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
9. BEAR MARKET OVER
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.

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.

When you can no longer hedge risk

Do you understand the gravity of what happened on Friday?

Do you see what I see?

With the quad-witch opex Friday, a great mass of financial insurance just came off the table.  The market bounced off resistance mid-session, and sold hard into the close.

The $SPY made new crash lows in after-hours trading.

Here is the problem.  With a sustained sky-high $VIX, hedge funds and other players are no longer able to hedge long positions in the markets.  Say you are a fund with 1 million shares of $SPY, optimistic for the long-term growth and progress of the America, but worried about the risks posed by an uncertain event, like Brexit or a "trade deal" negotiation.

With volatility at normal levels, with $VIX below 20, you can always buy put options to insure the value of your holdings against an unexpected drop in prices.  If you're clever enough, you might even cash out your puts green, rolling them into buying the dip on the indexes to make even greater returns, because the market, after all, she only goes up.

The $VIX is now pegged above 60, spreads are blown out, and put options as portfolio insurance are no longer possible -- with any duration, they are outrageously expensive.  The existing risk models and approaches no longer work.

March options have now expired.  You cannot insure your positions.  But you can sell them.

The S&P 500 closed at 2304.92 Friday.  If the /ES futures are limit down Sunday night, then we have the following circuit-breaker bands for Monday:

1. 7% - 2143 SPX, 15-minute pause
2. 13% - 2005 SPX, 15-minute pause
3. 20% - 1843 SPX, all markets closed for the day

A rare level 3 circuit-breaker crash is very much on the table for Monday.

The nearest clear technical support would be 1810 on the S&P, reached at the open on Tuesday.  This is a no-brainer for all players, which will rally us back to channel resistance -- now under the topping megaphone -- into the end of the month.  I believe that algorithmic trading systems will buy an 1810 low.

A final drop into early April returns us back to the area of the 2007 (year) highs, recognized as critical and truly ominous by everyone.

S&P 500 hourly zig-zag crash to 520

A sharp relief rally on the lunar cycle can then take us back to overhead resistance from the original move and base channel off the top.  We may see a slowing of the Chinese virus throughout the world, a leveling off of new cases and casualties, maybe even the welcome news of effective treatments for it.  These are good things, yes, but this pause and rally is just the eye of the storm.

We then meet the C-wave of the decline, as the economic impact of the virus arrives, like the second half of a hurricane beyond the eye-wall.  Now we get the mass-layoffs, destroyed earnings, collateral damage (on actual collateral) in real estate, commercial and residential, as well as all of the consequences from that.

The long-long term channel support for the markets is at about 520 on the S&P 500, which we could see as early as the June FOMC meeting.  This level also is the trendline between the 2002 and 2009 market lows.  The Fed will go full Bernanke helicopter-money on this one, maybe they can print up $50K or even $100K per American household.  The Federal quarantine shutdown bonus coming soon is a trial run of this mechanism.

long-long-term S&P 500 chart

We should know on Sunday night.  Good luck to friendlies.

Edit:

If we get a dump tomorrow that is comparable to the dive to 2854 in wave 1, then maybe we visit 1940 on the S&P 500 tomorrow.  Congress is bickering about fiscal stimulus package details, so the equity markets may help them resolve their differences.  This would trigger 2 halts tomorrow.

capitulation selling to end each leg down

Black swan - Corona Virus - FULL STOP

The .382 retrace from the 3385 high on the S&P 500 back to the 2009 low @ 666 is precisely 2346, the spike low from Christmas, 2018.

What's your favorite analogue?  Northy likes 1937.  I like 2008, a beautiful shape for a disaster.  From 3385 we get a head & shoulders with 2346 as the neckline, followed by a violent collapse to 1000 on Election Day, 2020, and subsequent dives much lower.

S&P 500 daily with 2008 tape overlay

Vertical pink lines are Fed meetings.  They will do all they can, but it cannot possibly be enough.

Not ... yet ...

This perma-bear may be the only one who believes right now that we still have that one more high left in the tank, and soon.  We are close to the top and the start of the meltdown, but there is a very simple reason why I think we have one last rally and high ahead.

Trump must resolve the stand-off with China.  He simply cannot proceed into the turning of the business cycle into recession with the China tariffs in place.  Any third-rate reporter from the USA Today could mail this one in, about how Trump brought back Smoot-Hawley and destroyed the great Obama economy.  A China deal must happen, any deal, any face-saving compromise, or Trump will be on the hook for what is coming and not see a second term.

And China needs this, too.  They desperately need our food.  The pork crisis in China is dire and threatens food prices and social stability.  At this point, Xi, too, would like nothing more than to settle this for now and take it up later, return to playing the "long game" for a while longer.

The tariffs kick in again on October 15, but I don't think Trump will wait that long.  We through a pin through critical support today and managed to close back inside -- a stern warning that the next break will keep going.

SPX daily

Trump is out of time and must make a deal now with China.  Even subjects like Huawei can be tabled for the moment, because no one is really looking forward to the cap-ex spending on a nationwide 5g wireless network anyway.  What if they eased the limits on Huawei but no one bought their wares?  We do not need 5g, and can't afford to implement it at the moment.

A trade deal, leaked soon and signed over the weekend, completes the rally at 3094 SPX by next week.  There is resistance at 3050, which we will probably take out, an "overthrow" of a trendline.

After October 10, the Fed closes out its latest repo program and we will see if anyone still needs fast cash.  Coincidentally, October 11th marked the high for the year 2007.  There is some symmetry here; let's start by looking at the beautiful 2008 crash tape.

SPX crash 2007-2009

We take the tape and copy it, as a graphical representation, and drag it into the present-day, fit it to the curve and constraints of the giant megaphone top we have drawn since January, 2018.  See the retests and well-proportioned bounces?

SPX daily with 2008 tape overlay

The narrative is plain enough.  We test the lower supports, bounce into January again, with all eyes on the Fed, and when it declines to provide a full QE program at its January meeting, we lose that support and experience something far worse than the last cycle.  Perhaps by the time the Fed is ready to intervene, events and leverage are in motion and a grim trend cannot be stopped.

2020 off a cliff - who knows?

But won't it take more time?  Why should it?  That is the meaning of a true crisis, the point of recognition and scramble for the exits.  Forced selling.  Margin calls.  Who still believes that we can get growth out of debt?  Oh, are there value investors out there prowling for diamonds in the rough?  How about stock buybacks with corporate debt?  Will the VIX break 100?

Trump can blame the Fed, or the Democrats, or Brexit, but he absolutely cannot have the tariff issue around by then if he wants to be re-elected.  He could even be impeached and convicted (of whatever, because reasons) in the Senate.  And I do think he can see a second term, even with this disaster, if he is able to expose and implode the Democrat party apparatus with their scandals and high treason against the nation.

But let's see if we can complete this topping pattern first, on positive trade news.

Are we there yet? Are we there yet?

Friendly reminder: Deutsche Bank is on fire, and the Fed is still tightening its quantitative.

Something has got to give -- faster than expected, and more severe.

SPX daily

Will PBOC devalue the Yuan this Sunday night?

It sure looks that way.

Please do not disturb the Amazon.com wagie

USD/CNY weekly chart, nice cup-n-handle.  Kyle Bass may have exited his famous Yuan short just as it was about to pay off.  This is headed to 8, then 10, then to 100.  Gee, that's too bad.

USD/CNY weekly

This also explains the sudden surge in BitCoin and other cryptos for the last couple of weeks; insiders know this is coming and are fleeing the scene.

If the market tanks in 2019 -- say if we plummet to the lower support in the next 2 weeks -- then the Donald Trump will have absolutely no choice but to go full scorched earth on the Bolshevik Democrat party in 2020.  He must destroy the evil party and salt the earth.

Note how we kissed back the Christmas rally channel this week.  The big bounce into early July is to the .618, likely after the Fed gets on-board here.

SPX hourly

I've been saying this for a long time, the way we defeat China is by pulling the plug on their cancerous financial ponzi and letting the Chinese people finish off their rotten elites.  Maybe they can end up with a proper representative government instead of another Oriental despotism.

Bearish alt

Probably where we are really headed, is a close in the Friday trading session back at 2630, a big gap down Sunday night, and a 400 pt minor crash in the S&P 500 next week.

In that case, the massive gap at 2630 becomes the target for a rally from mid-January into mid-March, ending with the March FOMC.

The 2900s will be done on the S&P 500, as well as the 2800s and the 2700s.  This then becomes a theme throughout 2019.

There are cheap cheap crash puts available on the SPY if you need to hedge, or, God forbid, speculate on the future.  Good luck to all.

S&P 500 daily

Point of recognition

Just fell out of the c of 2 channel.

please read this - even if you are pleb-tier and can't get my 1934 GA&U edition

Now the candles get scary -- 500 pts down in 2 weeks -- and a formally-declared Bear.  

Here's the general idea, sketch I made a couple of days ago:

S&P 500 sketch

The Fed will NOT hike at the December FOMC, and this will bounce us back up in "B" for a final kissback visit to the rally channel since the 2009 lows.

Then we get a bond event or similar dislocation in January.  Sorry.  The market visits the 1360 area SPX by the March FOMC, for reasons I will explain to you next week.

This weekend I'll be out on Six Ridge in Olympic NP looking for my fellow bears.

also read this

2000 top redux

Go back and look at the top from 2000, daily candles on the S&P 500, with the spike high and the 5-wave move that failed to best it.  That's what we have seen now since the end of January. 

With a similar slope to the sell-off in early February, we're looking at a first low at 2445 SPX, two weeks from now.  There is channel support from the ancient trendline on the S&P through the lows at 1074 and 1810! 

From there we'll visit the 200 DMA as overhead resistance instead of support, and August should shape up to be something truly special.

I can't wait to see the QQQ back at $20 next year.  Oh, you thought these companies were worth something?

SPX completed 5 wave channel -- failed 5th

W4 is in -- minor W5 up to go

It looks like W4 from the proposed ending-diagonal count completed at 2744 SPX today.  It doesn't look like we'll make it all the way down to the .382 at 2715. 

It retraced right to the .236 fib of the larger W3, and completed a very nice c of 4 impulse today.  Now there is a nice fib extension upward -- the 1.618 extension of this retrace -- pointing to the 2820 level right into the July 4 holiday.  /ES futures looking good now this evening.

SPX 06-21 ending-diagonal count

When this breaks down, we have channel support at 2430 or so at EOM July, followed by the August 1 FOMC (no hike) and a decent bounce.  The logical target of that bounce would be a retest and hard fail to retake the 200 DMA from underneath.

SPX path to 1810

The actual rate hike at the 9/26 meeting gives us the last leg down to firm support at 1810.  Then we can rally through Christmas, all the way to the mid-January Bradley turn date, before the real credit crisis makes landfall.

The case for 3070 on the S&P 500

I think we are headed to 3070 on the S&P 500.  I think we are headed there this month.

Getting there will piss just about everybody off.

The bears will be squeezed, again and again as they reload their shorts.  Bulls and bubble types will watch this proceed as a true blow-off top, and miss the OTM index calls which return high multiples.

It will be a most hated end for the most hated rally (since the March 2009 lows).

Tonight the /ES broke out of the old bearish channel.  It looks done now.  The overall decline never became truly dangerous and impulsive, did it?  The 2553 W4 low was made right after the Full Moon this past weekend.

/ES breakout

So here's the case for 3070, a true blow-off move into the end of April.

1. It's a 1.618 fibonacci extension of the drop from 2872 to 2553

2. It is the target for a Big W pattern per Bulkowski.  The psychology of this is simple -- we grind our way back to 2872, squeeze anyone covering at the new high, and push unimaginably further north.

3. The blue dotted line, which is the overhead channel trendline on a LOG chart all the way back to the 2009 lows.  IMO we need to test and reject it one last time.

4. The January highs put in historic extremes on RSI for the SPX, indicative of the 3rd wave of the series.  IMO we just wrapped up W4, so now we get the 5th, with higher index values and lower RSI, the final divergence marking the final high.

I still have the pet theory that the next great window for the start of a real Bear market (via a 40% crash back to the 1810 level on the S&P) will be the first estimate of Q1 2018 GDP, due out at the end of the month.  A miss on this would torpedo any remaining illusions of growth and expansion and animal spirits still in play.  Any bounces will be sold mercilessly.

GLTA

Bleak -- 50 DMA annihilated, 200 on deck

Well that didn't take long at all.  If the 50 couldn't hold up, then maybe the 200 can provide a bit more of a bounce, at least a few days of sideways.  From the pace of things, it looks like we are headed straight back to the origin of the blow-off top, the 2421 level on the S&P 500, late this month.

Any bounce from that level would have to be on hope for policy accommodation at the March FOMC.  We closed right on channel support today, broken now with continued heavy selling AH.  This red line becomes the target for a kissback rally into March.

SPX doom

Final cycle lows EOM May @1810 on the next major Bradley turn date.  We'll see if the 2/25 and 3/9 dates mark the actual low and rally highs of the respective upcoming moves.  The yield on the 13-week T-bill actually rose today, which means a rate hike for sure in March if this continues.

Manfred Zimmel's 1/29 Bradley nailed the top.

Bradley turn dates, http://www.amanita.at

Charts 8/9: Setup now for a huge sell-off

We closed right at the perfect spot for a gap and go in the morning.

We could see a 4-5% sell-off tomorrow, retracing the entire five-wave advance from SPX 2328!  Relief would follow next week, at least until mid-session Wednesday, when we rollover again.

SPX 30D

The big picture, including the debt-ceiling market crash in late-September (and face-ripping rally into January):

SPX 2Y

It has already started

Incredibly, we have set the lower bound of the crash channel.

"big things have small beginnings"

Check this out.

SPX 3D

Here's the larger picture with more count and detail on the failed 5th wave.

SPX 15D

Now look where this same pink line ends up in six weeks, on June FOMC -- SPX 1622.  By September, the larger rout will force the Fed to announce a fresh policy of the Quantitative Easing.

SPX 3Y

The story of 2017 is of a financial crash which only the most crazy, irresponsible, depraved tinfoil internet cranks could possibly foretell, one which forces the hand of the Federal Reserve to abandon its stated program of regular rate hikes and shrinking the balance sheet, to return to extraordinary monetary policy and direct intervention and support of deflating asset prices in the wider economy.  

This will be the death knell for the $USD, although this process, too, may take several years to work itself out. 

The S&P 500 needs to re-test the 666 price level

Here's how:

S&P 500 retrace to fair value

Vive Le Pen

It would appear that we are in a larger degree wave 4 than we had suspected, correcting the leg on SPX from 2083 to almost 2401.  This wave should run into next week, roughly toward the end of March, retracing to support near the .382 fib, around the 2280 level SPX.

Marine Le Pen, you're our only hope

Then we can look forward to some sort of political fix with Trump and the GOP, animal spirits, and a rally to finish the mess.

SPX 20D

The shape of the final rally, into the French elections.  Vive la majorité silencieuse.

SPX 1Y

Marine Le Pen elected Maximum Leader of the France will of course save that country from demographic peril, at the cost of Europe and the worldwide ponzi credit money system. 

Again, the Fed will CUT in June, as a desperate attempt to staunch the bleeding.  It will only trigger a vicious short-squeeze and halfway-back bounce.  

Then the crash resumes in earnest, and we re-test 666 on the S&P 500.  

New QE rolled out in September.

SPX 2Y