Tomorrow rather important

It looks like we finally retest the underside of the rally channel up from the March lows tomorrow.  Madame Speaker Pelosi (D, CA) has a press conference early in the session, and I'm excited to see what news she has to share. 

This fellow has an interesting analogue to the 1987 crash.  Make of it what you will.

I guess this would presage a dive into the election, followed by a Trump win and a monster bounce.  But reality will maul us by the All-Star Game.

Such fun in 2021

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.

Foresight is 2020

long-long-term S&P

GLTA.  Good luck to all you Austrian deflationistas out there.

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.

Gotterdammerung

Futures off 30 tonight, and we could see something truly beautiful this week into May opex.

It has always been my personal thesis that when this thing finally goes, it will throw a rod and fall much faster than anyone thinks.  Shock and awe, bloody destruction, again and again.

We could be testing the Christmas lows as early as this Friday.

SPX nightmare

Market longs are simply in error.  And the S&P 500 is due for a good culling.

Good luck to all bears.

Still so close to new highs

When we bounced off a channel support late in today's session, I noticed how we may still put in that so-far elusive new high on the S&P 500. 

And it may be by a single point, après quoi, le déluge.

S&P 500 hourly, ending-diagonal from the 2553 level

What's really bothering me is what may be shaping up to happen in the wake of the November elections.  I won't talk of it again until the waves leading up to it start falling into place, but I am already very worried for our nation.

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

It's do-or-die time for the 3K parabola

Have the last two days of sideways tape built up enough tension to launch us north into the January FOMC meeting?  We will need to put in a blistering 140 pts in 4 sessions to hit the 3,000 target, a truly vertical move.

SPX parabola

This is how it ends?

Insane parabolic finish? 2990 on the S&P next week?

Mrs. Northy put her finger on what seemed too terrible to be true.  We could be at 2990 SPX in 5 trading sessions.  It's set to go even more insanely vertical.

S&P 500 parabola!

Will the 10Y Treasury yield also go straight up?  Serious resistance is up at 3.5% -- rates we cannot afford as a broke, debtor nation.  Equities must be sacrificed to Moloch.

10Y Treasury yield, log scale

The good news is that this can have a happy ending.  After cresting at 2990, we can be back at the 1000 level on the S&P 500 by Christmas.

S&P 500 bounce off Brexit lows, retest, crash

Let's say it all works out through EOY

Let's suppose that President Trump gets his tax cuts, whether he has to cuck on DACA or not doesn't matter at this point, but let's say he at least gets it through Congress by the end of the year.  Once we're on the new, lower, rate on capital gains, for nervous sellers, what reason is there to hold stocks a day longer?

December 28 is the first day when stocks sold will settle under the new rules and rates taking effect in 2018.  The upper bound of the E-D on the S&P 500 is about at 2720 on a log-scale chart.

SPX E-D into EOY

The Fed is expected to hike this week, and the 13-week Treasury bill bears this out, and the Fed should reaffirm its policy plans for 2018.  Once the selling starts, however, and does not abate, we will look for the Fed to retreat at FOMC meetings and try to save the situation.  But the dominoes will be falling and they will play out the last, most severe leg of McHugh's Jaws of Death mega-pattern.

SPX Jaws of Death finale

The great game in the face of Fed deflation hell

The Fed is pulling their chips.  How long will everyone remain at the table?

An American Tragedy

It's all crystal-clear now.  Never say die.

S&P 500 returns to long-term support at 525

We can make the case for 3 more Fed hikes in 2017

The Fed promised us 3 more hikes in 2017, so why would they not deliver them?  Here's a 40-handle VIX for you, President Trump!

And now, looking at the chart of ^IRX, the 13-week Treasury bill, we can see that this looks very likely.  Why?  The yield is in the midst of a W3 move north.

^IRX 13-week Treasury yield

Next Wednesday's hike is in the bag, but the market's won't dive on the news -- this hike is expected.  We will see a hard reaction from it, but it will take another week to arrive -- after June opex.  For the next few days, it would actually be good for perma-bears to see a little weakness in the S&P 500, so we can achieve w1/w4 overlap on the chart at the 2398 level, for an ominous ending-diagonal.

SPX 60D

The truth is, the markets realize that China is attempting new waves of magic credit creation, when they have clearly already pushed the limits of rank insolvency.  It's time to give China the smackdown, and remind them who really runs Bartertown.  The Fed won't sit idly by while China purchases what's left of the world's real assets with fake money, and sustained hikes in the USA will end this little charade right quick.  Doom is coming to the Middle Kingdom.

Remember, historically, when things go crazy in China, they can get really fucking bad, something we in the West overlooked since our own nasty wars of the 20th Century.

If the 13-week yield keeps climbing in late August and into September, then the Fed will come under insane, intense pressure NOT to hike again at the September meeting.  But if ^IRX is sitting at 125 bps, they will hike again -- a marvelous equity short.  The larger 5 wave impulse can finish up after ^IRX finishes its larger impulse and brings the Fed to hike one last time in December.

SPX 2Y

However, the damage will be done at this point, as spec-u-vestors and riskloves scramble for safety in the 10Y Treasury.  They will drive its yield well under 1.5% -- inverting the yield curve.

SPX 4Y

An inverted yield-curve here signals the hard recession -- deflationary depression, really -- in 2018.  Stocks, real estate -- smoked.  After stocks hit their low, on the lower bound of the "Jaws of Death" mega-pattern, the trendline off the 2003 and 2009 lows, then bonds peak and join them on the bonfire.

This concludes the 20th Century postwar period.  The Fed has got 3 more hikes waiting in the wings for us -- this year.

Beware the Ides of March?

Short-term SPX is looking at an expanding-wedge pattern that could blow-off upward in a very violent fashion.

This would reach resistance at 2440 as soon as late in the session Tuesday, like so:

SPX 60d

The response post-FOMC and renewed fiscal crisis, looks like this:

SPX 2y

And the long term count since the 2009 (year) lows:

SPX 10y

The real question for equity bears is when the Fed will cut, not hike, rates

The Fed has promised hawkish policy and a series of aggressive rate hikes in 2017, presumably to counteract the inflationary fiscal policy from the Trump Administration.  Never mind that the larger project to dismantle globalism is profoundly and probably permanently deflationary.

We can expect one rate hike at the very least, as well as the very most.  This would be the third hike since December 2015, and arguably the one to tip the precarious balance in the equity markets.  Let's suppose the Fed members take a pass at the next meeting, in a few weeks, agreeing to wait to see what policy initiatives Trump and the GOP Congress can muster.

Let's suppose we see our next hike at the larger FOMC meeting in March.  There's your spark.  Never mind what was said in December -- that's it, we're one and done for 2017.

We're off to the races.  Solid support is at 1620 on the S&P by about mid-June.

SPX 2Y

Equity bears that are still among the living today should be asking when the Fed will next cut rates, i.e. when the members will see the face of raging deflation, the oncoming recession, panic, and reverse course.  I propose that we see this as soon as the June FOMC meeting, a desperate effort to restore confidence, animal spirits, inflationary expectations, credit expansion, earnings multiples, home equity loans, social media start-ups, 10-year auto loans, good vibrations, the works.

We'll get one hell of a surprise, and an epic bounce in equities, that's for sure.  Almost to a .618 retrace.

After that, we can look forward to the 10Y Treasury yield making its final lows at 1% or even below.  Rates have not broken out of the Volcker bond-bull channel just yet.

10Y Treasury since Nixon

Short-term, we're looking to tag the 2300 level next week, before a pull-back into mid-February.

SPX 20D

But it will be the rate cut, not the rate hike, that marks the end of the epic reflation rally and a prelude to a fall market crash that will humble 2008.  That's when the Fed shows how desperate and powerless it is at the end of the long-credit cycle.

No shorting until Christmas

Well, just after Christmas.  FOMC excitement today was just part of a 4th wave retrace, which has room to run into this Friday.

C wave channel has us rolling over right at the 2300 mark on the SPX when we return from the Christmas break.  Bonuses will be secured, so what will be the point of lingering a moment longer in the bourse?

We may have a President Trump formally set by then, but his plans for massive fiscal stimulus may be DOA.  And then how in the world will we create fresh new debt and credit-money to keep the great ponzi going?

Merry Christmas!

SPX final ABC to new highs

The best the bears can hope for ...

... would be a draw down into FOMC -- obvious rate hike -- and massive short-squeeze to finish the year.

SPX

But such a move would complete 5 waves of a megaphone C.

If we can't break out, we may fail hard at the 50 DMA

There is a very plausible count for this, and I believe it would sync with a smoking-gun release from Julian Assange's Wikileaks organization over the weekend.

The release would disqualify Hillary from higher office and usher in Donald Trump to White House.

The markets will not take this well.

And then the Fed will pile on in December with a 50 bps Christmas present to welcome the Donald to Washington, D.C.

SPX 1Y daily big-picture view

SPX 30D view of the proposed E-D failed 5th

Charts 06-27: Never say die!

There's a count for that.

SPX 06-27

We need to see 2135 SPX by Friday's NFP release

... and that will set a lot of matter into motion.

Dürer: The Four Horsemen of the Apocalypse

2135 SPX is a marginal new high and the top of the current channel.  News-wise, it would be a pop into the NFP numbers released before Friday market open, followed by a sharp sell-off.

SPX December

A decline into December FOMC allows the rate hike to be "priced in" and for a nice bounce back to resistance into the end of 2015 and Q4.

This sets up January 2016 to be a great crisis and disaster, as a head & shoulders off the 1737 neckline plays out.

SPX 2016