Stocks Just Took Out THE Line
The markets are finally beginning to realize that the debt ceiling debacle, economic contraction in the US, housing bubble 2.0 bursting, China slowdown, Japan stagflation and European banking crisis are not good for stocks.
With that in mind, the S&P 500 has briefly taken out the trendline that has supported it since QE 4 was announced.
Remember, the Fed is printing $2 billion per day and funneling it into the system. So if the markets begin to break down NOW, the only thing the Fed can do is print more money.
However, this combined with the debt ceiling debacle could make a REAL mess. Yesterday the US issued a 4-week Treasury bill that came darn close to outright failure. With investors beginning to question whether the US might indeed have a debt crisis on its hands, investors are beginning to shun some US Treasuries and T-Bills for others based on priority of payments.
Remember, every single Treasury and T-bill out there is utilized as collateral for millions of Dollars worth of trades. So if the big financial institutions begin to refuse to accept some US debt as collateral based on the perceived risk of a deb ceiling debacle there could quickly be capital call in the market similar to what happened when Lehman failed.
This is not to say that the US will default on its debt. Rather this is to say that the mess the Government created is affecting things behind the scenes in the financial system. And this is where the next crisis could emerg.
With that in mind, investors should be prepping now for a potential run of systemic risk.
If you have not taken steps to prepare for a market collapse, we have a FREE Special Report that outlines how to prepare your portfolio. To pick up a copy, swing by:
Phoenix Capital Research
Graham Summers is Chief Market Strategist for Phoenix Capital Research, an independent investment research firm based in the Washington DC-metro area with clients in 56 countries around the world.
Graham’s clients include over 20,000 retail investors as well as strategists at some of the largest financial institutions in the world (Morgan Stanley, Merrill Lynch, Royal Bank of Scotland, UBS, and Raymond James to name a few). His views on business and investing has been featured in RollingStone magazine, The New York Post, CNN Money, Crain’s New York Business, the National Review, Thomson Reuters, the Glenn Beck Show and more.