The first Minor Weekly Bearish Reversal in the Dow lies at 17434. A closing beneath this for the week will confirm what already appears to be in motion technically as well as after electing three Daily Bearish Reversals. The next critical area is really 17120 which happens to be a Daily and Weekly Bearish Reversal. This is the primary support. Breaking this area then opens the door for a more sharp drop ahead to retest 16000.

We have a more important number for month-end and that is 17579 followed by 17210. A May close below this level will confirm a correction into the August/September period, which can extend even into early 2017. This should produce a retest of the broader support at 16000 and a breach of that level on a monthly closing basis would set the stage for a new low under that of 2015.

Keep in mind the Fed realizes that it needs desperately to restore some “normalization” to interest rates. The Fed is departing from Draghi who is destroying the future of Europe as is the Bank of Japan. This is really turning into the Clash of Titans. This is also unfolding is helping to keep the dollar as the only game in town.

Last week, the Dow closed BELOW the technical support I warned had to hold on any retest, which it did not. This was the market warning that between the chaos of the elections, the BREXIT vote in June, and the Fed realizing it has to raise interest rates to try to ward-off the growing demands to seize all pension funds in the nation to bailout public pensions in the various States, the future looks a bit cloudy at best.

We need to watch gold as well. If gold exceeds last year’s high of 1307.80, the likelihood of a sustain breakout beyond 1360 is not very good with a strong dollar. However, such move would also confirm an extension of this entire mess and any reversal where there is a sudden crisis in confidence in government within the main segment of the population would probably come in 2017. This makes sense from the perspective of 2017 being the year from Political Hell. It also would not rule out the ultimate swing for gold to crash to new lows really twisting the minds of everyone with rising rates and the dollar.

June is the first target for a shake in confidence with the BREXIT vote. It still appears they will be desperate to rig the vote. David Cameron has been calling upon everyone to paint such a dark picture if Britain leaves it demonstrates how important this is to the survival of Brussels, not Britain. Everyone from Obama to Christine Lagarde have been in London to warn the Brits to stay in line. I seriously doubt even if the real vote is to leave, as Stalin said, elections are decided by those who count the vote. The election fraud in Scotland should warn that this is probably in the bag for the “establishment” and that does not look very good for Britain.

So hold-on. The markets are still churning. A monthly closing for the Dow beneath the 16000 level will warn of a new low under 2015 going into 2017. Nevertheless, everything will flip when the general public comes to realize that the future looks very chaotic and it boils down to how can you trust. That is when the flip come from Public to Private.

Keep in mind that the Fed is really caught between the worst of two worlds. It needs to raise rates to save pension funds, yet higher rates is going to devastate the bond markets and blow out federal budgets. I have been warning that there will be NO INFLATION as long as rates remained low. Raising the rates is the only way to ignite inflation. Europe and Japan and just brain-dead.

People have been indoctrinated with Marx and Keynes to such an extent, they cannot invest because they are confused and assume rates up stocks down. They just listen to the talking heads on TV and never grasp the real history of this move.

Therefore, a break even to a new low will get everyone offside and assume this is the mother of all crashes. This is when the reversals and timing will help to pinpoint that low. Keep in mind that we need the majority to turn bearish to provide the fuel to the opposite move. This is just the way markets function.

So watch the numbers now. It’s Just Time. Keep in mind we if we hold the 16000 level on a monthly closing basis, then we will just churn back and forth. That is the key area on any decline on a monthly closing basis.

QUESTION: Mr. Armstrong, there appears to be a dispute between what is money and what is a currency. Can you define each easily?

Thank you

LW

ANSWER: “Currency” is an official monetary instrument used in commerce. Currency must be “legal tender,” which means the government will accept it in payment for taxes. “Money” is a much more questionable element for it is different things to different people. The goldbugs would kill you if you dared to say gold and silver were not money. But go to Starbucks and try to explain that a silver dollar should buy you two coffees. Good luck! They will look at you as a con artist.

Money has traditionally been some commodity, be it gold, silver, bronze, seashells, cattle or sheepskins. You certainly cannot historically declare anything to be money for its changes with cultures and time.

As the legend goes, the Gauls attempted to invade the city of Rome quietly but had frightened the sacred flock of geese who made a lot of noise at the Temple of Juno. This alerted the Romans to the surprise attack giving us the word “monere,“ meaning “to warn” in Latin. The Temple of Juno then became popularly known as the Temple of Juno Moneta. Since this is where the coins were minted, we now arrive at the word “money” that springs from the origin of this legend and place that was an ancient mint. Our terms, such as capital flow, arrives from the Latin word “currere” meaning “to run” or “to flow.” This is where the money flowed from, and gives us the word “currency” meaning the “flow of money.” This is why Juno Moneta is pictured on Roman coins as holding the balance scales in one hand and a cornucopia in the other symbolizing endless bounty or wealth. This is the birth of the terms “money” and “currency.”

You can argue with Internal Revenue Service that gold and silver are “money” all you want, but they do not have to accept it in payment of your taxes. The paper dollar is the currency and duly states “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE.” The Supreme Court nullified all gold clauses in private contracts (PERRY v. UNITED STATES, 294 U.S. 330 (1935)), so legally only paper dollars are “currency” for they are accepted by law publicly or privately.

Of course, the markets have been causing losses among the bulls as well as the bears. This is what they do and MUST do before they can actually make a decisive move of the nature we are looking at ahead. It becomes rather amusing to watch the so called professionals end up constantly wrong so they start bruding and proclaiming this feels like 2000 or 2007 before the crash. Are they right? Or are they just angry because they lack the skills to forecast?

Nevertheless, our proprietary Golden Rule of the 3 Attempts (TM) is a very important tool to comprehend. (details will be at the Technical Training Course).

Well, let’s look at 2000 from the Dow perspective. The 2000 high was a Phase Transition in the NASDAQ DOT.COM Bubble. When we look at the Dow, we still see a high, but it is more of a declining sideways pattern. There were three failed attempts to make new highs but each was lower than the previous in compliance with our Golden Rule of the 3 Attempts (TM). This by no means appears even similar to the current pattern.

When we compare this to the current pattern pictured here, we see that the third thrust broke through the channel and made a higher high. This is not showing long-term weakness. We have a different trading pattern going on here one designed to create confusion and get the MAJORITY on the wrong side to enable a Phase Transition to even unfold. To revisit key support, the Dow must now close back below 17120 and then we will get a correction.

Here is the 2007 high. Again we see our Golden Rule of the 3 Attempts (TM) to rally but each one was significantly lower with new lows each time. This patterns warned of C R A S H & WATERFALL EVENT was in motion. This reflects a clear bearish pattern with lower highs and lower lows.

Now, look at how a market knocks on the door three times before it breaks out. This is just one of our technical rules we call the Golden Rule of the 3 Attempts (TM). No doubt other analysts will quickly plagiarize this and call it their own and you will then see who is a real analyst and who is fake. Still, even the 1966 rally, which was the Mutual Fund Bubble, and the 1968 rally when Bretton Woods started to crack, were the initial attempts to break 1,000. Then we had the 3 attempts which did exceed 1,000 before the breakout began with the beginning of this Private Wave. Note also that while gold rallied from $34 in 1970 to almost $200 by 1974, the Dow rallied and broke through the 1,000 level for the first time. They did not move in opposite directions.

So to those who keep yelling the market will crash to 10 cents on the dollar, all I can say is I suppose that means people will buy bonds at -10% interest rates just to park money? If what they are yelling is even possible, then interest rates must move lower and big money is willing to lose it all just to park money. I am sorry. I just do not understand such logic. This is normally the type of nonsense you get from people who want to pretend to be an analyst but have no experience in the field so they lack any comprehension of the moving parts. To create a stock market crash we need confidence to rise in government. Excuse me. Anyone hear of Donald Trump? Confidence in government is declining rapidly, not rising.

And as for the dire prognostications that the stock market will crash because the Fed will raise rates, this only once again demonstrates such people are not analysts at all for they have nothing original to add to the debate. I traded that rate hike under Paul Volcker into 1981. With each rate hike the market declined true, then rebound. The final hike in 1981 was a real lesson for the market rallied. It did not even decline. When they took place, I knew the ECM was correct and we peaked in rates right then and there.

So sure, we should expect the market will drop when the Fed raises rates. Fools will be easily separated from their money. This is why there are fools in the world. Every species is serves a purpose as energy in the food chain for the next one up in the food chain. Trading markets amounts to the same process. We always need the person on the opposite side.

Rising US rates will be inevitable. This will drive the dollar higher, fuel the debt meltdown, and when the capital inflows push US assets higher, the Fed will be compelled to raise rates further to stop the speculation because that is pure Keynesianism that does not work, but hey, what else do they have to do.