Stockman noted the S&P 500 has struggled to stay above the 2,000 level since for months, with numerous dips, plunges and signs of weakness since then. Now the clock is striking midnight, in his estimation.

 

"After the Fed has spent six years inflating a new and even more stupendous financial bubble – the third this century – the market top is in," he declared on his Contra Corner blog.

 

Stockman believes the timing of the Federal Reserve's expected monetary tightening, which consensus sees coming no later than this summer, could hardly be worse — it is coinciding both with the market top and an emerging downturn in the broader economy.

"The Eccles Building [where the Fed is housed] has been so petrified of a Wall Street hissy fit that it has cowered its way right into the worst central bank error in recorded history: Namely, it is finally attempting to wean Wall Street from its addiction to free gambling money just in time for the tepid post-crisis business cycle recovery to exhaust itself," Stockman predicted.

 

He said the stark evidence shows manufacturing production is in already in the tank, even while U.S. business inventories are filling up faster than a Cadillac on $2 gasoline.

 

"The buy-the-dippers will be looking for their heads in a bloody basket. The Fed is about to become your fiend, not your friend."

Stockman, no fan of the Fed's ultra-loose monetary policies, complains the world's industrial economy "has become unhinged by the money-printing central banks. First it vastly over-invested; now it will chronically over-produce," he noted.

 

"Needless to say, this global deflationary tide will kill profits, growth and jobs as it unfolds," Stockman argued. "The great credit-driven boom was universal and fueled by out-of-control central banks. Now comes the bust phase, and these same money-printing central bankers have no clue what to do about it."

 

Investment pros playing the derivatives market are betting the Fed will hike shot-term interest rates as early as June, which observers believe could put pressure on stocks, The Wall Street Journal reported.

 

However, the Journal said Fed officials are not dead certain to act by then. "Fed Chairwoman Janet Yellen has said she doesn't want to start moving rates up until officials are 'reasonably confident' that inflation is heading back toward the Fed's 2 percent goal after running below it for 34 months running," the newspaper noted.

 

Investors are reduced to reading tealeaves when it comes to the Fed's plans to switch to an upward rate bias, The Associated Press reported.

 

As evidence of the heavily nuanced pronouncements from the Fed, David Jones, author of several books about the Fed, told the AP: "I think the odds are better than 50-50 that the Fed . . . will drop the word 'patient' at the March meeting, and that would put an initial rate hike in play, perhaps as early as the June meeting."

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