bond

Before we begin this discussion, keep in mind that Michael Oliver’s work has identified a “blow—off” phase for the decades-long bull market in the 30-year U.S. Treasury bond. A 25-year chart of that market is shown above left. A chart of the 30-year U.S. T-Bond is displayed above right.

Let me ask you a few questions for you to ponder over this weekend.

  1. What if the bull market in debt that started back around 1982 is over?
  2. More importantly, what if the Fed and other central banks are powerless to stop a rise in rates?
  3. What would even a modest rise in the 10-to-30 year interest rate do to the solvency of a global economy addicted to free and easy money like no other time in history?
  4. What would rising rates do to a stock market that has risen not on the basis of earnings but on the basis of free money?
  5. If the Fed cannot stop rates from rising, how will it and other central banks respond? Will they begin implementing “helicopter” money with trillions upon trillions of dollars passed along to fascist entities that own the banking system and/or the governments that work with the bankers to continue engaging in war after war in a terminal effort to keep the Anglo-American empire from a suffocating death?
  6. What will happen to the dollar if massive money is created and not only handed to the banks to enrich the shareholders of the Fed as has been the case since 2008-09, but in fact is handed out to the masses to keep them from outright riots and potential overthrow of the established order?
  7. Will the result be a massive hyper inflation as John Williams predicts or a deflationary implosion as Robert Prechter and others predict?

The reason I pose all of those questions now is because I truly believe the warnings of Gundlach, which you can read more about here http://www.zerohedge.com/news/2016-09-09/%E2%80%9C-big-big-moment-gundlach-warns-fed-may-surprise-markets are very real. I say that in no small part because of Michael Oliver’s work which strongly suggests a reversal of the multi-decade long bull market in debt is just now getting underway and that there will be nothing the Fed or other central banks can do to stop a rise in rates which seems to me will almost certainly result in a deepening of the depression that, by the way, has never ended post 2008-09.

Let’s take a look at some of Michael’s latest work of this past week. For anyone who is aware that market forces are ultimately more powerful than any tyrannical government, including that of the United States, prospects of a sudden and out of control rise in interest rates should send shivers down their spines. At the same time, those of us who seek justice will look forward to punishment of evil central bankers who have, through their arrogant Keynesian lies, brought this disaster not only on themselves but to virtually humans on the face of the earth who live in any “civilized” society!

Over the past year or so, Michael’s work has demonstrated that two major markets—stocks and bonds—are nearing the end of their secular bull markets. At the same time, two other major markets—precious metals and commodities—are nearing an end of their bear markets and are about to turn into major bull markets. In a texting made world, inhabited by young people who do not think but impulsively and impatiently act on the last headline and take it as truth, Oliver’s work may seem to them to be moving as slowly as plate tectonic shifts which by the way is how Michael characterizes those four above noted markets. So while his warnings of the past year or two may have caused some to disregard what he says, smart investors like smart geo-scientists are constantly on the watch for that seismic shift that occurs at some limit point that releases enormous amount of financial energy. According to Oliver’s work, with regard to the most important market in the world—the market for U.S. Treasuries—we are now at that critical point, where rates are going to rise and there will be nothing Janet Yellen can do about that.

On September 1, 2016 Michael’s passed along to his subscribers his latest work and insights into three major geopolitically important debt markets, namely the U.S. T-Bond, the German Bund and the Japanese government bond. With regard to the U.S. T-Bond this is what he said:

U.S. 30?yr. T?Bond futures: Close a day at 169 is negative and breaks much overused massive momentum support structure on 100?day momentum. Use this as a daily sell level for partial position without waiting for a monthly close. As of September a monthly close at 171 or lower, does major initial damage to annual momentum. Currently (September 1, 2016) the T-Bond is trading at 171.875.

Update: As of Friday September 9, the U.S. T-Bond closed at 166 27/32 or $166.84375! Clearly these numbers are already substantially below the monthly close and well below the daily close of 169 that Michael’s work says is negative.

So here is my take from Michael’s missives over the past week:

  • If the T-Bond closes below 169 on a daily basis, you may want to start taking a small short position in the T-Bond. In fact that is what I have personally done on Friday of this week as the T-Bond plunged to 166 27/32.
  • If the T-Bond closes below 171 by the end of the September contract that ends on September 21, add to your short position.
  • If/when we get a monthly close for the September contract of 165 or lower, or 166.50 for October, then “consider this tier of breakage as the final alarm bell, the final starting gate for the down side. That breaks the multi-year up-trend structure on annual momentum and should definitely turn a dropping market into a collapsing one. However, I would not wait for that number, instead treat it as final add on or final negative evidence of debt market crisis.”

If Michael were just another technical analyst, I might be tempted to take all he says with a grain of salt. But in fact his track record has been so impressive since I started following his work about three or four years ago, that I have to not only take it seriously, but act on it as well.

Michael has said repeatedly on my radio show that he now believes a major rise in rates is what will finally cause the final financial plate tectonic action, namely a major bear market in stocks. And so, let’s take a look at what he sent out to his subscribers on Friday as both equity and debt markets seemed to be entering “crash mode.”

500“From our September 1st “Outlook for S&P500”: We expected the August pivotal price chart low (2147.58) to come out this month. This was based on the S&P500’s intermediate trend breakage on 10?wk. momentum several weeks ago when it closed a week below 2174 (that chart shown in prior reports).

“The intermediate trend breakage, though slow in producing results, has neither been negated nor offset by any action since. Therefore, it is still in play. The take?out of the August price low occurred today. (September 9, 2016 – S&P closed at 2127.81)

“We also said in that September report to look for an attempt to hold (not genuinely regain the upside, just hold) in a zone from 2138 to 2120 (upper rectangle). The S&P500 is in that zone today. However, if the index touches 2118 this month, that would open the door for an assault and much more pivotal longer?term downside trigger levels between 2060 and 2055 (lower rectangle). The two zones that are marked on the price chart are based entirely on momentum, not price, factors. That lower zone (very negative if sliced through) will rise for October to 2069 to 2090.

“So far the expectations for September have unfolded efficiently. The issue now is that 2118 number. If seen, it tends to argue that September, rather than being a transitional month towards the downside, could be more demonstrable. MSA will update as needed.”

Editor’s Note: If you are a serious investor, you owe it to yourself and your loved ones to subscribe to Michael’s letter. Sporadically, I share a few of Michael’s ideas with you in this letter and on my radio show, but if you value your investment and wish to exercise prudence in managing it, by all means subscribe to MSA. www.OliverMSA.com

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.