There's a New Moon this week (high), and one of McHugh's splendid phi mate turns coming up ... soon. Dr. McHugh absolutely nailed several important chart turns in 2018 with his cycle dates.
Current wave-count, looking at a long-in-tooth 5 wave structure here. Is it the first leg of a much larger wave way up above 3,000 on the S&P? Is it a "failed 5th" wave that dies at 2872 (last January's VIX-splosion high) and gives us proper impulses down? We know for sure later this year.
I don't see how we can reach any real agreement with the Chinese on the issues that count, save for complete capitulation on the level of treason by the administration. They will never respect IP rights, and we cannot accept Huawei (née Nortel) anything on our soil. A turn late this week would fit either a failed "deal" or a meaningless agreement, where the hype has already been priced-in, and the selling starts.
| S&P 500 hourly, wave 3 on peak RSI |
Deep-Throat IPO thinks we may see bulk-selling of US equities soon. He has a larger thesis about deflation in China matched with a bad policy response here, resulting in rampant dollar inflation. Whichever track we take, what is most important is that we zero out the bad debt, unsustainable obligations, and immoral promises (e.g. .gov pensions), so that we may one day have sound money.
If we can get a proper turn this week, and real impulses south, then this bear would like to see us test the long-term effective Fed policy channel on the S&P 500, around the 1400 level, late this year.
| S&P 500 daily, megaphone, supports, down to 1400 |
IMO, it is this channel on the S&P that will determine the final outcome of this crisis -- whether we break out below the channel into a severe and cleansing deflationary depression, or whether the Fed can force-feed debt and credit into this clown-world system (MMT and teh helicopter moniez) to send us to hyper-inflationary nirvana.
| S&P weekly, with the Fed clown-world channel |
24 comments:
Someone please kill the $VIX this week for teh cheap SPY puts.
Looks good Christian
Jesse says we’re tracking 1937
https://jessescrossroadscafe.blogspot.com
Tom DeMark has top in QQQ at 175.2, which we should hit this morning. Sees similarities to 1973, though needs to see how sell-off begins to confirm that. The 1973 pattern would call for four or five days near straight down to close below the 50 day MA. See that, and top is in, so says Tom.
GOOD to see you back Kevin, lets hope this is a start down today
Market very weak. Weeks of nothing.
Finally time to retrace some of that foolishness! I know the bears are going to get all worked into a froth here, but it's likely to be a shallow 5% or so pullback. I'm still betting 2019 will be a wildly bullish year after the first quarter. The March FOMC meeting will be the launchpad. Buy at the March meeting, sell at the October meeting. We're working out way toward one doozy of a recession. Once again people have gotten themselves up up their necks in debt, right about the time their jobs are going on the chopping block. By this time next year the unemployment rate will likely be skyrocketing.
Retrace? Or 1937 scenario and we are headed below 1850, and then to support ~1610.
Draw the channel from the highs.
Muh channel! Compare the Fed of 1937 to todays Fed.
Indeed. All the abuse that was taken. The evil doers now gone
Or compare 1937s market size to today
Well well well. What do we have here
"Well well well. What do we have here" Cryptic comments?
The goal-line stand will be at 2600 -- last chance to get the IHS and a target north of 3200 S&P.
I would be very surprised if we lose 2600. The 2630-2660 range looks like a good landing spot. After losing big in their 401K's, people are likely to lighten up their stock exposure right before blast off to 3200+. I know one person who lost 70K in that December selloff! WAY overexposed to stocks/company stock. I just want to say that like some here, I fully realize we're inching our way toward an end game scenario. I'm not smart enough to know when that will be, but I can't imagine it's more than 5 or so years away.
Carter Worth of CNBC Fast Money (likely the most bullish program on TV)...listen carefully!
https://twitter.com/CNBCFastMoney/status/1104147127612125184
I agree with Carter for the most part. Originally I thought we would retest the lows, but it's looking less likely by the day. 5-7% retrace is starting to look more likely. We will need some serious deterioration in breadth to get back down to 2350.
"We will need some serious deterioration in breadth to get back down to 2350"
it's occurring...it doesn't happen all in one day...
How a Soaring Dollar Will Cause Deflation
The U.S. dollar has been slow to challenge the 97.87 peak from last June (see inset), even if its buoyancy has gone more or less according to our forecast. Our long-term outlook for the greenback remains very bullish — so bullish, in fact, that we see the uptrend culminating in a short squeeze that wrecks the global financial system and reduces most commerce to a state of barter. The initial phase of this scenario would feature a rally in the Dollar Index that tests and then breaches highs near 120 recorded nearly two decades ago. Well before then, however, every profligate dollar-borrower on earth — you know who you are — would be crushed by the burden of having to pay off debts in a super-hard currency. The list of potential losers stretches on and would include, for one, virtually all of the players in a derivatives markets currently valued at more than a quadrillion dollars. You should view every dime of this as ‘unactualized’ deflation in order to understand why the puny central central banks are powerless to prevent it.
Not that they would even try. For, any attempt by the banksters to monetize this black hole of debt when it begins to implode would be tantamount to hyperinflating. And that would be worse than doing nothing at all. When the crisis hits, perhaps with a few banks failing to open some Monday morning, it will be impossible to roll short-term loans. This will force debtors to settle up in cash, creating a desperate need for dollars. The resulting short squeeze is why deflation rather than hyperinflation is the more likely of the two scenarios to produce a financial day of reckoning.
Bicycling to Soup Kitchens
In a debt deflation those who owe would be liquidated into bankruptcy, pushing their creditors into the same straits. This is computationally unavoidable, since, as the late C.V. Myers once wrote, every penny of every debt must ultimately be paid — if not by the borrower, then by the lender. Although the dire implications of this truism apparently have not registered even dimly on the brains of economists or politicians, you can bet that at least a few banksters can do the math. They will think twice about riding to soup kitchens on motorized, $10,000 trail bikes.
Hyperinflation could conceivably follow deflation, but only after the assets and liabilities on the global ledger have been deflated to zero by waves of bankruptcies. To those who would argue that “the Government” would simply bail out credit markets via monetization, I’ll recommend Adam Fergusson’s When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany. As you will come to understand, this cannot happen to the world’s reserve currency, the dollar — at least not immediately and through willful acts of the government, as occurred in Germany in 1921-23.
When the Trumpets Sound
In the meantime, the laborious consolidation that has taken place on the dollar’s charts for the last seven months suggests that the impending breakout above 97.97 will not be strong enough to signal the climactic phase of the dollar’s bull market. This will happen eventually, but not before the trumpets sound from on high. As individuals, we have time to prepare for the worst by paying down our debts. But this opportunity will exist only as long as a feisty stock market affords us the illusion of economic health. Once the inevitable bear market begins, it will be far more difficult and costly to get out of jeopardy. Enjoy the rally while it lasts. (If you don’t subscribe but want a peak behind the headlines, click here for a free two-week trial to Rick’s Picks. It will give you instant access to all features and services, including a 24/7 chat room where great traders from around the world share ideas that can help you profit.)
Hyperinflation happens because of a loss in productivity, not printing too much money. Weimar, Zimbawee, Venezuela all suffered massive productivity losses before hyperinflation kicked in.
When the Fed prints money they can do two things with it.
(1) Give it away (inflationary)
(2) Loan it away (initially inflationary,ultimately deflationary)
(2) is ultimately deflationary because when the money is paid back with interest there is less money circulating in the system (the interest).
The Fed can play both sides.
To see an example of a disciplined money printer who monetizes their debt without hyperinflation look at Japan.
hey engineer,
There has NEVER been a case of hyperinflation anywhere in the world WITHOUT money printing/drastic increase in money supply!
You can have all the loss of productivity you want BUT without money printing it will not result in hyperinflation!!
Where Japan is concerned, it is a unique situation where their own population has tremendous savings and other factors which are beyond discussion here in the comments section - we, on the other hand, have one of the lowest savings rate in the western world.
Weimar
https://en.m.wikipedia.org/wiki/Occupation_of_the_Ruhr
https://en.m.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
"But all the workers on strike had to be given financial support. The government paid its way by printing more and more banknotes. Germany was soon awash with paper money. The result was a hyperinflation."
Zimbawee
https://en.m.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
"Hyperinflation in Zimbabwe was a period of currency instability in Zimbabwe that began in the late 1990s shortly after the confiscation of private farms from landowners towards the end of Zimbabwean involvement in the Second Congo War."
Venezuela
Do I really need to post a link about Maduro and his policies?
Japan is not a special case. The Japanese government simply doesn't do stupid things like those other countries have done (paying people to strike, land appropriation, jailing people for raising prices).
And it's not the money printing itself that causes hyperinflation, it's the velocity of the currency circulating over many hands in a short period that causes it. The Fed can't bring funds rate above 2.25% today without the markets panicking. Before the financial crisis it was at 5%. Before the dotcom crash it was over 6%. That is how a fiat scam works. Why would America's end result be any different than the countries listed above? Because we're the USA?
Sad that the permabulls cheer on the stock market making its highs on cheap fiat money. I guess the only thing that matters to them is nominal value, not store of value.
Think they hike next week? The curve is tight.
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