2024/12/21
Another 48h - Fear of Not Growing Out of Stagflation Drives DXY
“trump's re-election cannot be ignored when it comes to price action!
but inflation is more serious? economic growth? the labor market? or?”
First, in the wake of the FED, a violent bearish sell-off until midday on Friday, then an extreme bullish rally! What happened? And all this after the
DJIA had more or less a bearish day for almost 10 days in a row! What we are currently experiencing is a foretaste of the price action in 2025, when Trump is back in office? No - it is not about Trump! It is much more the reaction of traders and/or investors to the hopeful growth out of the US economy from the self-organized US stagflation (higher US inflation than higher US economic growth). And this scenario is at stake - regardless of the volatility in the media - to get Trump back in office in 2025. Because since the PPI index (with +3.0% far more higher as +2.6% excepted) came out, the DJIA has been struggling more than ever - while the 
DXY is tending to rise, as a result of the US YIeld Curve, i.e. US10Y , which is not falling as massively as is actually expected based on interest rate expectations! Why? Because traders and/or investors on the bond market no longer assume that the US economy will grow out of green US inflation under the guise of democracy. And their political supporters have already started discrediting Trump, even though he's not even in office yet. Therefore, there are actually hardly any fundamental monetary material reasons why the stock market was and is rising? Maybe, because of PCE inflation data. My cfd online broker analyst friend suspected "that Fed member Goolsbee's statements that interest rates would fall significantly next year triggered the rally!" However, the most important reason for yesterday's big expiry day was probably simply the sentiment of the big traders and/or investors - after the bearish sell-off, there was a bullish short squeeze yesterday. Also from me - in the form of the resolution of all of our 4XSetUps. Which, for my humble self, is further proof of a fundamental overvaluation of Wall Street - DJIA & 
SP500 and/or 
NDX - even if hardly anyone wants to admit it, because in the public mainstream media and/or even social media the most actors simply choose the bullish data they want so that the stocks continue to rise. I too succumbed to this self-deception - admittedly - and therefore closed all of our 4XSetUps. Also due to the fact that we had the best performance in 2024 since I started revealing my 4XSetUps to the public in 2022.
“Let's deal first with your general theory of reflexivity.
Essentially, it has to do with the role of the thinking participant, and the relationship between his thinking and the events in which he participates. I believe that a thinking participant is in a very difficult position, because he is trying to understand a situation in which he is one of the actors. Traditionally, we think of understanding as essentially a passive role, and participating is an active role. In truth, the two roles interfere with each other, which makes it impossible for the participant to base any decisions on pure or perfect knowledge. Classical economic theory assumes that market participants act on the basis of perfect knowledge. That assumption is false. The participants' perceptions influence the market in which they participate, but the market action also influences the participants' perceptions. They cannot obtain perfect knowledge of the market because their thinking is always affecting the market and the market is affecting their thinking. This makes analysis of market behavior much harder than it would be if the assumption of perfect knowledge were valid.”
George Soros
It goes without saying that stock markets turn when hardly anyone in the public expects it - because everyone is fully invested in the current price action. And fewer and fewer are willing to buy at this price action level. Which is why the price action usually turns. Whether in the stock market
DJIA SP500 NDX in currencies DXY or even the bond market US10Y - the philosophical psychological mindset is always the same. But every generation probably has to experience it for themselves. That's the way things go, human relationships! Anyway? Of course, looking back, no one saw it, no one noticed it beforehand - including me. But I don't want to come across as a fear-monger at this point. But I cannot and do not want to hold back a few factual concerns at this point regarding the fundamental overvaluation of the stock market in the historical context when it comes to price action. Both the Buffet Indicator shows that the US stock market is heavily overbought and the Price/Earnings Model shows. The Buffet indicator is a ratio which fluctuates over time since the value of the stock market can be very volatile, but GDP tends to grow much more predictably. From this pov (point of view) a really, i mean really really, good indicator about the relationship of the US economy and/or even the WallStreet. The current ratio of 208% is approximately 66.62% (or about 2.2 standard deviations) above the historical trend line, suggesting that the stock market is Strongly Overvalued relative to GDP. Like the Price/Earnings Model shows also. The P/E ratio is a classic measure of a stock's value indicating how many years of profits (at the current earnings rate) it takes to recoup an investment in the stock. The current S&P 500 10-year P/E Ratio is 36.5. This is 79.2% above the modern-era market average of 20.4, putting the current P/E 2.0 standard deviations above the modern-era average. This suggests that the market is Strongly Overvalued. Which is why I'm not panicking now, let alone screaming sell sell sell! But at least until Trump is back in the White House, from 20th January 2025, all 4XSetUps would be dissolved just to be on the safe side - in order to realize the profits in 2024. And then to reshuffle the cards in 2025...However, whether the stock markets
DJIA SP500 NDX influence the DXY, let alone the US10Y and/or whether the DXY, even the US10Y influence the stock markets DJIA SP500 NDX ? I don't know! What I do know is that they all influence each other earlier or later more or less interactively and/or ambivalently. Nevertheless, at this point I would like to once again focus exclusively on the DXY, at the end of 2024.108.541 : 2024/12/20 - Annual Year High 2024
108.071 : 2024/11/22 - 2nd Annual Year High 2024
107.815 : 2024/12/22 - last price action
107.348 : 2023/10/03 - Annual Year High 2023
106.517 : 2024/04/16 - 1st Annual Year High 2024
104.799 : 2024/07/30 - High Before W Trend Reversal Formation
104.426 : 2024/08/02 - High Of The August 2024 2 Day Sell-Off
103.125 : 2024/08/02 - Low Of The 1st Day Of The 2 Day Sell-Off
102.160 : 2024/08/05 - Low Of The August 2024 2 Day Sell-Off
In the case of the price action of the
DXY , the highs & lows of this year 2024 and/or high & lows of last year 2023 are crucial. Because both the high & the low of this year 2024 were within the high and low of the year 2023. Except for last week - 3 trading days in November 2024. What does that tell us? The price action in DXY is ready to break out upwards in 2025! Of course, there is no guarantee for this - but the probability that the price action in 2025 will become more expensive rather than cheaper is fundamentally greater. And this is also due to the above-mentioned fundamental overvaluations on the stock market and also the still ongoing US stagflation. even the risk of an increase in the US unemployment rate? A possible impending recession in the USA? Nevertheless, the USA is and remains the cleanest dirty shirt of all economic areas in our so-called West. Which is why I basically want to talk about a 
EURUSD weakness in price action - vice versa: DXY strength in price action.Building on the fear that US inflation will not break out again, but will at least not fall significantly in the coming months as previously assumed, I assume that the bond market
US10Y and/or the DXY will set the tone in the coming days and weeks, possibly in the 1st and/or even 2nd quarter of 2025. Which is likely to put the WallStreet price action DJIA SP500 NDX under pressure for the time being. Which is why I'm paying the greatest attention to price action since the Trump election, for the coming days and/or weeks, for the first quarter of 2025. Because the expectations in the case of Trump are high - after all, the Americans, and even the entire so-called West, could hardly wait for him to disappear from the White House in 2020! Defeating inflation, flood our so-called West with cheap energy so that prices fall (especially here in Europe, especially Germany), reduce the foreign trade balance (so that us americans are no longer dependent on foreign countries when it comes to goods, services and/or money), Consolidate the fiscal budget (so as not to lose all tax revenue in debt payments), pacify Ukraine with Russia, stand by Israel (against anti-Zionists, let alone anti-Semites) - they notice it himself? Correct! He won't be able to do it at all. At least not in 2025 - if you ask me. But why shouldn't he and his new old group manage it in 2 years, let alone during 4 years? He has full power - in the first two years - including in the House and Senate. Which is why I'm paying the most attention to price action since Trump's re-election.108.851 : 2024/12/20 - Annual Year High 2024
108.071 : 2024/11/22 - 2nd Annual Year High 2024
107.815 : 2024/12/22 - last price action
105.441 : 2024/11/06 - High While Trump Election Day
105.420 : 2024/12/06 - Low While Last US Unemployment Rate
After Donald's re-election, there were 7 green bullish trading days and/or even 4 red bearish trading days until the price action in the
DXY reached a new annual high of 108.071 points. Both the previous annual high of 2024 and/or the annual high of 2023 were overcome. Nevertheless, in the following 8 days the bears took over the terrain - 7 red bearish trading days and/or only one green bullish trading day - so that the price action of the DXY reached the high of the day Trump was re-elected. Which confirms the importance of this price action zone! Because since this day - Friday, December 6th, 2024, the day the US unemployment rate was last published - the DXY has been marching towards new annual highs again. And this has been going on for 11 days (until Friday, at the end of last week) - whereby we had 8 bullish green trading days and/or only 3 red bearish trading days. That's why let us wait for the new year 2025 - especially the upcoming publication of the US unemployment rate, on Friday, January 3rd, 2025. Because as I have already tried to describe, I always assume an ambivalent interactive relationship between the price action between the price actions of the stock market, the currency and/or the bond market. I do not claim to be 100% correct - admittedly - but with this hypothesis, and/or assumption for my sake, any price action on the financial market, especially with the help of cfd`s, can be operated better. According to George Soros' theory of reflection.That`s why in the current scenario, for the 1st quarter of 2025, I have switched to Jim Biancho's camp for the time being. He already said this in an interview on November 11th, 2024: “It’s Time to Position the Portfolio for Rising Yields and a Stronger Dollar”, by drawing attention to the fact that “Donald Trump’s election and the Republican red sweep are setting financial markets in motion. Because he believes that the change of power in Washington will give the US economy a fresh boost. However, it also poses the risk of inflation flaring up again, which will be a challenge for investors.” That's it - after I assumed in the summer of 2024 that the FED would only lower its interest rates in 2025 - and then only in -0.25% baby steps at all regular central bank meetings in 2025. But this scenario has now dissolved - as well as all 4XSetUps from my side. Don't just read this link - all links are worth reading and insightful. The next “Another 48h - DXY …” I will post here on Saturday, January 4th, 2025.A Merry Christian Christmas 2025
and/or also Jewish Hanukkah 3597!
With best wishes and with good intentions:
Aaron
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.