Thursday, May 14, 2020

Has C down begun?

For the next eleven weeks, equity markets will be in a dialogue with the monetary policy gods who now run our entire world, over the question of direct support, as in Japan.

Market crashes proceed in three waves -- ABC.  The question now is whether "A" and "B" are in, and we are beginning a destructive 5-wave impulse "C" to new lows.

Channel break?  A plausible "B" wave triplet complete?

S&P 500 hourly + channel break OMG

Let us propose this scenario:

  1. "C" down has begun, selling into EOM, support ~2075 from prior lows
  2. Bounce into June FOMC is on "hope" that the Fed will buy equities - 2460?
  3. Fed declines to buy equities
  4. A real market crash to ~1040 S&P after June FOMC, 3 of "C"
  5. Late June to July opex on EOQ2 fund rebalancing and new "hope"
  6. By late July CMBS, CLOs, RRE all imploding, market follows down
  7. Shocking new historic lows - 520 on the S&P 500?
  8. Fed announces direct purchases of $SPY, $QQQ at the EOM July meeting
  10. MMT and start of the final collapse of global credit monetary system

S&P 500 hourly "C" wave to 520

Good luck to all friendlies.

Wednesday, April 29, 2020

What would it take ...

... for the Fed to announce a policy of direct ETF purchases to support U.S. equities?

I bet a mid-May oil crisis could do it.

The June /CL contract settlement is hanging out there waiting to wreck the fake US shale oil industry, the worthless paper underwriting the mess, and the financial infrastructure that started it all.  Oil was up 30% today at one point, in a crazy act of denial of what is inevitable.

The Saudis have sent an armada of oil tankers to our shores, and we cannot not receive them, or they will go somewhere else, to be paid with something else (non-$USD).  So, short of sinking these ships in the Atlantic, we are trapped now.

S&P 500 hourly May crisis and collapse

What if we don't visit the 200 DMA now?  What if we finally have a proper reaction to these disastrous unemployment reports tomorrow morning?  Any rollover into "C" should be as shocking to us as the initial panic waves off the 3393 bubble top.  The floor just drops out.

The heart of the oil crisis, the chaos into the 5/19 end of trading for 5/20 delivery, becomes the 3rd wave down of such a crash.  The final waves of stock liquidation, probably the little people at this point with their 401(k)s, take us to the FOMC in early June, to beg for Fed pesos to keep the S&P afloat.

So it's June at the earliest, because the fair value of the S&P 500 is still 520.

Wednesday, April 8, 2020

Rollover ahead

It looks like we have one more pop, to ~2882 on the S&P into the holiday weekend tomorrow.

4chan genius

Current chart and count, looks like we are descending in ABC triplets, may keep tripping us up for awhile.  520 on the S&P 500 in August makes sense.

S&P 500 hourly, LOG10

same chart, but linear

Wednesday, March 25, 2020

No, Peter Schiff, this is not hyperinflation

The usual suspects have come out of the woodwork, Peter Schiff and Jim Rickards, warning of hyperinflation and the necessity of buying gold yesterday.

They are both wrong.  A lot of people scrapping for gold at $1600/oz are going to sell this stuff in frustrated desperation for $1000, maybe less, because they prefer to have dollars again.

Today is not hyperinflation, nor is it next week.  The economy has come to a full stop.  This is a deflationary apocalypse.

Does anyone seriously believe in a wage-price spiral at this juncture?  The Fed is shoveling cash into a black hole, desperate to stave off cascading debt defaults and complete chaos.  They will shovel a lot more, so that we may survive this crisis.  They simply have no choice.

Daniel Sullivan says it's a "bank holiday", and he may be onto something.  Enough of this was in motion or telegraphed ahead of time, such that the Wuhan coronavirus provided the trigger for the crisis.  There was even a great topping wave count on the S&P 500.

The Fed is desperately trying to keep our economy and society from imploding.  They and Congress will create a huge mass of "money" as quickly as possible, buy anything, prop up whatever, because we still have the world reserve currency, and so we can do this.  It's a feature.  And the rest of the world is counting on us to do it.

Let's review where we are again on the long-term chart, with annotations added to indicate whether we are at risk of hyperinflation.

As we are screeching south towards a low of maybe 520 on the S&P 500, this indicates that we are not at risk of hyperinflation.  Money is scared and scarce!  The flows are all broken.  We are in a crisis, it will be vicious, and maybe also brief (over as soon as August?).

They will stuff all the channels, they will feed all the geese, they will buy all the paper at par, and it won't be fair, and you won't like it.  But it may just work, for now, and that is all that matters.

The hyperinflation comes later.

The hyperinflation comes on the heels of one of two reactions to surviving this crisis.  Either we gain a new confidence in our ability to print money at will and to buy all the things, so we keep doing it as formal policy (MMT), thinking we can "manage" it; or we find ourselves tragically stuck here, unable to recover to a new normal.  The built-in $1T Federal deficit will become $2T annually, eventually $3T, and we no longer believe in the worth of this debt or of our money.

Hyperinflation arrives when we have to print money to pay the interest on all of this debt.

The rest of the world will suffer comparably, as we apparently bounce back from this, while they are still hurting, because we create the money.  Hyperinflation arrives when the envy and resentment for this privilege drives them to end the system.

Hyperinflation arrives when the tens of millions of New Americans either feel no obligation to pay for these ancient obligations, or they are just not productive enough to support them.

Hyperinflation arrives when we have even dumber scams than crypto-currency and $900 $TSLA, that we cease to give any credence to any supposed values.

This could happen next year or a decade from now.  The current crisis sets the stage for us to bounce back and evolve into that new normal, where we finally exhaust the US dollar as the world reserve currency.

Current wave count, I think we finished W4 today and are headed down in W5 of A, which should undercut the topping megaphone a bit, reaching 2015 or so at the end of March.

SPX hourly

April is the relief rally.  We will get positive news on the Wuhan coronavirus front, have a lot of free, fresh new money circulating in the system, and we might even get back into the office.