Techical and Fundamental analysis of traditional markets 1
Despite the virus, despite millions losing their jobs, despite the world changing dramatically very quickly... Stocks are showing substantial strength. In my opinion this is a combination of the actions from the Central banks especially from the Fed (which is 'successfully' flooding the market with cash), the 'whatever it takes - bailouts for everyone - the Fed should buy stocks' narrative, along with a technical bounce, a short squeeze and optimism that things will get better. If the SPX closes above 3020 (currently 2790) and the USD DJ Index closes below 12080 (currently 12480), I think we are heading to a new era. An era with a weak USD, dead bond markets and... with commodities, crypto and stocks performing amazingly well. The dollar is only down 4% after its massive spike which is still quite strong if someone considers all the actions the Fed has taken in order to weaken the dollar substantially.
The question is how successful will they be if someone considers the current market conditions. So far they seem to be on top of it, but in my opinion they will let another dollar spike happen before they fully set it under control and maybe even irreparably damage the dollar. They will need to do a lot of things to weaken it, most of which imho will boost the US stock market long term. That's because if there is a large demand for USD and they print a lot of USD, that money has to go somewhere. The value of the USD stays relatively stable or slowly bleeds, but the influx of dollars in the system will go into hard assets. Could this eventually damage the dollar irreparably? In my opinion yes it can, but it will take some time (1-2+ years). The US is still quite strong and it still has the strongest fiat currency out there.
For now I see the dollar potentially losing another 2-3% against major currencies and major indices gaining another 5-10% before things rolling over again. If the dollar starts getting stronger and markets rolling over I won't hesitate to short. Things change so fast that nobody can make easy medium to long term prediction and it is better to follow TA rather than narratives/fundamentals. Fundamentals can only help us ride a trend by backing it with more data or helping us spot reversals to exit or maybe wait for a new trend to form.
What is certain to me is that soon cash will definitely not be the place to be in, same for bonds, while real estate definitely doesn't seem attractive now with people slowly moving out of cities, staying with parents or working from home. As you can see the 3 biggest asset classes in the world are in a really bad shape right now. Once again commodities, crypto and stocks will benefit in different ways, at different times and depending on the type. Maybe it is time for Asia to boom again. Maybe WTI oil stays below 45/barrel for 1-2 years before it explodes above 100$. Maybe most industrial metals don't significantly outperform gold and maybe even go lower as gold goes up for 1-2 years. This is how I see things playing out in the next decade where the trends will be completely different from the previous decades, but the timing is completely unknown and unpredictable right now.
For the medium term there is a high chance we see a massive crash once economies start to reopen. Most people are buying the rumor so we should sell the news. I don't think it makes sense for people to wait to buy then as it will be too late. If we don't get the second leg down, then I expect at least a dip. Only when the economies reopen will people truly realize how bad things really are. Right now everyone believes things will change in a few weeks or months and life will be as it was before. They have absolutely no idea what is coming. The whole structure of the US stock market will change. Low earnings, no buybacks, everyone trying to hoard cash, everyone asking for a bailout, more debts chocking the markets, lots of fraud being exposed and so on. At the same time in similar situations we have seen at least a 50% drop from ATHs while this time we stopped at ~38%. I know that this time the Fed has taken action a lot faster, but I think the potential sell pressure is much larger. Lots of people withdrawing from funds, we have illiquid ETFs, lots of foreigners needing dollars or to cover expenses in their countries, or even people in the US needed to feed their families as their business fail and so on. Admittedly it is the first time Central banks have acted so quickly and in such an emphatic way. However I think they will let another crash to happen so that they can step in and buy stocks. Why only buy debt? They will let some deflationary pressures kick in so that they can move into stocks and rescuing the Eurodollar system. well as where the Fed has to bailout everything even more aggressively. Imho we have to see that step before we get that shift, but all they've done and are doing might be enough.
What we are seeing play out in front of us is a health/humanitarian crisis, a debt crisis, a currency crisis, an energy crisis, a potential EU crisis and a potential banking crisis. Our economies have been optimized for perfection and consumerism. There will be such huge changes and different forces playing out that we are going to see lots of crazy things. Markets will be very different than what they used to be, as people get stressed out while there is a huge influx of cash in the markets. Many participants will rotate, many algos will be turned off, many firms will shut down and of course many people will burn out.
Below I will add some charts with potential ideas and where I think the USD gets rekt and stocks go higher. As for more content I will try create new ideas and link them here every 3 days. Will get out twitter and start putting more quality content here.
Silver looked like massive accumulation that had the final wick. Above 17$ I think we get a proper bull market
Gold is a strong resistance in the 1740 zone where I see lots of important pivots. If it closes above 1740 which seem possible based on its strength, I can see it top around 1800-1830 and drop back down to 1700 before going higher. If we get another USD mega squeeze I can see it go down to 1370 which was my main target for retest before CBs stepped in, but it looks way less likely right now. Dips are for buying.
Potential SPX500 scenario. 3200 is also possible which is a mega short, but for now I think that getting some short in the 2900 - 3020 zone especially for scalps is pretty damn good. It could take some time for
The British Pound looks a lot like Silver and they both got near to their cycle lows. It is now getting close to significant resistance and if it closes above we might see more strength ahead.
The USDOLLAR Index is really important to me and from this we can see where things go. For now the trend is still bullish even though it is short term bearish. Below I have put a few more USD charts that indicate that the USD is at its cycle highs, but like we saw with the NOK, we might see more of these pops as the dollar gets stronger. The trend is still up, but we have to be aware that its strength might be what triggers its demise.
The question is how successful will they be if someone considers the current market conditions. So far they seem to be on top of it, but in my opinion they will let another dollar spike happen before they fully set it under control and maybe even irreparably damage the dollar. They will need to do a lot of things to weaken it, most of which imho will boost the US stock market long term. That's because if there is a large demand for USD and they print a lot of USD, that money has to go somewhere. The value of the USD stays relatively stable or slowly bleeds, but the influx of dollars in the system will go into hard assets. Could this eventually damage the dollar irreparably? In my opinion yes it can, but it will take some time (1-2+ years). The US is still quite strong and it still has the strongest fiat currency out there.
For now I see the dollar potentially losing another 2-3% against major currencies and major indices gaining another 5-10% before things rolling over again. If the dollar starts getting stronger and markets rolling over I won't hesitate to short. Things change so fast that nobody can make easy medium to long term prediction and it is better to follow TA rather than narratives/fundamentals. Fundamentals can only help us ride a trend by backing it with more data or helping us spot reversals to exit or maybe wait for a new trend to form.
What is certain to me is that soon cash will definitely not be the place to be in, same for bonds, while real estate definitely doesn't seem attractive now with people slowly moving out of cities, staying with parents or working from home. As you can see the 3 biggest asset classes in the world are in a really bad shape right now. Once again commodities, crypto and stocks will benefit in different ways, at different times and depending on the type. Maybe it is time for Asia to boom again. Maybe WTI oil stays below 45/barrel for 1-2 years before it explodes above 100$. Maybe most industrial metals don't significantly outperform gold and maybe even go lower as gold goes up for 1-2 years. This is how I see things playing out in the next decade where the trends will be completely different from the previous decades, but the timing is completely unknown and unpredictable right now.
For the medium term there is a high chance we see a massive crash once economies start to reopen. Most people are buying the rumor so we should sell the news. I don't think it makes sense for people to wait to buy then as it will be too late. If we don't get the second leg down, then I expect at least a dip. Only when the economies reopen will people truly realize how bad things really are. Right now everyone believes things will change in a few weeks or months and life will be as it was before. They have absolutely no idea what is coming. The whole structure of the US stock market will change. Low earnings, no buybacks, everyone trying to hoard cash, everyone asking for a bailout, more debts chocking the markets, lots of fraud being exposed and so on. At the same time in similar situations we have seen at least a 50% drop from ATHs while this time we stopped at ~38%. I know that this time the Fed has taken action a lot faster, but I think the potential sell pressure is much larger. Lots of people withdrawing from funds, we have illiquid ETFs, lots of foreigners needing dollars or to cover expenses in their countries, or even people in the US needed to feed their families as their business fail and so on. Admittedly it is the first time Central banks have acted so quickly and in such an emphatic way. However I think they will let another crash to happen so that they can step in and buy stocks. Why only buy debt? They will let some deflationary pressures kick in so that they can move into stocks and rescuing the Eurodollar system. well as where the Fed has to bailout everything even more aggressively. Imho we have to see that step before we get that shift, but all they've done and are doing might be enough.
What we are seeing play out in front of us is a health/humanitarian crisis, a debt crisis, a currency crisis, an energy crisis, a potential EU crisis and a potential banking crisis. Our economies have been optimized for perfection and consumerism. There will be such huge changes and different forces playing out that we are going to see lots of crazy things. Markets will be very different than what they used to be, as people get stressed out while there is a huge influx of cash in the markets. Many participants will rotate, many algos will be turned off, many firms will shut down and of course many people will burn out.
Below I will add some charts with potential ideas and where I think the USD gets rekt and stocks go higher. As for more content I will try create new ideas and link them here every 3 days. Will get out twitter and start putting more quality content here.
Silver looked like massive accumulation that had the final wick. Above 17$ I think we get a proper bull market
Gold is a strong resistance in the 1740 zone where I see lots of important pivots. If it closes above 1740 which seem possible based on its strength, I can see it top around 1800-1830 and drop back down to 1700 before going higher. If we get another USD mega squeeze I can see it go down to 1370 which was my main target for retest before CBs stepped in, but it looks way less likely right now. Dips are for buying.
Potential SPX500 scenario. 3200 is also possible which is a mega short, but for now I think that getting some short in the 2900 - 3020 zone especially for scalps is pretty damn good. It could take some time for
The British Pound looks a lot like Silver and they both got near to their cycle lows. It is now getting close to significant resistance and if it closes above we might see more strength ahead.
The USDOLLAR Index is really important to me and from this we can see where things go. For now the trend is still bullish even though it is short term bearish. Below I have put a few more USD charts that indicate that the USD is at its cycle highs, but like we saw with the NOK, we might see more of these pops as the dollar gets stronger. The trend is still up, but we have to be aware that its strength might be what triggers its demise.
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