The European Central Bank (ECB) will NOT aid Italy with an EU rescue program if the country or its banks are in financial turmoil. The Italian government is taking the view that Italy has become an “occupied” country and that Germany has conquered Europe imposing austerity and its view of inflation upon the whole of Europe without firing a shot. While the spin is that the ECB is making Italy a test case to demonstrate that Europe and its mechanisms work, in reality, it is a realization that the ECB cannot save Italy’s financial institutions because austerity has created the greatest economic depression perhaps in economic history.

The new five-star Movement in Rome and Lega have been on a confrontational course with the EU Commission, as they plan a higher level of new debt to fulfill election promises. The EU Commission, on the other hand, is calling for less spending and the implementation of austerity as demanded by Germany. Italy is already sitting on a debt of around 131% of GDP. The financial markets are nervous for they see a confrontation that could tear Europe apart at the seams. Italy now has to offer investors significantly higher interest rates when placing its government bonds in order to raise money. In addition, the gap to the yield of German government bonds widened. But in reality, stopping the ECB’s Quantitative Easing will result in interest rates rising by at least 300% very rapidly. Italy is getting ahead of the curve BEFORE everything comes crashing down.

The EU rules prohibit the ECB from helping a country unless it has agreed to a rescue program of EU partners. Then, for example, the Euro-watchdogs could buy up Italian government bonds in order to contain a rise in yields. This provides for a monetary policy emergency tool adopted in 2012 – called “OMT”. However, this has never been used before. The ECB, behind the curtain, fears that if they try to use this mechanism and it fails, as our model warns, then the CONFIDENCE in the entire EU system will collapse.

Jeff Bezos of Amazon loses about $80 million for every dollar the stock goes down.  No billionaire was hit as hard by the drop this week in the share market than Jeff Bezos. During the Wednesday selloff alone, the Amazon founder and CEO lost more than $9 billion. This is how they measure people’s worth by the value of shares they hold which is NOT cash. If he ever tried to sell everything, the share price would also crash. At the peak, his net worth reached $160 billion, according to Forbes.

The Bloomberg Billionaires Index shows Bezos total net worth is $145 billion, comfortably ahead of Bill Gates, who sits second at $96.3 billion. Gates lost more than $2 billion, while Warren Buffett lost nearly $4.5 billion. When we look at the Arrays, the week coming up as a key target has nothing to do with interest rates – it’s the elections STUPID

While the IMF chief Christine Lagarde has come out expressing her fear that not only a trade but also a currency war may emerge that could dampen the growth of the global economy, there are some serious issues that need to be addressed.  The problem with misunderstanding currency and its role in the floating exchange rate system can easily engulf even bystanders in this clash of the titans – US v China.

The background behind the smoldering trade dispute between the world’s two largest economies, the US and China, demonstrates that there are serious misconceptions of the role of currency. President Donald Trump has fanned these flames for he too fails to understand the FOREX markets. Trump accuses China of unfair trading practices and theft of intellectual property. The People’s Republic is also accused of devaluing its currency against the dollar, which tends to widen the already high US trade deficit.

The dollar has been rallying against the yuan since the March low here in 2018. Clearly, the dollar is going to rise further for a trade war will hurt China more so than the USA. While we see critical turning points in January and March in 2019 followed by May, we must keep in mind that this pattern of a dollar rally is impacting the entire world. Trump FAILS to understand Capital Flows and his accusations against China is manipulating its currency to beat the USA in trade is NOT justified. Our models are showing the capital flight from China but also from Europe overall which contributed to the US share market rally into October basis the Dow Jones Industrials, which foreign capital buys looking always for the trophies.

We have tremendous Panic Cycles throughout 2019 and we see even the yuan is lining up with the targets concerning BREXIT. This is by no means a Chinese manipulation. What we see ahead in 2019 is anything but a nice steady market projection.

COMMENT: It really does appear that the IMF is following you and repeating your forecasts. They first said the world economy was booming at the start of the year for the next several years. Now they have revised that forecast and saying we are at risk of a decline. Any comment?

HK

ANSWER: Yes, at the start of this year, the International Monetary Fund (IMF) was very bullish. The world economy’s “broad-based momentum” was their call which produced an upgrade to its forecasts for global growth over the next few years. Now, they have admitted that they were “over-optimistic” and they have cut its projections down to where they were last year. They are warning that “the likelihood of further negative shocks to our growth forecast has risen.” What they have completely failed to take into consideration is the economic meltdown in Emerging Markets coupled with the failure of Europe as a whole under the EU

US stocks have plunged this week from the high of the week of 10/01 which has been the biggest rout since February. Meanwhile, investors remain jittery, to put it mildly, and confused as people try to attach a fundamental reason for the decline mixing in the recent jump in interest rates and the potential harm tariffs could cause tech companies. But our sources overseas are more concerned about politics. The Democrats are vowing to raise taxes and lower health care costs which they created in the first place.

The NASDAQ peaked in August and our model had called for an August high would be followed by a low into this period. So nothing unusual has transpired other than foreign buyers have backed off concerned about what happens if the Democrats take the House. The S&P500 peaks in September and the Dow peaked in October with the dollar illustrating once again the international capital flows are different from domestic.

The interest rates have been rising since the 4th quarter of 2015. To suddenly claim that is the reason for the decline merely reflects the problem that they need to point to something to explain a move that cannot be attributed to anything but the political uncertainty on the horizon.

We will update Tonight on the Private Blog with the specific numbers.

Interest Rates have been on the rise since 2015.75 4th quarter. All of a sudden, the headlines claim U.S. stocks took a dump to close sharply lower because investors spooked by rising bond yields sold equities in all sectors. The Nasdaq Composite Index (COMP) fell 315.97 points, or 4.1%, to 7,422.05, its biggest decline of 2018. The Dow Jones Industrial Average fell more than 800 points and the S&P 500 had its worst day since February as technology stocks went into a freefall.

This really begs the question – Did everyone suddenly notice interest rates? No, the market peak on the target week in the Array of 10/01 so it is simply all about the market getting tired. The vast majority are bearish and the most fascinating thing is what happened to the Flight to Quality? Normally, the stock market crashes and you run to bonds. But if the stock market is crashing and bonds are crashing, is this a completely new type of flight?

We will be providing an update tonight on the private blog.

QUESTION: Hello Mr Armstrong
I have been following you now for a couple of years, since the movie the forcaster, it showed me exactly whats is happening in the world and how little I know about finaces and trading. I am a blue collar worker in Canada with a small pension, how can I or where should I go to learn how to trade? Better yet how to use Socrates or someone who can help me or invest for me?
Your work has opened my eyes and also scares the hell out of me for what is coming.
Please can you help me and the other little guys who not as educated?
Thank you

ANSWER: What you want is not to short-term TRADE but to be a position trader. People who try to trade back and forth usually get caught up in emotions and end up losing money. What you want is to POSITION TRADE for the long-haul.  Here is what happens just using the Long-term Reversals only – not even every single one. Sure, you leave some on the table. The important thing is to reduce the number of trades and your confidence will increase and you will actually make more at the end of the day.

Right now, we are still in this consolidation phase, yet this is still a cycle inversion. We have not elected any Monthly Bearish Reversals at all so you just stay with the trade. The exit point keeps rising as the market rises. You can use the Weekly to Exit after a long bullish run. But for now, just hang tight. We may have the greatest trade on the century knocking on the door very soon.