Category: zerohedge

Authored by Michael Snyder via TheMostImportantNews.com,

Mt. Rainier and the New Madrid fault zone are both shaking, and a catastrophic seismic event at either location would cause death and destruction on an unimaginable scale.

Mt. Rainier has been called “one of the most dangerous volcanoes in the world”, and scientists tell us that it is just a matter of time before a major eruption occurs. When that day finally arrives, Mt. Rainier has the potential to bury hundreds of square miles with a colossal tsunami of super-heated mud that is literally several hundred feet deep. And since Mt. Rainier is very close to major population centers, we are talking about the potential for the worst disaster that we have seen in modern American history.

But a massive earthquake along the New Madrid fault zone actually has the potential to be far worse. A very deep scar under the ground that was created when North America was originally formed has made that part of the country very mechanically weak, and many experts believe that a big enough earthquake along that fault zone could literally rip the United States in half.

But before we discuss the New Madrid fault zone, let’s talk about what just happened at Mt. Rainier first.

According to the USGS, Mt. Rainier was hit by a magnitude 3.6 earthquake on Sunday afternoon…

After a spurt of seismic activity this weekend, Mount Rainier National Park was shaken by a 3.6 magnitude earthquake Sunday afternoon.

The quake hit at 12:31 p.m. and was felt as far as Kent, nearly 80 miles away, the U.S. Geological Survey reported. The relatively shallow quake was centered roughly a mile beneath the earth’s surface.

In addition to that quake, there have been quite a few others in recent days.

In fact, it is being reported that Mt. Rainier has been hit by “more than a dozen” earthquakes since Thanksgiving day.

The Seattle Times is assuring us that this is perfectly normal, but they are also warning their readers that they “should prepare for what might happen in the event of an eruption” just in case…

Regardless, people living near Mount Rainier should prepare for what might happen in the event of an eruption, said Wes Thelen, a research seismologist at the Cascade Volcano Observatory. Specifically, an eruption could cause lahars — large volcanic mudflows — to rip down the side of the mountain.

Many of my readers clearly remember the eruption of Mount St. Helens in 1980, but a catastrophic eruption of Mt. Rainier would be so much worse that the two events would not even be worth comparing. The following comes from Wikipedia…

If Mt. Rainier were to erupt as powerfully as Mount St. Helens did in its May 18, 1980 eruption, the effect would be cumulatively greater, because of the far more massive amounts of glacial ice locked on the volcano compared to Mount St. Helens,[40] the vastly more heavily populated areas surrounding Rainier, and the simple fact that Mt Rainier is a much bigger volcano, almost twice the size of St. Helens.[49] Lahars from Rainier pose the most risk to life and property,[50] as many communities lie atop older lahar deposits. According to the United States Geological Survey (USGS), about 150,000 people live on top of old lahar deposits of Rainier.[9] Not only is there much ice atop the volcano, the volcano is also slowly being weakened by hydrothermal activity. According to Geoff Clayton, a geologist with a Washington State Geology firm, RH2 Engineering, a repeat of the 5000-year-old Osceola Mudflow would destroy Enumclaw, Orting, Kent, Auburn, Puyallup, Sumner and all of Renton.[39] Such a mudflow might also reach down the Duwamish estuary and destroy parts of downtown Seattle, and cause tsunami in Puget Sound and Lake Washington.[51] Rainier is also capable of producing pyroclastic flows and expelling lava.[51]

A lahar is essentially a giant tsunami of super-heated mud, and they can be hundreds of feet high. If you live in that region, you might be thinking that you will just outrun any lahar that is headed your way, but the truth is that the highways will instantly be jammed once an eruption happens and a lahar can travel at speeds of up to 50 miles per hour. The following is how one author described the danger that those living in the area could potentially be facing…

The numerous towns and cities that occupy the surrounding valley would all be at risk for not only severe destruction, but complete annihilation. Residents of cities like Orting, Sumner, Buckley, and Enumclaw are estimated to have no more than 30 minutes before the lahar, speeding down from the many rivers that flow from Mount Rainier, buries their homes and businesses beneath as much as 30 feet of mud and debris. Even the larger cities like Auburn, Puyallup, and Tacoma itself are not safe. Auburn and Puyallup, with nearly 80,000 residents between them, would be covered in 20 feet of mud in less than an hour, and Tacoma, at almost 200,000, is estimated to be hit with nearly 10 feet from the lahar.

As you can see, the death and destruction would be off the charts, and let us hope that such a disaster does not arrive any time soon.

And as I mentioned earlier, a major earthquake along the New Madrid fault zone has the potential to create even greater death and destruction.

According to scientists, the New Madrid fault zone sits directly above a very deep geological scar that was created when North America was formed. According to Wikipedia, this immense scar makes “the Earth’s crust in the New Madrid area mechanically weaker than much of the rest of North America”.

Today, the New Madrid fault zone is approximately six times bigger than the San Andreas fault zone in California. It covers portions of Illinois, Indiana, Ohio, Missouri, Arkansas, Kentucky, Tennessee and Mississippi, and the largest earthquakes in the lower 48 states have happened in this region.

Scientists assure us that it is just a matter of time before more catastrophic earthquakes hit this fault zone, and that is why what has been happening near the town of Ridgely, Tennessee in recent days is so concerning…

A swarm of at least 15 earthquakes reaching up to 2.1 magnitude rattled Ridgely, Tennessee — a small town near the Mississippi River — over a two-day period, the U.S. Geological Survey reports.

The other quakes in the swarm ranged from 1.1 to 1.5 magnitude, according to the USGS.

Most Americans have never heard of Ridgely, and it is definitely a very small town, but what makes this so important is that Ridgely sits directly inside the New Madrid fault zone…

Ridgely is home to just 1,657 people, according to the U.S. Census Bureau, and sits less than four miles from the banks of the Mississippi River.

It’s also part of the New Madrid Seismic Zone — which the Missouri Department of Natural Resources refers to as “the most active seismic area in the United States, east of the Rocky Mountains.”

In 1811 and 1812, four absolutely massive earthquakes along the New Madrid fault zone opened up very deep fissures in the ground, they caused the Mississippi River to actually run backwards in certain places, and they were reportedly felt as far away as Washington D.C. and Boston.

Fortunately, very few people populated the region in those days, but if such a quake happened today the death and destruction would be unimaginable. The following description of one of the quakes that happened in 1811 comes from Smithsonian.com, and for a moment I would like for you to imagine what would happen if such an earthquake happened in our time…

The Midwest was sparsely populated, and deaths were few. But 8-year-old Godfrey Lesieur saw the ground “rolling in waves.” Michael Braunm observed the river suddenly rise up “like a great loaf of bread to the height of many feet.” Sections of riverbed below the Mississippi rose so high that part of the river ran backward. Thousands of fissures ripped open fields, and geysers burst from the earth, spewing sand, water, mud and coal high into the air.

The New Madrid fault zone has altered the course of the Mississippi River before, and someday it will happen again.

We live at a time when our planet appears to be getting increasing unstable. In addition to the other earthquakes that I have already mentioned, Alaska was actually hit by a magnitude 6.0 earthquake on Monday.

Unfortunately, most Americans are not going to start caring about the warning signs until a major disaster has already happened.

Most people will simply not wake up without a major amount of shaking, and let us hope that such a day can be put off for as long as possible.

In the past few days, China’s Global Times twitter troll Hu Xijin has been quite vocal not only about China’s anger over the recent passage of the pro-HK bill that was signed by Trump last Thursday, but also about China’s response to what he said was the imminent passage of a Xinjian-related bill, which would sanction Chinese officials responsible for the repression of over a million Muslim Uighurs in the Xinjiang region.

Overnight, Hu issued his latest not so veiled threat on the matter saying that “since US Congress plans to pass Xinjiang-related bill, China is considering to impose visa restrictions on US officials and lawmakers who’ve had odious performance on Xinjiang issue;it might also ban all US diplomatic passport holders from entering Xinjiang.”

Based on what I know, since US Congress plans to pass Xinjiang-related bill, China is considering to impose visa restrictions on US officials and lawmakers who’ve had odious performance on Xinjiang issue;it might also ban all US diplomatic passport holders from entering Xinjiang.

— Hu Xijin 胡锡进 (@HuXijin_GT) December 3, 2019

Yesterday, Hu retweeted a post by The Business Source division of the Global Times, which warned that China would release an “unreliable entity list” soon, which includes relevant US entities, in response to the passage of the Xinjiang-related bill “that will harm Chinese firms’ interests, prompting China to speed up the move.”

Source told Global Times that China will release an “unreliable entity list” soon, which includes relevant US entities. US House is expected to pass a Xinjiang-related bill that will harm Chinese firms’ interests, prompting China to speed up the move.

— The Business Source (@GlobalTimesBiz) December 2, 2019

His comments came just days after one or more Chinese dissidents leaked the troubling secrets of China’s Xinjiang camps to the foreign media, which prompted the following retort from Hu: “China wants real human rights in Xinjiang: people’s rights to have a peaceful life. West’s hypocrisy won’t affect Xinjiang internally, nor will it influence Muslim countries’ attitude. It’s just a few media outlets and politicians pretending to be representing the world.Pathetic.”

China wants real human rights in Xinjiang: people’s rights to have a peaceful life. West’s hypocrisy won’t affect Xinjiang internally, nor will it influence Muslim countries’ attitude. It’s just a few media outlets and politicians pretending to be representing the world.Pathetic. https://t.co/zMKlMVttEz

— Hu Xijin 胡锡进 (@HuXijin_GT) November 25, 2019

Well, moments ago the U.S. House of Representatives indeed overwhelmingly approved legislation that would impose sanctions on Chinese officials over human rights abuses against Muslim minorities, provoking Beijing to retaliate just as trade deal negotiations between the two sides appear to be on the verge of collapse.

The bill is an amended version of the Senate’s S. 178 to support the Uighurs, a Muslim ethnic group in western China, and it passed Tuesday, on a vote of 407 to 1. Chinese state media warned before the vote that the government could release a list of “unreliable entities” that could lead to sanctions against U.S. companies. The measure follows legislation supporting Hong Kong protesters signed into law last week by President Donald Trump.

And now, with Xi Jinping having already lost serious credibility after he failed to forcefully respond to Trump’s signing of the Hong Kong bill, all eyes will be on China, and whether it will indeed trigger visa restrictions and limit travel for US officials to Xinjiang province (something which will never happen) and, more importantly, if Beijing will finally publish its “unreliable entity”, aka black list, which it has been threatening to do since May and which may include such names as Apple and Micron. Well, now that the House has passed the Uighur bill, Beijing may no longer be able to delay, or else it will be seen as a pushover every time a diplomatic – or other – challenge escalates. Needless to say, for a president for life such as Xi Jinping, that is hardly an option, so stay tuned for China’s response which may be due any moment.

DoubleLine’s Jeff Gundlach sat down with Yahoo Finance and discussed how US stocks would get absolutely crushed in the next recession. 

Gundlach said 2019 was the year when investors could pick “just about anything…Just throw a dart, and you’re up 15-20%, not just the United States, but global stocks as well.” He warns that it could all change in 2020, as a recession is fast approaching.

He shared his “chart of the year,” which divides global equities into four regions (the US, Japan, Europe, and Emerging Markets). What it shows is an alarming market top forming in US stocks, similar to what happened with the Nikkei 225 in the early 1990s or the Euro Stoxx 50 Index in the late 1990s or MSCI Emerging Markets in 2007/2008.

“So, where are we today? Today, we have the S&P 500 is killing everybody else over the last ten years, almost 100% outperformance versus most other stock markets,” he said.

“My belief is that pattern will repeat itself,” said Gundlach, who has spent much of 2019 warning of a downturn ahead of the 2020 elections.

“In other words, when the next recession comes, the United States will get crushed, and it will not make it back to the highs that we’ve seen, that we’re floating around right now, probably for the rest of my career, is what I think is going to happen,” he added — suggesting that a recovery won’t be seen for years.

Last month, Gundlach warned about the levels of government debt, and the US equity markets are not sustainable. He told investors that they should brace for significant disruptions.

“The corporate bond market in the United States is rated higher than it deserves to be. Kind of like securitized mortgages was rated way too high before the global financial crisis. Corporate credit is the thing that should be watched for big trouble in the next recession.”

And maybe a downturn in the economy has already started, considering credit markets usually lead. As shown below, significant cracks in the junk bond space are beginning to appear:

The spreads on CCC US junk bonds have jumped above 1,000bps for the first time in more than three years as a sell-off in energy weighs on the lowest-rated debt.

Blowing the CCC market’s risk out to its widest against single-B since April 2016…

Generic CLO BBB tranche is starting to flash very red…

The broader junk bond market posted negative returns last month… as stocks have soared…

Gundlach’s Sept. presentation titled “The Greatest Economy Ever!” made it clear that the next big move for the dollar is lower, and warned that when the next recession occurs, the US dollar and stocks will be in trouble, recommending investors to diversify into other currencies and markets.

And since his view on the economy is that it is anything but the “Greatest Ever”, pointing out the sharp slump in 2019 global GDP projections…

And as we’ve said on multiple occasions, the next shoe to drop is likely the consumer. Something that Gundlach is waiting for as well explained in the latest interview with Yahoo. 

Highlight: A recession probability “is around 40% right now,” @truthgundlach says. “The ISM looks bad… Consumer sentiment, though, remain at a decent level. What we have to watch for is consumer confidence declining, because that’s almost definitional we cause a recession.” pic.twitter.com/cI0JQil68b

— Yahoo Finance (@YahooFinance) December 2, 2019

Authored by Mac Slavo via SHTFplan.com,

The US Department of Homeland Security (DHS) is pushing hard for mandatory facial recognition scans at airports.  The government wants to “remove a loophole” that is currently allowing Americans to opt-out of it right now.

Considering artificial intelligence is already watching and judging almost every move we make, this could be the last nail in the coffin for what’s left of individual freedom.  The government is asking for complete domination over everyone and everything, and so far, people have allowed their very human dignity to be eroded because of it.

Under the existing guidelines, U.S. citizens and other lawful permanent residents have the ability to avoid airport biometric scans and identify themselves by other means. While some travelers have found it difficult to opt-out given opaque or inconsistent guidelines from airport to airport, the DHS would apparently like to cut down on the confusion by doing away with the exemption altogether.

Proposed in a recent filing, the DHS requested a change to the current rules in order to “provide that all travelers, including US citizens, may be required to be photographed upon entry and/or departure” from the US, citing the need to identify criminals or “suspected terrorists.” 

While not yet implemented, the rule change is in the “final stages of clearance,” a DHS official told CNN Business, according to a report by RT.

This new attack on freedom is being condemned by a few groups. 

“Time and again, the government told the public and members of Congress that U.S. citizens would not be required to submit to this intrusive surveillance technology as a condition of traveling,” said Jay Stanley, a senior policy at the American Civil Liberties Union, adding that the rule raises “profound privacy concerns.”

Recalling a data breach in June which saw 100,000 license plate and traveler images stolen from a private contractor hired to store information for the DHS, Stanley said the government simply “cannot be trusted” with the invasive technology.

We are losing what’s left of our basic human rights and liberties pretty quickly at this point.

Rep. Devin Nunes has sued CNN for defamation after the outlet alleged he met with a fired Ukrainian prosecutor in an attempt to obtain information that would be harmful to Democratic presidential candidate Joe Biden, according to the Washington Examiner‘s Byron York.

CNN claimed in a Nov. 22 article entitled that Nunes, the ranking Republican on the House Intelligence Committee, traveled to Vienna in Dec. 2018 to meet with Viktor Shokin – the former Ukrainian prosecutor who claims he was fired for investigating then-US Vice President Joe Biden’s son Hunter.

The “demonstrably false” report was based on allegations by Joseph Bondy, the attorney for Ukrainian-born Lev Parnas – who was heavily involved in efforts by Trump attorney Rudy Giuliani to get to the bottom of alleged meddling in the 2016 US election, along with corruption allegations against the Bidens.

CNN reported that Bondy said Parnas was “willing to tell Congress” that in December 2018, Nunes traveled to Vienna to meet with Viktor Shokin, the top Ukrainian prosecutor who was famously fired in 2016 under pressure from the U.S., represented by Biden, who said Shokin did not do enough to prosecute corruption in Ukraine. CNN cited congressional travel records showing Nunes and a few aides traveled to Europe between November 30 and December 3, 2018.

Quoting Bondy, the CNN report said: “Mr. Parnas learned from former Ukrainian Prosecutor General Victor Shokin that Nunes had met with Shokin in Vienna last December.”

Shortly after the report was published, Nunes said it was “demonstrably false,” but declined to elaborate. In the lawsuit, Nunes has provided the details.

Nunes did travel between Nov. 30 and Dec. 3. The lawsuit says that on those dates, Nunes was in Libya and Malta. Nunes traveled to Libya to “discuss security issues with General Khalifa Haftar,” the suit says. In Malta, Nunes “met with U.S. and Maltese officials, including Prime Minister Joseph Muscat, and participated in a repatriation ceremony for the remains of an American World War II soldier missing in action,” according to the suit.

The lawsuit provides photos of Nunes with Haftar, with Muscat, and at the repatriation ceremony. –Washington Examiner

“[Nunes] was not in Vienna in December 2018,” reads the suit. “Further, he has never met Shokin; never spoken to Shokin; and never communicated with Shokin.”

“At no time during his visits to Libya or Malta did [Nunes] or his staff ever meet any Ukrainians or have any discussions with anyone about the Bidens.”

York notes that Nunes argues CNN should have known that Parnas was an untrustworthy source.

“From all the evidence in its possession, CNN was well-aware that Parnas was a renowned liar, a fraudster, a hustler, an opportunist with delusions of grandeur, a man in financial extremis laboring under the weight of a $500,000 civil judgment, and an indicted criminal defendant with a clear motive to lie.“

That said, York also notes that CNN has a leg to stand on – in that they can simply claim they were reporting an allegation by Parnas through his attorney. The outlet was careful to frame the allegations with phrases such as “Bondy said,” or “According to Bondy” and “Parnas claims.” Thus, CNN can say it accurately reported on an allegation which turned out to be untrue.

That said, CNN’s on-air ‘talent’ presented the Nunes allegation as fact.

The story’s author, Vicky Ward, appeared the night of November 22 on Chris Cuomo’s program. Cuomo asked, “How do we know that Nunes met with Shokin?”

“So, it gets interesting,” Ward answered. “So, Shokin tells Lev Parnas, Rudy Giuliani’s associate, who’s Ukraine-born…”

“So Devin Nunes, who’s at the hearing,” said Cuomo, “and — I’m sorry, but I’m learning this from you, you know, this is new reporting — “

“Yes, yes, yes, yes, yes,” said Ward.

“Devin Nunes, at the hearing, saying ‘This is crazy that the president would want Ukraine to look at the Bidens,’ the prosecutor who was the one at the center of all the controversy — “

“Right,” said Ward.

“Met with Nunes in Vienna — ” said Cuomo.

“Right,” said Ward.

Read the rest of York’s report – including details on a second allegation, here.

Authored by Celine Ryan via CampusReform.org,

University of California Santa Cruz employee was recently forced to defend herself after an unfortunate copy-and paste incident that left her facing accusations of pushing Nazi propaganda.

UCSC Graduate Student Adviser Emelye Neff was accused of slipping white supremacist hidden messages into an email to graduate students of UCSC’s Baskin School of Engineering. In November, Neff sent an email to students about an upcoming deadline. The email subject read “[allgrads] 14 of about 88 *PLEASE NOTE THE UPCOMING UNIVERSITY DEADLINE*.”

The numbers 14 and 88 are often referenced by white supremacists and neo-nazis to identify one another, with 14 being a reference to the “14 words” slogan used by white supremacists, and 88 referring to “h” as the 8th letter of the alphabet and thus being an abbreviation for “Heil Hitler.”

After receiving the email, one student took to the university Facebook group proclaiming that “someone sending emails using the BSOE graduate student affairs email account has some explaining to do,” and insisting that the numbers “can’t be a simple coincidence.”

“Someone is trying to throw in Nazi slogans into the email subject line,” insisted the student. 

While some students commenting on the post dismissed the numbers as having a more likely explanation than nazism, others maintained that it should be treated as promotion of nazi ideology by a university employee using university resources.

Later, the student updated his post, saying that Neff had reached out to him directly to apologize, and acknowledging that the appearance of the numbers that startled the student was, in fact, an “unfortunate and very unlikely coincidence of events, which occurred by accident.”

In defense against accusations that she was using university resources to distribute nazi dog whistles, Neff sent a follow-up email offering her “sincere apologies for the numbers accidentally included in the subject line of the announcement.” 

Neff explained that the numbers were a result of searching for and then copying an old email.

“For message continuity, I had searched for previous announcements in our soegrad [sic] inbox with the title “university deadline” and copy-pasted the content of an older email to a new email and inadvertently included the email search count in the subject line,” Neff explained.

“The email search count was located just about the email message in Gmail and was copied along with the subject line of the older email by accident (the email search count is the text circled in blue in the picture attached to this email for your review). In this unfortunate instance, I was unable to catch the error in time to correct it before it was sent out to students.”

“I am so very sorry for any added confusion, anxiety, or inconvenience my error caused you,” Neff concluded before inviting any students with remaining concerns to contact her personally. 

After the world’s negative yielding debt hit a record $17 trillion at the start of September, mostly as a result of Japanese debt the vast majority of which is trading in negative territory, this number has shrank substantially in recent months, sliding to $11.5 trillion in the past three months.

Well, as of today that number is in danger of becoming far, far smaller in the coming days because the one single bond tranche that represents the biggest component of global negative debt, Japanese 10Y bonds, is on the verge of flipping to positive yield territory, for the first time since April.

In fact, overnight the 10Y JGB yield rose as much as just 0.8bps away from 0 following what was the lowest bid to cover for a 10Y auction since August 2016.

So what gotten Japanese bondholders spooked in recent days? The answer: joining the rest of the world in pushing for  even more debt, Japan – which currently has a debt/GDP of about  250% – is preparing an economic stimulus package worth $120 billion to support fragile growth (i.e., a debt-funded stimulus), according to the Nikkei and Reuters.

While the package would come to around 13 trillion yen ($120 billion), it would rise to as much as 25 trillion yen ($230 billion) when private-sector and other spending are included. A similar stimulus in the four times as large US economy would be roughly $1 trillion.

Some details: the 13 trillion yen includes more than 3 trillion yen from fiscal investment and loan programmes, as the heavily indebted government seeks to take advantage of low borrowing costs under the Bank of Japan’s negative interest rate policy. In other words, the government is hoping to kick start a lite version of MMT, and with everyone else begging Abe to be the world’s MMT guniea pig, it just may work (if only for a bit). Direct government spending is expected to reach around 7-8 trillion yen.

The Nikkei business daily reported on the weekend that the government was considering putting together a large-scale stimulus package with fiscal spending exceeding $92 billion. Since then the number appears to have only grown.

With the BOJ’s stealth taper meaning Kuroda is now monetizing just a tiny fraction of the bonds the BOJ was mandated with buying for the simple reason that it has almost run out of monetizable debt, a fiscal stimulus may be Abe’s only option, even if it means the ultimate collapse will be even bigger.

Meanwhile, Japan’s collapse – ironically enough, a function of its massive debt load – has resumed, and in the third quarter, its economic growth slumped to its weakest in a year as soft global demand and the Sino-U.S. trade war hit exports, stoking fears of a recession. Some analysts also worry that a sales tax hike to 10% in October could cool private consumption which has helped cushion weak exports.

Such spending could strain Japan’s coffers – the industrial world’s heaviest public debt burden, which tops more than twice the size of its $5 trillion economy.

Despite the headline size of the stimulus, actual spending would be smaller in the current fiscal year, and economists are not expecting much of a boost.

Which said otherwise, means don’t think of Japan’s fiscal stimulus so much as an actual fiscal stimulus – those have been tried repeatedly and failed to actually “stimulate” the economy – but as a way for the BOJ to have more debt to monetize. Without it, Kuroda will run out of bonds to purchase as soon as next year.

“We expect this fiscal year’s extra budget to total around 3-4 trillion yen. We should not expect it to substantially push up the GDP growth rate,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute.

Amusingly, the Nikkei claimed that the spending package won’t involve deficit-covering bond issuance; which of course, is hilarious because all debt issuance in Japan, where the “helicopter-money” MMT experiment is about to unfold, is deficit covering.

Authored by Sven Henrich via NorthmanTrader.com,

After weeks of rallying on low volume on virtually no 2 way price discovery and relentless volatility compression the inevitable has happened: $VIX has busted out of its latest compression phase for another big spike very similar to what we saw this summer.

In process most of the November gains were wiped out in 3 days. What does this mean for the rally? Let’s have a look at a few key charts.

Firstly, like this summer, the $VIX burst targeted an open gap above, the 17/17.5 gap left open following the Fed’s QE announcement:

And like this summer $VIX has become short term overbought and like this summer $SPX broke its up trend in the process.

Hence on the surface this is all a very similar looking replay of structures.

But there is a difference. Since the massive liquidity injections by the Fed began $SPX managed to break above the megaphone and rallied until it hit trend line resistance last week:

Oh yes, markets can be this simple, trend lines matter:

Markets are simple.
We just make them complicated.$SPX pic.twitter.com/D856AtQta6

— Sven Henrich (@NorthmanTrader) December 3, 2019

And so the rejection of $SPX makes perfect technical sense.

In the summer I had pointed out that a breakout above the megaphone trend line that gets successfully retested would be bullish, likewise a retest that fails would be bearish.

Today $SPX is engaged in that retest process and it’s key that bulls defend this trend line:

A couple comments:

One: During the recent rally the RSI became the most overbought in 2019.

Two: In October $SPX broke above resistance (yellow line), and has now reverted and is retesting this line as support. If a bounce can hold and make new highs from here it’s bullish. If it can’t hold support or a bounce fails to make new highs this would suggest a potential move to the lower trend line 3000-3030 support. If that breaks watch out, things could get very shaky in markets.

Three: $VIX broke out of its most recent compression pattern and filled its open gap of 17/17.5 today. Hence resistance and reversal intra-day now along with $SPX are support conducive for a bounce/rally.

But should support fail on $SPX, $VIX has risk higher. There are 3 trend lines above that suggest resistance on any $VIX spikes. Above the first line the secondary line suggests 21/23, the next larger line, if the previous doesn’t hold, suggests a move toward 27/28.

Of note: Despite successive marginal new highs on $SPX $VIX has maintained a general trend of higher lows. Hence if $VIX were to break above all of these trend lines we may see a revisit of the 30-50 range.

Unfathomable? Not really if you look at $NYAD:

Here too we can observe a very repetitive structure, in this case a large channel that is now sitting at key support.

When the 2018 channel broke it led to a very ugly period for markets marked by a period of very high volatility with lots of long and short trading opportunities. Indeed the chart above suggests key trend line support below on $SPX should this $NYAD channel break to the downside.

If it does and $SPX experiences a more sizable correction than currently, bulls are faced with a larger issue: That the megaphone breakout was false and did not sustain. As I outlined in Game Over? $VTI is sending a different message altogether.

So yes, defending these support zones here is key for bulls. Falling below the megaphone trend line would risk that markets are repeating the pattern that we’ve seen over the past 2 years: That new highs are not sustained. The September 2018 highs petered out 3.5% above the January 2018 highs. The July 2019 highs petered out 3% above the September 2018 highs. In all of these previous cases we saw sizable corrections off of new highs. These highs here have so far ended at 4% above the July 2019 highs.

And now bulls need to prove that they can sustain new highs. It is key for how the rest of 2019 plays out.

*  *  *

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Larry Page and Sergey Brin, the Stanford students who founded Google 21 years ago as a research project before transforming it into one of the world’s most valuable companies, are stepping back from their day-to-day roles at tech holding company Alphabet, ending what is arguably the most successful management double-act in history. Sundar Pichai, who in 2015 became the CEO of Google, will also become the CEO of Alphabet.

In a public letter announcing the change, Mr Page and Mr Brin did not give specific reasons for stepping away from the company, instead painting it as a natural progression for Alphabet as it becomes a more mature company.

“Today, in 2019, if the company was a person, it would be a young adult of 21 and it would be time to leave the roost. While it has been a tremendous privilege to be deeply involved in the day-to-day management of the company for so long, we believe it’s time to assume the role of proud parents—offering advice and love, but not daily nagging!”

* * *

“While it has been a tremendous privilege to be deeply involved in the day-to-day management of the company for so long, we believe it’s time to assume the role of proud parents — offering advice and love, but not daily nagging!” they wrote.

In 2015, when Google reorganized into the Alphabet holding company, Page and Brin first stepped back by naming Pichai CEO of Google, which became one of several businesses owned by Alphabet.

Both Page and Brin, who between them control more than 51% of the votes in Alphabet through a special class stock, will remain on the company board.

“We are deeply committed to Google and Alphabet for the long term, and will remain actively involved as board members, shareholders and co-founders,” Page and Brin wrote. “In addition, we plan to continue talking with Sundar regularly, especially on topics we’re passionate about!”

The shake-up sees Sundar Pichai, who took over management of the Google internet business four years ago, also take on the CEO at Alphabet. As head of the search business, he already had authority over operations that accounted for more than 99% of Alphabet’s revenues. Now, as head of Alphabet, Pichai will also take over the running of the company’s “other bets” — a collection of “moon shot” technology projects that include the Waymo driverless car unit and Calico, a healthcare company set up to tackle illnesses that are the most common cause of death.

According to Bloomberg, Page has been criticized for not engaging more as Google’s growing power has sparked scrutiny from regulators and lawmakers. Promoting Pichai to lead Alphabet may address some of these concerns.  Page and Brin retain majority ownership of Alphabet through special voting stock. They do not plan to sell more company stock, beyond their previously disclosed plans, a spokeswoman said.

Alphabet shares rose 1% in afterhours trading on Tuesday. The stock closed at $1,294.74 in New York, leaving it up about 24% so far this year.

Like Ray Dalio advised during a recent appearance with Paul Tudor Jones, it’s not the growing national debt that Americans need to worry about, so much as the liabilities that don’t appear in the federal budget.

And a lot of those liabilities are centered around America’s crumbling pension system. According to some data providers, American public pensions are suffering from a trillion-dollar gap between their liabilities and assets.

Some pension managers have tried to combat this by firing expensive managers and allocating more money to low-cost passive strategies. Marc Levine, the former chairman of the Illinois Board of Investment, is known in the industry for firing hedge funds and other expensive active managers who were “destroying value” with their enormous fees. Levine said he still stands by the strategy that he embraced during his four years of running the Illinois Pension. Levine said he found soon after taking over that the state pension fund’s benchmarks for its hedge fund investments was a joke – it was an average of hedge fund performance. This prompted Levine to change it up and compare the actively managed hedge funds to index funds, and soon discovered that the hedge funds were extremely overpriced.

After offering viewers a handful of suggestions for passive funds that he would recommend for trying to track the broader US market.

Levine warned his audience that market timing rarely works, and if investors are saving for the long-term, they shouldn’t hesitate to invest now, before transitioning into a discussion of the endemic problems of state public-employee pensions funds.

Once you get these defined-benefit pensions rolling, Levine said, they’re “inherently unstable” and they end up hoovering up taxpayer money with their generous benefits.

“I think the federal government is going to have to do something about this because, basically, the potholes need to get fixed the traffic lights need to work. I think ultimately there will be some kind of grand bargain where they freeze benefits in exchange for federal money in some kind of grand bargain. Is that going to happen in the next couple of years, no, but in the next decade? I suspect it will.”

“Like a bailout?” asked MarketBrief’s Caroline Woods.

“Exactly,” Levine replied. “But I don’t worry the most about that because those are very rich benefits. Those beneficiaries are making more in retirement than they made while they worked.”

The real retirement crisis, Levine said, is the lack of retirement savings for all Americans (something that’s only going to get worse as time moves on).

The discussion of America’s pension crisis starts at around the 5-minute mark: