by Graham Summers
The financial markets are literally standing on the ledge of a cliff looking
down into the abyss. The fact we’ve had a coordinated Central Bank intervention
in the last week should tell you just how desperate things are getting.
The one hope for the bulls is that the Fed will announce some massive new
program at its September meeting which takes place tomorrow and Wednesday. I
fully believe the Fed will disappoint in a big way as Bernanke and his loose
money policies have become politically toxic: see the GOP debate in which all
frontrunners united in their criticism of the Fed.
The market looks to be agreeing with me. The bearish flag formation I warned
about last week remains in play. The ultimate downside target for this is 1,000
on the S&P 500.
Within the bearish flag formation, we’ve also got the
makings of a Head and Shoulders pattern: another very bearish formation. The
drop Sunday night has made this pattern even more probable.
Neither of these formations predict a massive rally on QE 3 or some other new
Fed program. Indeed, how can the Fed announce something new? A record
number of Americans say they are paying more for their food. Oil is close to $90
per barrel. And Gold is north of $1,800, having touched $1,920 earlier this
month.
Aside from this, the Fed has already instigated several new moves this month
including the coordinated Central Bank intervention of last week and the opening
of FX swap lines last month. I view these moves as preparation for a Greek
default, which is most certainly in the near future.
Indeed, having staged two bailouts of Greece and talking down the possibility
of a Greek default non-stop over the last 18 months, the ECB and political
leaders in Europe seem to have done a complete 180, with the notion of a Greek
default now a matter of “when” not “if.”
In early 2010, a Greek default was never even considered to be on the table.
At that time, the entire discussion focused on whether or not Greece even
needed a bailout. Today, the words “Greek Default” show up in almost
every headline pertaining to Europe.
Greece Has 98% Chance of Default on Euro-Region Sovereign
Woes
Potential Greek Default Worries European Politicians
Greece default ‘virtually 100 percent
Scenarios: Potential market impact of a Greek default
I fully believe that behind the scenes, the groundwork has already been laid
for Greece to default. The market is already pricing this as a 100% certainty.
France has its own problems and won’t be able to provide another Greece bailout.
Germany is now in another round of elections in which voters are destroying
Angela Merkel and her party for supporting the bailouts… at a time when it’s
revealed that even German banks needs tens of billions more in capital.
In simple terms, the “bailout” madness is ending in Europe. What will follow
will be a Greek default followed by debt collapses and restructurings in Italy
and Spain. Europe is already aware of this, which is why liquidity has dried up
to the point that the world’s Central Banks had to stage a coordinated
intervention last week.
Indeed, I fully believe that we may in fact be on the verge of a Crash in the
markets. All the Red Flags are there. Europe’s entire banking system is on the
verge of systemic collapse. Take a look at European banks and you’ll see what I
mean.
This is Agricole, the mega-French Bank. Does this look
like a solvent financial institution to you? Do you really think that Europe has
a chance when even French and German banks are collapsing?
Let’s be blunt, the global financial system is now on DEFCON Red Alert. If
you have not already prepared your portfolio for a possible CRASH, you NEED to
move now! Because by the time the selling pressure comes back into the markets
in a BIG way (next week or so) it will be too late.
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