We are now at the mercy of oil and the commodity markets. Bernanke’s plan to print our way to prosperity is destined to fail. Ultimately, he is just going to spike inflation and collapse the global economy, resulting in a worse downturn than what we saw in 2008/09. Let me explain. Words: 510

So says Toby Connor (www.goldscents.blogspot.ca) in edited excerpts from his original article* (which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.)

Connor goes on to say, in part:

The Last “Four” Year Cycle Longest in History

The last “four” year cycle that started in 2002 and bottomed in the spring of 2009 was the longest “four” year cycle in history. It was stretched to these extreme lengths by Bernanke’s desperate strategy of debasing the currency to avoid the bear market that should have begun in 2006.

The Current “Four” Year Cycle Has Been Delayed

As I have mentioned before, often a long cycle will be followed by a short cycle and, this being the case, the current “four” year cycle should have bottomed in the fall of 2012 [see chart below]. That process had begun last year in May but was temporarily aborted by massive Central Bank printing.

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As such, as convincing as the current stock market rally has been, I am confident that what is happening now is an ending phase (that doesn’t mean that we won’t see a test or even a marginal break to new highs first ) and not the start a new secular bull market…

The Next “Four” Year Cycle Will End In A Great Depression

Amazingly, I think we are going to see another stretched “four” year cycle and this one is going to end just like the last one when the price of oil spiked far enough to collapse the global economy and create a market crash [see chart below]. The next economic downturn won’t be a Great Recession, it will be a Great Depression.

The Current Situation

At the moment the stock market is in a runaway move very similar to what unfolded out of the summer 2006 yearly cycle low. These runaway moves are characterized by uniform mild corrections all of similar magnitude and duration. For this particular rally the corrective size has been roughly 25-35 points. This could continue for weeks or months, but all runaway moves end in the same fashion, with a crash or semi-crash that wipes out months of gains in a matter of days – or even minutes.

The Tipping Point

Generally speaking, once a corrective move has run 20% beyond the normal correction size that is the signal that the move is over [see chart above]. Unfortunately, [by that time] you are usually already into the ‘crash day’. This is why, at some point, (whether that breaking point is at $120 oil or $160 oil is anyone’s guess,) one has to say enough is enough, and stand aside, or risk getting caught in the crash.