U.S. Stock Market Correction Not Made In China – Ep.104

* What a week for global stock markets, but in particular, the U.S. stock market, which had its worst week in 4 years

* The Dow Jones down better than 1,000 points - over 10% from its peak puts it in official correction territory

* One-third of the stocks in the S&P 500 are already down 20% from their highs

* The Dow lost more than half of the 1,000 points today - 530 points, which is the 9th biggest point decline ever

* This is on top of the 350 points dropped on Thursday

* Thursday we broke below some key technical levels so Friday's drop was inevitable

* There could be a bigger one looming for Monday

* This is reminiscent of the weekend before Black Monday back in 1987

* We are only about 300 points above the lows from October last year when St. Louis Fed President James Bullard saved the market and sent the Dow up 2,000 points

* This time he is throwing the market an anchor

* He still indicates the Fed is undecided

* What data over the next couple of weeks could be that significant?

* The Fed does not want to admit that they can't raise rates

* When is the Fed going to blink?

* Valuations are extremely high, and the Fed is about to go from supporting the market to leaning against it

* The economy is decelerating

* I think the market is going to surrender all the gains it has made since March of 2009

* None of those gains have been real - they did not come from increased production or a genuine increase in corporate earnings, it was all Fed engineering

* The market has gained no ground since QE was suspended

* If the market goes down on Monday, what is the Fed going to do?

* The Fed needs an excuse not to raise rates

* The drop is not because of China

* The problem in China and in the emerging markets is caused by the perception that U.S. Fed is going to raise rates

* The markets want to blame the market correction on China but that is not why our market had a correction

* Emerging market currencies are taking the brunt of the selling by those who are expecting a Fed rate hike

* The euro is very strong today, and the dollar index is declining

* The euro is going to go on a big move, especially if the Fed caves

* Gold is up $80 in the last 2 weeks

* What happened to the theory that gold will collapse below 1000?

* Two weeks ago hedge funds were for the first time net short gold

* How is that trade working out for them now?

* A lot of people are trapped short the euro and short gold

* Now pro-dollar bets are pressing smaller currencies

* This is the last throes of the dollar bull, based on the rate hikes that aren't going to happen

* At the end of the 6 or 7 year journey, there can't be a rate hike

* If the Fed actually raises rates, they lose credibility because they will have to immediately reverse course

* If they do not raise rates, they can say caution is needed because of another dip in the recession

* This way they don't have to admit that the policy was a failure

* The only economic data that came out today was the August Manufacturing PMI number - expected to improve over last month

* It dropped again to 52.9 - the lowest level since October 2013, and the biggest miss in 2 years

* If the Fed is truly data dependent it would have already admitted that it can't raise rates

* At the end of 2014, I predicted that 2015 would be a much weaker economy than forecasted

* I was right about that

* I thought by now the Fed would have admitted that the economy is too weak for a rate hike

* But the Fed just keeps talking about a potential rate hike as though it were a real possibility

* This is a very dangerous game



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