Backfire
I read Puplava's column last night, and was struck by his comments about recent "rallies" starting in the futures pit.
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As expressed a number of times on this board, I subscribe to a demographically driven, long term generational wave Market View. From that perspective, we are currently between the mania peak (Delusion) that culminates a secular bull market, and the P/E compression low (Despair) that ends the first (P/E compression) phase of a secular bear market. Subsequently, the market will (IMO) traverse a decade long low level oscillation before reaching the turning point (Disgust) that begins the next bull market.
Since I believe that we are in the Plunge from Delusion to Despair, the only question is how do we get there? As Puplava has shown, every time we get to the “edge of the cliff”, a magic, mysterious, unknown buyer “appears” in the futures pit with some significant buy orders – and a rally begins. Now I don’t want to get involved in an argument about whether the buyer is the infamous PPT or some member of “da Boyz”. Given that the PPT works through “da Boyz”, and given that the Fed with the Bernanke speech last summer, has given the green light to pump, I believe there has been a blurring of the lines between the actions of “da Boyz” and the PPT. So I believe it is a given that as soon as the cliff edge is approached, there will be some buying in the futures pit. I don’t know that it will always work (i.e. produce an immediate rally), but expect the attempt.
Longer term, I make the analogy to a forest fire. A lot of “undergrowth” accumulated during the last secular bull. This “undergrowth” can be consumed in a great conflagration as in ’29 to ’32 or in a long series of brush backfires. Either way the “undergrowth” will be removed. Just as rangers spray flames to ignite the brush/grass for a backfire, the PPT/da Boyz use sudden explosive buying in the futures to ignite their fuel (shorts). Given recent behavior, I believe we can look forward to series of “backfire” rallies with an occasional mini-conflagration when things “get out of hand”. Longer term the result will be all of the “undergrowth” will be gone. Only then can the germination period, required for the next secular bull, begin.
JMO
lurqer |
