Middle East Chaos

The Middle East has been in turmoil and Trump has stood his ground against the neo-cons. The UAE is trying to avoid involving its nation in the conflict with Iran and certainly sees no upside to turning its country into a battlefield between the US and Iran. Iran promised to talk to the Yemeni officials to avoid hitting targets in Dubai and Abu Dhabi, provided the UAE pulls out its forces from Yemen. The so-called “deal of the century” proposed by President Trump’s son-in-law Jared Kushner, which sought to deal with the Palestinian-Israeli conflict, was met with minimal interest. The $50 billion in aid to the Palestinians was view as just a bribe.

Meanwhile, Trump has been thwarting the neo-cons for he came out opposing their policies, stating with respect to Iran: “We’re not looking for regime change. We want them out of Yemen.” Those unfamiliar with the players in the Middle East should read our report on the region – The War Cycle.

Cycles, Einstein & Galileo – Geometry of Time

QUESTION: Mr. Armstrong; It has dawned on me studying Einstein’s General Relativity, that the two of you reached the same realization from different fields. Newton’s laws of gravity were turned upside down by Einstein who rejected Newton that there was a linear formation to space. Einstein came up with the fact that space was curved and that time and space were linked so that time was not the same throughout the universe. In reading the few chapters on the Geometry of Time you handed out at I think was the 2011 WEC, your entire process is also linking the curvature and time albeit from a different observation than Einstein.

Would you elaborate?


ANSWER: According to Einstein’s theory of general relativity, massive objects warp the spacetime around them, and the effect a warp has on objects is what we call gravity. So, locally, spacetime is curved around every object with mass. However, what led Einstein to his discovery was the question of free fall. Before I had ever ready Einstein, I was probably about 12 years old and I fell out of a tree and over a cliff falling probably a couple of hundred feet. I was lucky and it was Fall so at the base of the cliff was a mountain of leaves. The leaves broke my fall but my teeth nearly came through my bottom lip. The wind was knocked out of me and my nose was bleeding. I went to my friend’s house nearby and finally got my nose to stop bleeding. I kept tasting blood. I opened my mouth and saw the injury and only then did it start to hurt. It was a good 30 minutes. I went to the hospital and they stitched me up.

Two things dawned on me that day. First, I asked why did my mouth not hurt until I saw I was insured? Secondly, when I was falling, I did not feel like a dead weight, but I felt like I was flying – weightless.

Because of that incident, I came to realize that there was some truth to the saying what you do not know, can’t hurt you. But it also gave me insight into what Einstein was talking about. In the middle of a free fall, you feel weightless as if gravity has canceled itself out. Actually, Aristotle first tried to reason that a heavy object will fall faster than a light object in a free fall. He was incorrect. Galileo was the first to actually get it right. He realized that a falling body picked up speed at a constant rate.Galileo also made the observation that in a vacuum, all bodies fall with the same acceleration. That was a truly astonishing idea. That experiment was carried out on the moon with a hammer and a feather. They both fell to the ground at the same time.

Yes, these things influenced me in seeing what I called the Geometry of Time in how and why do trends unfold and what are their durations? Was there a constant force at work, or were there patterns of time within time? This is an extremely complex subject. Far too much for a blog post. I will publish that work in 2020.


Understanding the Energy Model



I try not to bother you with questions, I know you’re plenty busy answering much more complex questions but I’m wondering if you could explain energy in the markets a bit?

I always watch for divergences in energy and price (both positive and negative), or fading energy during a rally, or a random jump in energy during a consolidation period but I can’t stop thinking about your last private blog where it can’t crash if the energy is negative… so only if it’s peaking? So should someone be cautious if the energy starts getting high? Does that also mean if it’s negative it has more potential to swing to the upside?

Here on bitcoin energy peaked after price peaked, which leaves me confused again, what does that mean? And both Bitcoin and Netflix and others I’ve found had a panic to the upside when the energy went negative, is this more of a rule, or are these exceptions?

And the million dollar question, are there other things I should be watching when it comes to energy? I’m sure there is still much I don’t know

Thank you,

ANSWER:  The Energy Model is measuring the bulls against the bears. It is providing a different measurement of how much “energy” remains in the market from the long-side. Therefore, if people are recently long, i shows to what extent that represents the whole of the market position. A crash is possible when energy is at a high level and a rally is likely when energy is negative.

In the case of Bitcoin, the market failed to make a new high with the new high in energy. That was the divergence warning that this was a top. In Netflix, the market was bottoming and the energy turned negative. Again, because the energy was negative, that effectively means the liquidation is over. It is impossible to get a panic crash without energy still in the positive. The risk will be to the upside when the energy is negative.

Now, let’s look at the Dow. You can see that energy bottomed negative three weeks from the breakout. This, again, warned there would be no crash as everyone was predicting. The Energy Indicator is an excellent tool in judging the risk in a market from a purely numerical perspective — not opinion.


Australia Lowers Rate to Historic Low of 1%

The Reserve Bank of Australia has cut the official cash rate for the second month in a row to 1%. As we head into the turning point of the Economic Confidence Model come January 2020, the unemployment rate increased to 5.2% in April. GDP growth remains very low at 0.4%, wage growth is sluggish, inflation is well below target, and retail sales are struggling. None of this will change until after the ECM turns as people begin to see that central banks are incapable of managing the economy.

The Fate of Italy & the Italian Lira

QUESTION: Mr. Armstrong; A friend of mine world for the central bank back in the nineties and he gave me a copy of this chart you provided to Italy on your recommendation not to enter the euro on the present terms back then. He said you were the only one with a database and nobody ever saw what the lira looked likely before World War II. Do you have that report you gave to the Italian Central Bank?


ANSWER: Sorry. I do not have a copy of that report. It was a private issue. The general advice was put out back then in a series of reports we published for our general client base (see Euro). Here is a chart from 1792 to 1999. We can see that the intraday high for the US dollar against the Italian Lira was 1985.

Here is a chart on a closing basis. We can easily see that the US dollar is breaking out and will be making historical new highs against Italy going forward in time.


Now when we ask the computer to extrapolate the Lira from the past and project where the turning points would be in time looking ahead as if it were a single currency, 2018 comes up as a directional change and 2019 in a Panic Cycle. Here are the turning points and we will see this provide the critical points for cracking the euro

Hungary Election Also Shows EU’s Days are Numbered

Viktor Orban has clearly won the parliamentary elections in Hungary winning 74.6% of the votes on Sunday in Budapest. His party could take 134 seats in the 199-seat parliament giving it a constitutional two-thirds majority. This is an amazing landslide victory for Orban that no American president has ever reached such a majority. The record is 61.05% of the popular vote and that was a sympathy vote for Lydon Johnson after the Kenney Assassination. Even Franklin Roosevelt in 1932 only won 57.41% and Ronald Reagan even beat Roosevelt scoring 58.77%. This puts Orban’s victory at a truly historical level and it is decidedly anti-EU based upon the Refugee Crisis.

After all, it was 1683 when the Turks invaded the Holy Roman Empire and sought to conquer Europe with the Battle of Vienna. That is a historical event that lives on in memory throughout that region. The Muslim invasion crossed from Istanbul through Bulgaria, Serbia, Hungary, to Austria. That event still lives on in the memories of the people in that region that Western Europe does not respect.

Little by little, the European Project is being torn apart all because of the Refugee Crisis that was begun by Markel without ever putting anything to a vote for all of Europe who must suffer simply because Merkel tried to divert her critics from Greece. This has demonstrated that the European Project has been a complete failure. It allowed Merkel to affect all of Europe without any democratic process. The European Project has failed for it has tried to federalize Europe covertly, yet has undermined the political-economic structure necessary to accomplish that goal. The European Project should have remained a trade agreement rather than a political agenda. By trying to force their centralized agenda upon everyone, they are acting no different than any other conqueror.

Russia & the Panic


QUESTION: Mr. Armstrong; I greatly appreciate the mere fact that you cover the Russian markets when nobody does. It is really incredible that your computer can write so much and there is no fear of bias or policial slant. Socrates just wrote, “At this moment, this market is in a downward trend on all our indicators looking at the weekly level.” There has been a panic taking place here with stocks crashing on the news of asset confiscation. You mentioned that your model will predict war correlating all the markets. Is this what is beginning with the crash?



ANSWER: Yes. Here is a chart of the British share market as World War I began. There, the market began to display inherent weakness. It could not get through the top of the channel and as soon as the previous year’s low broke, the market crashed. They then closed the market completely so many people lost all liquidity. We must fear that Europe will do the same. The EU does not like free markets. They have outlawed short government bonds. They are trying to seize the market in the Euro from London because they want to manipulate the currency and will try to prevent a currency crash with the stroke of a pen. Europe remains deeply in danger of a liquidity crisis. If you have money all parked in Europe, you may find it of little use in a crisis.

The immediate crash in Russia was caused by investors in Moscow dumping Russian shares and the ruble following the announcement that the West wanted to confiscate Russian assets abroad. The ruble depreciated by nearly 3% against the dollar. The United States imposed sanctions on Russia for interference in the 2016 US presidential campaign, which is something they do to everyone else from Canada all the way to Russia. Hillary has turned Russia bashing into a national sport. This is clearly leading to a confrontation for the West desperately needs a war to divert attention from the failure of social program promises.

The Russian government will retaliate against the tightened US sanctions. Clearly, the actions of the Congress are unjustified and intended to provoke a confrontation. We are on the path to war and every opportunity to further that goal is clearly being taken by the USA, UK, and the EU.