U.S. Stocks: Collapse Looming? Dollar Declining

The atmosphere in the U.S.financial markets has turned electric as Friday night saw the stock market plunge right after opening.This unsettling trend immediately raised alarms among top government officials,signaling what might be the start of deeper economic troubles.Such fluctuations are not uncommon; however,a shift of this magnitude typically renders policymakers—and especially the Federal Reserve—on high alert.

As the NASDAQ index fell by approximately one percent,Federal Reserve Governor Christopher Waller quickly jumped into the fray with statements hinting at emergency interventions.He suggested that the Federal Reserve might consider a significant interest rate cut of 50 basis points at their November meeting to stabilize the market.Yet,for many investors,the question remained: can the U.S.stock market defy gravity and sustain its growth amidst such volatility?

Concerns are mounting as market experts,including renowned financial analyst Michael Oliver,have sounded the alarm regarding a potential market crash.Oliver,credited with forecasting the dramatic stock market collapse of 1987,warns that the current trends indicate a looming disaster for the U.S.stock market.His credentials as the founder of Momentum Structural Analysis (MSA) lend weight to his predictions,as he employs distinct momentum indicators to analyze market dynamics instead of relying merely on traditional price charts.

Oliver’s technical analysis reveals an unusual momentum scenario in the U.S.stock market that could lead not to a gradual decline,but rather to a sudden and severe crash—a notion that understandably evokes anxiety among investors.While the current superficial indicators may suggest stability,a closer inspection using the monthly chart of the S&P 500 in conjunction with third-quarter moving averages unveils alarming trends reminiscent of the prelude to the 1929 crash.He notes that the NASDAQ 100 index has soared 16 to 18 times since its low in 2009,whereas the S&P 500 lagged behind with a rise of only 7 to 8 times.Given these disparities,any downturn in the fourth quarter could instigate a widespread sell-off,exacerbating a market collapse.

Simultaneously,Oliver forecasts that gold prices might surge to between $3,000 and $3,200 per ounce,although he cautions that this might not signify the peak for gold.Alongside gold's ascent,he speculates that silver prices could skyrocket to the range of $55 to $60 per ounce.Historical parallels offer a troubling reminder: many may recall the tumultuous financial landscape of October 2008 when both the stock market and gold prices plummeted for nearly six weeks.Prior to the stock's decline,gold had been on an upswing,and the stock markets had already been in a bear position for almost a year.

During that time,the technical indicators for both gold and silver revealed signs of adjustment,ultimately leading to their decline further fueling instability in stock markets.Historically,gold and stock markets have not maintained a strong correlation.In the wake of the 1987 crash,for instance,when stocks fell sharply,investors rushed to gold,causing its price to soar.

Yet,one must wonder,are we witnessing another case of “the wolf is coming”?Has the market merely conjured up shadows of panic without substantial backing?Alternatively,has the dollar experienced a decline in credibility that casts a long shadow over the future of the U.S.stock market?

The integrity of the dollar today contrasts starkly with its former self.Even as the Federal Reserve contemplates rate cuts,the underlying structural issues could render such measures ineffective.Historically,whether through interest rate hikes or cuts,the dollar maintained its viability by being tied to oil transactions,which allowed the burden to shift to other nations,particularly manufacturing heavyweights such as China and oil-rich states in the Middle East and Russia.

However,the moment the dollar detached from its oil anchor,any infusion of liquidity through interest rate reduction or quantitative easing risks accelerating its decline.Many advocate that the dollar can navigate these turbulent waters,believing that the Federal Reserve can simply print money ad infinitum.While numerous governments have attempted such strategies,history reveals that none have emerged unscathed from the repercussions.

Reflecting on historical instances,one remembers the fiscal turmoil following the hyperinflation of currency in 1947 in China after excessive printing of treasury notes led to catastrophic governance for the Kuomintang,ultimately exiling them to Taiwan.Similarly,Japan,which has long engaged in policies of excessive currency issuance,now finds its yen in a precarious condition,raising questions about what this bodes for their economy.

Interestingly,emerging nations are not sitting idle amidst dollar fluctuations.Recent reports highlight that India has dramatically increased its gold purchases,hitting approximately $100.6 billion in imports in August alone—triple that of previous months,reinforcing a historical trend for the country as gold prices hit a staggering record of $2,622 per ounce.

Simultaneously,Saudi Arabia has also been quietly accumulating gold reserves since early 2022,acquiring around 160 tons through hidden operations.Their strategic carefulness in buying gold without antagonizing the United States suggests a shift in economic strategy,pivoting away from dependency on the dollar as the quintessential currency for their oil trades,instead cementing their role as a substantial player in global gold reserves.

The actions of nations,from significantly increasing their gold reserves to reassessing their financial dependencies,signal a global readiness for the potential depreciation of the dollar.Experts universally agree that in the forthcoming years,the devaluation could outpace any in the last several decades,with the possibility that the fallout might provoke even greater catastrophes.Thus,as the stock markets wade through turbulent waters,the world watches closely,bracing for what comes next in this unfolding financial drama.