Wednesday, October 9, 2013

12 Very Ominous Warnings About What A U.S. Debt Default Would Mean For The Global Economy

Ominous Clouds - Photo posted on Instagram by annekejongA U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash unlike anything that the world has ever seen before.  If the U.S. government purposely wanted to damage the global financial system, the best way that they could do that would be to default on U.S. debt obligations.  A U.S. debt default would cause stocks to crash, would cause bonds to crash, would cause interest rates to soar wildly out of control, would cause a massive credit crunch, and would cause a derivatives panic that would be absolutely unprecedented.  And that would just be for starters.  But don't just take my word for it.  These are the things that top financial experts all over the planet are saying will happen if there is an extended U.S. debt default.

Because they are so close together, the "government shutdown" and the "debt ceiling deadline" are being confused by many Americans.

As I wrote about the other day, the "partial government shutdown" that we are experiencing right now is pretty much a non-event.  Yeah, some national parks are shut down and some federal workers will have their checks delayed, but it is not the end of the world.  In fact, only about 17 percent of the federal government is actually shut down at the moment.  This "shutdown" could continue for many more weeks and it would not affect the global economy too much.

On the other hand, if the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous. (more)
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Euro’s New High Negates H&S Pattern

If Dollar sentiment is a warning that the Investor Cycle is coming to an end, then the same conclusion can be drawn from the Euro COT report.  It shows that Large Speculative bets on a rising Euro are at 2+ year highs, an extreme level that often marks a key Cycle pivot. The Commercial Traders (smart money) are net short the Euro for only the 2nd time in this 3 Year Dollar Cycle, so this is not a positive development for the Euro. Remember, though, that the COT reports are not in themselves a timing tool – but they do provide complimentary indicators to support the overall Cycles framework.
The Euro put in a higher Top in this Investor Cycle, negating a major weekly H&S pattern. The move higher confirms that the primary trend for the Euro is up, and that we should expect to see a continuation of this trend after the Euro completes its ICL. The Euro is only just breaking out of a 7 month consolidation, so I expect a sentiment clearing retracement into an ICL to recharge the Euro for another run higher.   
At 12 weeks into an overbought Investor Cycle, the Euro has moved into the timing band for an Investor Cycle Top.  Both sentiment and the COT report show levels that are indicative of a top, so investors should be prepared for the Euro to consolidate gains by moving toward its ICL.
10-5 Euro Weekly
The discussion of the Euro is critical to understanding the US Dollar. The Dollar’s weekly chart shows the momentum is now clearly to the downside.  Although the current Dollar IC is near completion, it topped in just 4 weeks and failed, strong evidence that 3 Year Dollar Cycle that has also topped.  But with the Euro ready to move downward into its ICL, there is reason to believe that a further move down by the Dollar may not be immediate.
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Dollar Valueless, About to Crash - Karen Hudes World Bank Whistleblower

The US government shutdown - a temporary ailment or a symptom of a grave disease? Are the Republicans right in their move to block Obamacare spending? Who gains from the shutdown turmoil? Do the politicians care about their citizens? Our guest comes from the very heart of the banking system: Karen Hudes was World Bank lawyer when she blew the whistle on major corruption cases in the system and was fired as a result.
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JPMorgan Chase & Co (NYSE: JPM)

JPMorgan Chase & Co., a financial holding company, provides various financial services worldwide. Its Consumer and Community Banking segment provides deposits, investment products and services, lending, and cash management and payment solutions to consumers and small businesses; mortgage origination and servicing; and residential mortgages and home equity loans. The company's Corporate and Investment Bank segment offers various investment banking products and services, including advising on corporate strategy and structure, capital-raising in equity and debt markets, and loan origination and syndication; transaction services, such as cash management and liquidity solutions, and trade finance products; and market-making services in cash securities and derivative instruments, as well as offers risk management solutions, prime brokerage, and research. The company's Asset Management segment offers investment and wealth management services, including equities, fixed income, alternatives, and money market funds; multi-asset investment management services; retirement products and services; and brokerage and banking services comprising trust and estate, loans, mortgages, and deposits.
The JPM stock has formed a head and shoulders (H&S) pattern. Please take a look at the 1-year chart of JPM (JPMorgan Chase & Co) below with my added notations:
1-year chart of JPM (JPMorgan Chase & Co) Over the last (5) months JPM has created a key level of support at $50. That $50 support is also the current “neckline” for JPM's H&S pattern. Above the neckline you will notice the H&S pattern itself. Remember, patterns such as an H&S need to confirm to have the meaning that they imply. Confirmation of the H&S would occur if the stock were to break below its $50 support. If JPM does break that level, the stock should move lower from there.

The Tale of the Tape: JPM seems to have formed a head & shoulders pattern. Although a trader could go long at $50 expecting a bounce, the stock's pattern implies an eventual breakdown. If that happens, a short trade should be entered on a break of the $50 level.
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Dollar Collapse To Trigger Massive Bull Market In Gold & Silver

Today the Godfather of newsletter writers, Richard Russell, warned that the “US dollar is poised right on the edge of a cliff.”  He also issued this ominous warning, “if we get a sell signal on the dollar it will have international implications.”  This is an incredibly powerful piece with a legend who has been writing about the markets for 60 years, and he concludes by discussing what is going to trigger a massive bull market in gold and silver. 
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Obama Destroying Dollar, China To Take U.S. Land for Debt: Ann Barnhardt

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