The Real Risks Out There

What we are now watching is no longer an intellectual game for the purpose of making money. It is real, and the stakes are far higher than just money.

In context of my most recent article that I sent to you a couple of days ago, the following two charts show just how critical the juncture is that we have reached:

If the target of 12,900 in the latter chart is achieved, and holds, then the Dow will come to rest above the Dow Theory "sell signal", and the first chart will remain bullish.

If it bounces "up" from that (or any higher) level, the bear market will be avoided (for the time being)

If it breaks "down" from there then it's all over bar the shouting.

Will it break up or down?

The market is indecisive - as can be seen from the following chart of gold divided by the Dow, which has reached a double top.

If I had to guess, I would guess that the various markets will bounce rather than break. (This time around)

Another really worrying chart is this one of Citigroup:

This chart has reached its measured move based on vertical count

Further, the less sensitive 5% X 3 box reversal shows Citi still in a bull trend

The $29 level has to hold.

Will it hold?

Not sure. The following two charts of Fannie Mae and Freddy Mac suggest not

Fannie Mae has a measured move target of $20.94

Freddy Mac has a measured move target of $11.74

If the US property market dies, it's hard to see how the banks will be able to hold up. If the banks can't hold up then it's hard to see how the Dow Industrials will hold up.

Conclusion

Any "bounce" in the stock market from these levels will likely represent an opportunity to get out.

The Goldollar Index below suggests that the "inverse" move between gold and the US Dollar is now shifting to favour gold.

The "key" question is whether or not the Euro price of gold will break to a new high (chart up to date to November 5th 2007)

My "gut feel" (unsubstantiated) is that if the Dow breaks down, the ratio of Gold:$Indu will break up and, if that happens, the Euro price of gold will rise to new highs.

Under those circumstances, we will likely experience a full blown crisis of confidence in the financial markets.

Probabilities of that happening? Subjectively and unsubstantiated, 60:40

This is no longer an intellectual game. It's real. This is not business as usual. If the markets collapse, the entire infrastructure of society will likely come under threat because, for example, we have passed 'peak oil'. If investment confidence goes, how will we adapt to that particular problem? Guys, it's not about making money this time around. It's about survival.

I for one do not want to witness a full blown crisis of confidence. We absolutely need to hold it all together in order to allow time for a migration to new energy paradigms.

Brian Bloom
www.beyondneanderthal.com
11 November 2007

Author's comment

It appears that the authorities have not yet come to understand the subtleties and/or the nuances of the statement that "energy drives the world economy". An unholy alliance between the Banking Industry, the Fossil Fuel Industries, Big Business and the Politicians has given rise to a life-threatening accident that is now waiting to happen.

The time has come for the world to begin migrating to a new platform of industrial, consumer and transport technologies which will be driven by electromagnetic energy. There are three such energy technologies which are introduced in my novel, Beyond Neanderthal, which is targeted for publication in March 2008. The logic which underpins these technologies is compelling. If embraced, they have the capacity to usher in a new era of human evolution.

By means of its entertaining storyline, Beyond Neanderthal explains both the logic and the technologies themselves, and also articulates a clear pathway forward. If taken, this pathway will enable us to extricate ourselves from the quagmire into which we have been led by the unholy alliance of self-interested groups. There is still a window of opportunity to act - but the evidence suggests that this window will begin to close around 2012. Please register your interest to acquire a copy of the novel at www.beyondneanderthal.com.