Are we in the bubble yet?

The Fed OMC meet for their monthly pow-wow today and tomorrow. The big money is on no change and no surprises. As a natural contrarian, it pains me to agree! The latest US economic data has been very weak – yesterday’s Pending Home Sales (PHS) data was a huge miss again.

With PHS numbers month-on-month staying well under 0% and trending down, when will the market sit up and notice that the vaunted US real estate recovery may not be the kicker to the general economy that many assume? And in fact, it is an echo bubble!

We are seeing a gigantic bubble in the London market. Sentiment, though, is still bullish, which allows pundits to proclaim in today’s Telegraph that the London boom will spread into the rest of the UK. Ha! Fat chance with wages stagnant – and likely to remain so. London is a separate country.

Signs of bubble behaviour are now appearing with Help to Buy scheme for 95% mortgages.

Also yesterday, US manufacturing output slumped in September. This is in synch with overall world trade, which remains flat on its back:

This is a scary chart. The bulls are cheer-leading for growth. But there isn’t any. So despite all of that QE stimulus, which clearly has not gone into trade, economies are still mired.

But we know where the funds have gone, don’t we? That’s right – into the ever-popular banking system where they have bought equities with abandon. But they all still carry those bad loans, and this skeleton in their cupboards will come out to haunt them (and us) when interest rates resume their rise.

GBP/USD

Has broken my short-term tramline and is heading for my long-term lower line:

The lower line should provide support, but if it is broken, then we may see a sharp move to the danger zone. And breaking that would confirm the “V” top – and a major top in the 1.6250 level.

I positioned short yesterday on the minor tramline break.

DOW

Is inching up in its extended rally – and I just have to show you my superb tramline set on the 15-min: