What is the future of interest rates?Only time will tell. My guess is that they'll be coming down, but first we get a major melt up from equities and then the recession can start when government spending gets the Elon AXE.
FEDFUNDS
TLT/TLT5 Indicates TLT BBOTThe current value of the ratio of TLT to its leveraged product is equal to the monthly closes of the last two blast off points, resulting in 16% and 20% rallies within 2-5 months.
NFP & Port Strikes: Why Jobs Matter This Week Nonfarm Payrolls (NFP) are projected to rise by 140,000 in September, matching August's pace and pushing the three-month average job gains to the weakest level since mid-2019. The NFP data is due this Friday.
At the same time, a major labor disruption is underway. Dockworkers at 14 key ports, handling roughly half of U.S. trade, have launched an indefinite strike. The walkout could disrupt trade and strain the economy ahead of the presidential election and the crucial holiday shopping season.
Chicago Fed President Austan Goolsbee expressed concern that a prolonged strike could worsen supply chain bottlenecks, exacerbate inflation, and alter expectations for the Federal Reserve's next move on interest rates.
How to break the marketsIn a fortunate turn of events, inflation has calmed.
For equity bulls, more good news. Yield rates have probably peaked.
To stop inflation, you must cool down a HOT economy. Overconsumption tends to increase prices. In an unfortunate (?) turn of events however, the markets haven't calmed down. Some charts suggest that the markets haven't felt at all the decisive rate-hike schedule.
A question arises: Are markets so strong not to feel current yield rates? Or is there some kind of lag we must take into account? When will equities suffer, and how much? These are important questions right now that need serious answers.
A custom indicator was invented to calculate the average-rate-of-return of equities against yield rates. It attempts to answer the following question:
How much better do equities perform YoY against the "safe" US 10-year bond investment?
Some interesting charts come up from this analysis:
In 1951 yield rates broke out of their long-term bear market. At the same time, the equity market exploded in even higher strength. Note that at that period, equities managed to perform better than the ever-increasing yield rates. It was after yield rates ~tripled that problems arised.
Moving to today, we only recently witnessed a breakout in the equity and the yield-rate-schedule. Judging from the '60s, we could even witness a decade of yield rates trying to catch up to the equity market.
A simultaneous breakout can make sense. A massive amount of money has flown out of the bond market and had to enter the equity market.
Equities may be forced to grow, for now. An incoming drop in yield rates from a pause in the rate-hike-schedule will almost certainly create an outflow from equities and back into bonds.
Be prepared. The weakness in the equity market hasn't showed up yet. At any point, the steep upward trend can collapse. A crash will certainly come. But at a time when nobody expects it to. Remember, rates of ~7% managed to break irreversibly the equity market back in the '60s.
Ask yourself and wonder. How tight of an economy can opportunistic equities handle?
At what point will stability become more important for us than growth?
Tread lightly, for this is hallowed ground.
-Father Grigori
FOMC FORWARD GUIDANCE SINCE 2018 w/FED SPEAKERS w/SPX The chart provided visually represents the forward guidance issued by the Federal Open Market Committee (FOMC) alongside the performance of various key economic indicators and market indices. The FOMC forward guidance serves as a crucial tool for signaling the Federal Reserve's monetary policy stance and future intentions, thereby influencing market expectations and economic behavior.
By examining the interplay between FOMC forward guidance and these key economic indicators, investors, policymakers, and analysts can gain insights into the likely direction of monetary policy and its potential impact on financial markets and the broader economy.
I have also included comments from various FOMC speakers to better form a picture of the past.
FOMC FORWARD GUIDANCE SINCE 2018 w/SPXThe chart provided visually represents the forward guidance issued by the Federal Open Market Committee (FOMC) alongside the performance of various key economic indicators and market indices. The FOMC forward guidance serves as a crucial tool for signaling the Federal Reserve's monetary policy stance and future intentions, thereby influencing market expectations and economic behavior.
By examining the interplay between FOMC forward guidance and these key economic indicators, investors, policymakers, and analysts can gain insights into the likely direction of monetary policy and its potential impact on financial markets and the broader economy.
Gold forecast: Crazy to expect rate cut tomorrow? Gold forecast: Crazy to expect rate cut tomorrow?
Mostly yes. Market consensus leans towards the U.S. central bank maintaining current interest rates following the conclusion of its two-day meeting tomorrow. However, the potential impact on the U.S. dollar and gold is likely to hinge on statements from Fed Chair Jerome Powell regarding expectations for a rate cut.
While there is an anticipation of a somewhat dovish shift from Fed officials in the market, the robust January data and the positive JOLTS job report this morning present a case for the possibility of a sustained hawkish stance,
The JOLTS report revealed that U.S. job openings in December surged to 9.026 million, surpassing the expected 8.750 million and marking the highest figure in three months.
XAU/USD was trading in the green for a second consecutive day before the JOLTS report. Gold is currently above a mildly bearish 20 Simple Moving Average for the first time in over two weeks, with longer moving averages situated significantly below the current level.
Still, gold has breached its minor downtrend line originating from the early January high raises the possibility of a bullish target towards $2055, presumably reliant on the possibility of a Fed rate cut (or not).
déjà vuCircle is the most perfect of shapes. It optimizes its area perfectly. An architectural marvel with no point of failure. And it is unique. All circles are similar to each other. Some small, other large. In the end identical.
Cycle is the Hellenic word of Circle.
I purposefully call it "Hellenic" instead of "Greek"
Market cycles are just that, cycles/circles. All of them are identical clones of the original.
Price is after all, nothing more than perfect fractals, the equation of which is, and will forever be, unknown to us.
FED is the all-powerful entity that gives birth and death to bull markets. Its only weapon is yield rates. Don't go against the FED.
Yield rates up = Bull Equity Market
Yield rates down = Bear Equity Market
Many think this is the other way around, that yield rates kill equity markets.
Why do rate hikes help equities though? Because Bonds. Bonds suffer during periods of rate hikes. And they soar when yield rates remain constant or fall.
The usual investment strategy of equities+bonds is creating a rapid shift in flow as we speak.
For a year, massive amounts of wealth was withdrawn from bonds, and invested into equities.
This trend is about to shift rapidly.
And the speed of such a shift is extreme.
While short-term rates are very fast moving, long-term yields represent a heavy market, and thus are more important in our analysis. I will ignore the FEDFUNDS rate because it represents a fraction of the weight of US10Y.
Long-term yields didn't change much in 2007, but the crash was devastating.
In 2018 the same happened, but faster in US10Y. The slope was much higher than in 2007. This resulted in a literal black swan event. The consequences of the 2020 crash are still unknown.
Moving to today, we witness an unparalleled change in yield rates. This has resulted in massive bond crashes as we have shown before, and will most certainly lead to incalculable effects in the equity market.
History has shown that the stronger the rate change, the harder the crash. This makes sense. The higher yield rates go, the greater the incentive to invest in bonds.
Be aware, the market is waiting for the FED to trigger the crash.
Make sure to pick the correct side when the cycle ends again.
Tread lightly, for this is hallowed ground.
-Father Grigori
The Great SufferingWe all remember The Great Depression. That is a lie.
Very few who live today lived when this monumental event occured.
After the Roaring '20s, a decade of parabolic stock market growth and explosive demand for stocks , the cash-out came. In the Depression, people were giving out stocks for free, burning the titles. Truly a desperate action by many. Demand for stocks has gone to zero.
Then, WWII came around, and demand for money was vital for survival.
In finance, supply and demand dictate everything.
Prices increase when demand increases, and they fall when demand diminishes.
Equities and Currencies are opposite powers, both vital to sustain the eternal cycle of markets.
The aftermath of the Great Depression is full of lessons.
Demand for stocks has never been so high as it was in the Roaring '20s.
This may have two explanations. Most of worlds' debt is denominated in Dollar. The function of the dollar changed substantially after the first QE experiment: Abandoning the Gold Standard.
A modern analogue of the mania that existed in 1920s is Bitcoin.
With that in mind, we may conclude the following for the relationship between Gold and Dollar.
Now, demand for Dollars is at an all-time high level.
Fiat currency is a proof of debt. To make some sense of the scale of demand for dollars, we can calculate the total debt. The World Economic Forum has posted the following article regarding world debt.
www.weforum.org
In short, Global Debt has surpassed 300 Trillion in 2023.
Much of that debt is dollar-denominated. US Debt alone has reached 33T at the time of writing.
The (im)possible serviceability of that scale of debt deserves a conversation on its own.
Many questions arise, more than the conclusions.
If BRICS is to create an alternative reserve currency to dollar, what effect will that have in the strength of the dollar? Some may believe that dollar strength will vanish if an alternative is born. After all, demand for it will surely decrease.
Well, there is a catch to all of that.
Dollar has been artificially weak so as weaker economies can afford to borrow it.
As we talked about, world debt has largely depended on dollars.
Some charts (even slightly wrong ones like the following one) may suggest that a Dollar Milkshake scenario is indeed probable. A simplistic PnF analysis of accumulation gives us the following targets for DXY. Don't forget that DXY is nowhere near its all-time high value. So there is the remote probability that this chart is true.
Until now, the focus of the FED was keeping dollar cheap to promote its' borrowing.
Now their stance has changed dramatically.
Yield rates are decisively high, and money supply is actually being burned.
Money supply is vanishing rapidly. This has given birth to a war, between demand for dollars and demand for other currencies. The FED is doing what it can to stop the mania for equities and crypto.
A pivot has been reached. For decades the benefit of the many (cheap debt) resulted in dollar taking the hit (dixie). With the US indirectly involved in war, it is time for The States to look at their survival....
...keeping the nation, the currency and the economy strong. Now that, is something the FED is unwilling to pivot upon. All charts suggest that the FED is performing actions that will strengthen the US. Inflation is being fought, unemployment avoided and equities being kept in stable levels.
Extra Chart:
If the role of the dollar changes once again, and global demand for it decreases substantially, what effect will that have for the relative demand for equities?
Thought Experiment:
Imagine if you will, a scenario where corporate investment utilizes Bitcoin ETFs.
What effect will that have in the performance of their equities as a result of improved investment strategies?
Tread lightly, for this is hallowed ground.
-Father Grigori
Galloping SPYThis chart is frightening. It suggests that SPY can become a modern-day example of Galloping Gertie, the famous Tacoma Narrows Bridge which collapsed from nothing more than wind.
I have said it before, 2022 was the year when an Equity Crash didn't actually happen, while we were all talking about it.
It is but a scratch. But with a bleeding chopped-off arm, how long can you last in war?
Instead of an equities being killed, a Bond Crash came, and nobody has talked about its ramifications.
This is the European Bond, one of the most stable, until 2021. Imagine what has happened in corporate bonds. We can never know for sure the sheer extent of the destruction...
In stock market, higher is not necessarily better. Higher is riskier.
SPY is considered to be diamonds. JUNK Bonds are, well, junk.
Imagine the balance shift when this trend breaks. And it very much it will.
It is statistics after all. The more times you get heads repeatedly, the rarer the event.
Think, for how long has SPY been diamond, and JNK junk?
With yield rates peaking problems may arise. The bond market will suddenly revive again.
As a byproduct, dollar will get a massive hit. Some charts suggests that its days are numbered.
This chart calculates dollar strength based on the value of its total supply. If a currency manages to get printed a lot and sustain high strength, then it must be good. Especially if it pays out good yield rates. Rate cuts in US isn't good news for Dixie...
Tread lightly, for you are dead. You just don't know it yet.
-Father Grigori
Final thought:
Rate cuts can be a double-edged sword.
If FED announces rate cuts, this gives two messages.
-- Financial strength has weakened and rate cuts must come to keep the economy afloat. Bad news can trigger Black Swans. The 2008 crisis followed after rate cuts, not rate hikes.
-- Rate cuts will trigger a massive flow of money into bonds, emptying the equity market.
Careful what you wish for, and what you prepare for.
Parabolic Volatility in the Bond MarketYield Rates represent a percentage. How much would an investor get if they invested in a US Treasury Bond.
A stable economy needs three things, at least according to the FED.
- Low Inflation
- Low Unemployment
- Strong Economy
Yield Rates are the ultimate weapon of the FED. By manipulating rates they stabilize the economy accordingly. They stimulate when they should, and they calm as needed.
A strong economy is a stable economy. Volatility in markets is bad juju.
Stability in yield rates is a matter of survival.
But it seems that we have failed in that.
The average rate-of-change in yield rates has gone parabolic over the decades.
And we are talking about 100 years. The bond market is currently in a whipsaw.
The rate / percentage yields oscillate is beyond comprehension.
Who knows what effects this will have in the years to come.
A similar picture prints in FEDs mind right now.
In absolute yield-rate terms, the average-true-range of rates has formed a bull flag.
Once again this confirms the beginning of the 1960s stagflation.
Tread lightly, for this is volatile ground.
The Golden Elephant-- Prologue --
Crises don't come when everybody expects them to.
I have said this over and over again, for the last year I've been in this platform.
I don't take it back.
Finding out the kind of crisis that will come, the time and the severity, is hard.
Trading, investing, living, is hard...
Some have called me schizophrenic. This is funny. When you say what they want to hear, you are a genius.
When science presents something we aren't used to, we take it as impossible.
In my last few ideas, I received the "kindest" comments of all.
How is it possible... when a chart shows weakness on equities and strength on commodities, it is loved.
How is it possible... when a chart shows weakness on gold and strength on dollar, it is hated.
In my bio I warned you. You will have to deal with my presence for much, much longer.
So here I am again. In front of your face.
-- Analysis --
Price discounts everything. The magic of the fractal nature of the stock market satisfies me every time.
Chart patterns like flags, wedges, channels, triangles, rectangles, rounded tops, appear everywhere.
Some of them have greater strength than others. But each one of them has it's meaning and importance.
To get the elephant out of the room, let's look at the historical Gold chart.
Do note that this chart measures: How much one ounce of Gold is worth in dollars?
In a sense, how precious is a piece of colorful paper compared to a piece of yellow metal?
After decades of QE, Gold has trapped itself inside a MASSIVE wedge, that engulfs it's entire lifespan (inside stock market).
What is the outcome of such a trap? Usually down.
Fractals at their best!!!
If one believes in the Dollar Milkshake, they must not believe that Gold/USD will explode.
And with Bull-Flagging dynamics in the scarcity of Dollar, what will the outcome be?
-- Thought Experiment --
IF a food crisis comes, and you have invested in gold, what would you do?
- Find a food market that accepts gold, and purchase food with gold.
- Find a gold market and sell gold for dollars, and purchase food everywhere with dollars.
Even if you buy stuff with gold coins, the receiver of the coin will go out and exchange it for dollars to pay out their business responsibilities. In both scenarios, gold is taken out of the picture, exchanged for dollars.
Either we like it or not, by default we give more value to money because we use it as money. We don't use gold as money.
-- Conclusion --
There are two ways price increases. Scarcity and demand.
Gold is scarce but who demands it and for what?
Dollar is plentiful and everyone uses it. And now, it gets less and less plentiful.
Tread lightly, for this is hallowed ground.
-Father Grigori
-- Extra Charts --
Commodities like oil could very well overperform equities. I don't advice for or against any investment. I am not an investor. Trade at your own risk.
If one believes in the Dollar Milkshake, then they should invest either in dollars, or in dollar-denominated investments.
Question is: What could these investments be, and how will they perform?
For more information, I have linked below my two hated ideas.
Top of the world... again.The scale of what is happening cannot be understated.
Massive amounts of money have been printed, then burned immediately.
It is as if the FED is trolling us... Or we are being trolled by our own minds.
Equities reflect the mental state of investors, big and small alike.
The dilemma is causing headaches, it has reached a paradoxical state.
No human, not even ChatGPT can solve paradoxes, it is not suicidal.
This chart is one attempt into clearing the picture.
This exotic chart attempts to calculate the price of equities based on the current state of yield curve inversion. It can help calculate the "absolute" strength of indices like IXIC. Similar calculations can be made using the DXY*IXIC/100 formula. It has reached with incredible accuracy the 1.272 retracement, as shown in the main chart.
In short, the higher this chart goes, the better the QE Machine performs.
The Yield Curve is now showing a clear warning signal.
I have been watching closely the price action, now it is more certain than ever that the yield curve may correct sooner than later. A correction of the yield curve has usually led to severe recessions.
After all of this analysis, still no conclusion about equities...
Occam's razor could be the solution. Clear and simple analysis gives the best results.
---
1. Simple Price Patterns.
Sometimes, the simplest answer is the correct one.
---
2. Classic Dow Theory.
It dictates that the weakness of the few may lead to the weakness of the many. DJI is the first to show signs of weakness. Will wider indices like SPX weaken?
With bear flags clearly appearing, and an apparent HnS pattern forming, things couldn't get worse. The post-GFC bull market may fail any time now.
---
3. The Basis of Stock Market
There is this rule that everybody knows and most forget. Price is split between two areas, above and below average. When price is above average, sellers dictate price. Similarly, when price is below average, buyers dictate prices.
Price is higher than average for a long-long time. It is one of the longest-standing equity bull markets. For many years, equity prices are facing increasing selling pressure and decreasing buying pressure. Why? Because investors progressively cash-out of equities.
There may be too little interest for serious investors to buy into equities. Equities are too expensive and too risky for them to be a viable investment decision. You can find more about investment risk in @SPY_Master 's idea linked below.
Tread lightly, for this is hallowed ground.
-Father Grigori
P.S. There is much information I may have left out of this idea. I don't want to be repetitive and I try to keep ideas short and clear. You can find more info about the QE Machine in the following idea.
You against inflationMoney printing has been a double-edged sword. One one hand ample liquidity helped the exponential productivity of the economy, on the other hand inflation hit hard.
In periods of stagflation like the 1970s, immense inflation created an impenetrable ceiling for equities.
In periods of extreme deflation (2010s), equities bubbled. It is interesting that in this period, inflation figures were are all-time lows, with immense money printing.
With this chart we attempt to measure when and how much equities managed to overperform the weight of inflation.
There are two methods of calculating inflation, one is total money printed, and the other is the "cumulative inflation".
If we analyze SPX compared to money printed, this would be the outcome:
This is not very helpful, since SPX is too closely related to total money printed.
To measure "cumulative inflation" I attempted modifying this chart by @SPY_Master
DBC*GOLD is a good estimate of inflation. Since we don't have enough historical data for the DBC index, we analyze one of it's cousins, the PPIACO index. DBC is an energy-focused mutual fund, while PPIACO measures the production cost. We assume that PPIACO*GOLD is a suitable replacement for DBC*GOLD.
We end up with the cover chart, which I will briefly analyze, since it speaks on it's own.
For almost 10 years we were attempting at penetrating the ribbon, to no avail...
These fib-retracements are very beautiful...
SPX:
NDQ:
They all prove that there is massive weight on top of us.
After almost 10 years of trying to get back inside the high-energy-level above, can we do it now?
Tread lightly, for this is hallowed ground.
-Father Grigori
FRED Are Done Raising Rates -- Raise Rates? Japan Collapses.
Japanese Currency Strength is back to 1987 levels
Japan is the main source of YCC for the USA buying down bond Yields
If USA raises rates any more Japan will be in free fall collapse (hyperinflation)
They need to pause at worst start reducing rates.
My guess?
Money printer is coming back and will come back fast to save the Yen, this is not just a "Asian currency" this is the single weak point for the entire US bond system if the Yen goes the US bond yields go ^^^^^^^^^^^^^^^^^^^^^
Japan cannot tap out and raise rates, Japan cannot ditch the Yen and adopt the US Dollar, Japan is in some serious trouble here.
All Japan can do is continue to issue "Stimulus Packs" that is making the M3 go parabolic that leads to serious inflation. Now what happens when a country issues unlimited Stimulus Packs and cannot raise interest rates?
Oil, S&P, FED Funds & CPIPurple droplets indicate where CPI peaks (pink line) and green arrows point to the corresponding oil peak.
Blue dotted lines measure where oil peaks to allow a reference point to S&P chart. Light blue is FED Funds rate.
FEDFUNDS | Too TightThe point of TradingView (and being a human/trader in general) is to learn from your mistakes. I did make some mistakes. Perhaps this idea by itself is another mistake. But I cannot do any different. I must speak out about what I see.
For the past year I tried to understand the pressures that are pushing prices higher, equities lower.
It is important in analysis to avoid the mass, the "common truth".
We all have expected a future of uncontrollable inflation, extreme prices and The Great Reset. The place where everything is too expensive to buy, and we will have to live with coupons.
While some of these may come, it is important to analyze what isn't coming.
Oil prices have been paired with the dollar (with the petrodollar).
Many expect oil prices to explode even further, while "dollar is losing value" and "hyperinflation is imminent".
Some charts however show a different picture...
WIth the 2M chart warning of downward swing, and with the 3M chart showing divergence, the future of oil may not be as explosive as we may believe.
But that is in relative terms. The strength of money seems fated to increase a lot more. Which in relative terms will constitute oil cost to be viable.
In the main chart, it appears that oil is moving into what appears to be a Wyckoff Distribution.
And oil is not the only one who will have trouble with the high-yield environment.
Until now, the usual equity-bond investment scheme has performed tremendously.
This trend is now changing. With a significant trend violation that occurred last year, it seems that we are entering a new period of investment strategies.
From bonds as a hedge against equity weakness, investors should seek alternatives.
The old way of doing things is broken. Commodities will be playing a significant role in the future of investments.
It is in our power to find the new way of doing things.
Tread lightly, for this is hallowed ground.
-Father Grigori
P.S. A link to the indicator I am using.
SPX | Waiting For The Miracle To ComeThis year has been very boring... Lot's of horizontal movement, not many interesting news.
Well, except of course that "a couple" of banks went bust.
But if I didn't tell you that, you couldn't tell where in this chart this occurred...
SPX, and the market in general, has been too stubborn despite the importance of the events occurring.
On the one hand, this makes sense. This kind of crisis (banking) has come before, so the markets are calm. A crisis comes when nobody expects it to. And by design, a crisis is an unknowing event of unknowing consequences. A bank going bust is not frightening anymore. The market expects the FED to step-in and bail everyone out.
But the FED cannot possibly bail anyone out. They cannot print any more money (we might have reached a debt ceiling), and even if they could, they could be unwilling to print more money. Inflation will get worse.
So no more money.
Dollar has served as the worldwide reserve currency, until now. China amongst other powerful nations, collaborate into creating an alternative reserve currency. One that will be controlled by them, not by a panicking (?) FED.
The FED might not be panicking, even if we believe that they are trapped. I believe that they have very good knowledge of what they do, and of the repercussions. Absurdly high interest rates can be a mechanism to increase the dollar purchasing strength. And you need purchasing power when you have enemies (Russia, China etc.)
Since 2015, this has worked out tremendously well. The Dollar is making higher highs.
Of course, there are many fundamentals (like the Dollar Milkshake) that push the dollar value to new highs. But interest rates are interest-ing (hahaha) to the Dollar.
And the Dollar is winning battles against many countries of the world.
And with lower money supply, it's value is fated to increase even further.
(I like real reality, not augmented reality, that's why I used M2REAL instead of M2SL)
The money supply is vacuumed back into the printer which created it. And the power of the vacuum is not big, it is exponential.
The Dollar Milkshake Black Hole is now open.
But how much can the FED possibly hike?
The discrepancy between the FED's rate and the Market's rate is at it's highest level. The FED may not be able to hike any higher against the market's expectance. Who knows what will happen if the FED overcomes this limit... (is it even fundamentally possible?)
Inflation is high and it is fated to increase even more. I have posted about it extensively.
The preview of this chart idea is broken, oops...
Now, oil is looking substantial signs of strength.
Oil, the main inflation influencer, is showing significant signs of bottoming. Furthermore, it has retested a trendline that followed us since 2008. Long-term, the only way for Crude is up!
And the only way for equities is down! Just to reach the mean, the OIL/SPX ratio has to increase by 75%. So there is much room upwards for commodities...
Have you realized what SPX has shaped into?
Could this be the anatomy of a bubble? And has it already broken?
It seems that the recession is only now just beginning.
During normal times for the US economy, equities could grow even as yields were increasing. Now we are entering a period of weakness for the economy. Something has to give, either the equities go bust, or the yield rates. (Equities have much more room to drop than Yields do)
A crisis is definitely inching towards us...
A final chart for today:
Equities used to grow as money was created. Now this chart has immense dynamics to move downwards. In a sense, equities have MUCH room downwards, even if money gets created. This comes to prove that equities cannot absorb any more money supply. Money printing from the FED cannot possibly help equities, no matter what they do, they are trapped inside the bearish wedge. Only way for equities is down!
And similarly for SPX
Tread lightly, for this is hallowed ground.
-Father Grigori
PS. What could these charts mean? Are they of any meaning after all?
A crisis is definitely itching towards us...
I HAVE to test. All the time. Or I get this... this ITCH. It must be hardwired into the system or something.
-Wheatley, Portal 2
SPX | Of Course I'm Lying (?)I am not lying.
I am completely disproving my latest idea, on how to short SPX. That idea went on Editors' Picks. And I am now killing it.
I am not kidding, April Fools is for fools. I don't consider me or you a fool. So I am being serious.
Chart analysis is not always straightforward. Pinpointing tops and bottoms is the ultimate bet for a trader. As most of you know, this is very hard sometimes.
In 99% of a chart's movement, the trend is continuing. A significant trend change is very rare. Significant evidence for a trend reversal are VERY RARE, and not apparent in all timeframes.
This is a chart that shows clear evidence of reversals. On the weekly timeframe, SPX analysis has showed significant evidence of peaks and bottoms.
Believe it or not, SPX and NDX are showing evidence of going long.
But what about long-term?
Now THAT is a hard conversation.
KST (and many other indicators) can show us incredibly early signs of price stagnation.
Signs of stagnation in long-term charts however, can take DECADES to play out.
SPX/M2SL Technicals were peaking in 1957, but the peak in SPX prices came 6 years later.
For the standard SPX chart, things took even longer to play out.
It is as if we are in 1957. And there is more evidence towards such a realization.
What I did here was basically compare the .com bubble with the Roaring '20s.
The .com bubble was just a very-fast version of the Roaring '20s. If we slow down NDX a little, we end up with the following:
The effect of bubbles is apparent in different periods, and in different scales. The same laws that shaped the 1950-1980 price movement, may be dictating the movement of today's stock market.
The Roaring '20s still has an effect on our moves. We may be living inside the reality-distortion field of the .com bubble.
KST Peaking is an EXTREMELY early sign of stagnation. Price continues upwards, albeit at a slower rate.
Now as we speak, KST reaches this exact point of peaking. This has proved an extremely early sign of stagnation.
Will this time be different, and instead KST is showing an immediate sign, an abrupt crash?
Perhaps things are too simple after all.
Long Live the US!
P.S. Remember, the stock market is for the patient ones, those who plan for decades ahead.
Tread lightly, for this is hallowed ground.
-Father Grigori
SPX | Another LieOrdinarily, I wouldn't contemplate them... but these *are* extraordinary times.
- G-Man
A bank just went broke, oops! It was certainly something we expected. With money literally burning, these kinds of events are expected. So what might be ahead of us?
The rate-hike schedule went relatively smooth sailing until now. But just last week something changed... When the first bank failed, the consensus shifted from calm to fearful.
Now the market is pricing-in the coming yield-peak. This goes hand-in-hand with the yield-curve correcting. At that time, the market expects only short-term yields to increase, while long-term ones will slowly and steadily drop.
Back in 2018, we were begging for the FED to lower the interest rates so as the economy to "grow".
Little did we know, that by lowering rates we were pulling the rug from underneath our own feet.
Equities growing when cutting rates is cheaty...
Now we have the same. We beg for the FED to stop burning money and calm the liquidity crisis that is building-up around us.
This bankruptcy may prove an event that causes even a premature FED pivot. At any rate, both charts and simple logic call for a pause in the rate-hike schedule.
So what can we expect? What I talked about in the original cake. Unsurprisingly, I expect equities to grow next year. Their price will increase while their true "value" will drop. While a sell-off may occur in the weeks to come, this will give the signal that the bottom is in. I believe however that this capitulation will not be the main "event".
The 2018 "Recession" had some violent drops. A sudden 20% drop in 3 months in Q4-2018 was definitely something that conquered the headlines. Passing through that gave the signal that a bottom was already in. The same consensus may be brewing now. Surely the FED cannot tighten further. Surely they will step-in an cautiously calm the financial markets.
The calm will come, and it will stay for some months. Until the calm erodes. And if rates drop, the economy itself will silently erode. Until the building collapses, at a time nobody expects it to.
Tread lightly, for this is hallowed ground.
-Father Grigori
PS.
There are two ways to become rich. Theft and Inheritance.
-Aristotle Onassis, Billionaire
For the rich to get richer, they must rob. They are robbing the unknowing gamblers/investors. In the era of information, in order to rob you must fool the public by changing-up the picture.
Present the eroding building (economy aka. SPX*yields) with a luxurious cover (SPX). And hide the treasure in the dirtiest place of all.
Find the treasure. Don't fall for the trap.
M2SL | Mo Money Mo Problems!Oh boy, many of them problems...
Sometimes there are cycles, some cycles are shorter than others.
In chart analysis, we are familiar when we analyze trends. Either short term or long term.
The economy does not function only in trends. There are cycles. The most common / important of cycles is the yearly one.
Unfortunately, cyclic patterns may prove tricky to analyze. But they are very important.
Since I haven't taken the time to create TradingView indicators that calculate cycles, I will instead use a spreadsheet.
For the following charts, I basically take all historical data of a cyclic chart and export that data. For every week or month, I calculate the average distance from the mean. With that, I try to calculate the "expected distance" from the mean, for each time of the year. Natural Gas prices one might say, are lower during the summer months. So an unusually high price in summer may become explosive during the winter.
Today's main subject will be money supply. Since the January's M2SL data hasn't yet updated, I will try to guess how much money supply we can expect the following months. There is a cousin to the M2SL index which is updated weekly, and it is WM2NS. This index however as you can see on the chart above fluctuates from M2SL throughout the year. So, the regular WM2NS price should be adjusted based on it's cycle against M2SL.
This curve shows the expected yearly fluctuation of the ratio, compared to the mean,
Specific care has to be taken when we calculate the "fundamental cycle duration". Some cycles last 2 months, 3 months, or 6 months. The fundamental cycle of the economy is 3 months which repeats 4 times during the year. While this may prove irrelevant, It is incredibly important in the "cycle spectrum" creation.
If we consider a 1M duration of the fundamental cycle, the chart isn't as representative as the 2M one.
The Diesel / Gasoline cycle is incredible. This comes to prove that these two are highly correlated.
With the same method we can compare gasoline price with crude oil price.
For fuel prices, it seems that the end of the year can serve as a good baseline for the outcome of the next year. Absolute and relative are at their minimum in this time of year.
Similar charts can be drawn for DJI. While more chaotic (wider error lines), weeks 10 and 44 (March and October-November) appear as the weakest periods of the year.
So what M2SL price can we expect in the following days? I am an impatient man, I cannot wait for the results!!!
After a substantial drop in money supply, one might fear that further downside is to follow.
There are charts that calm such fears. Price has never touched the Quadratic Kernel indicator (a form of historic moving-average), and it may never touch it.
When RRPONTTLD increases, money supply decreases (I am oversimplifying because I don't know the exact specifics).
Bullish stochastics may signal more upside for money supply.
Finally, I will analyze the protagonist chart:
Suddenly, the 1.2% increaase doesn't sound that extraordinary...
Sometimes, a simplistic analysis like this one above, may prove correct like this one below:
Final thought:
With inflation higher than expected and money supply about to increase yet again, how high of an inflation can we expect?
With commodities bull-flagging against money supply itself, and Bitcoin bull-flagging against the Tech-Bubble, things can get pretty bad for equities...
Tread lightly, for this is hallowed ground.
-Father Grigori
PS. I have analyzed several cycles for different kinds of commodities. If you are interested ask me so as to post them.
SPX | We are not out of the woods yetEverywhere good news, inflation is dropping, the FED is about to pivot. Energy is dropping and every single technical indicator is telling us that we are in a "perfect bottom". Many argue that we are in a similar situation to 2015, at least the price action of the main indices. So let's discuss some arguments and figure this out. First and foremost, price action.
Price action and indicators are ultra-bullish
One of the "bullish" indicators is the well-known Stochastic RSI. Stochastic RSI analyses RSI. The 1M and 2M oscillators are at a bottom. So we expect a swing upwards.
I have circled the RSI in two separate times, in 2015 and now.
RSI has to go through both the 50 mark, and it's WMA. There is significant resistance above.
There is more...
On the peak of the stochastic on 1W, the difference is night and day.
In 2015 we had already easily skipped an "uninverted ribbon", while now we are into significant resistance. This week we had outright rejection.
This tells us that the 1M oscillator will have much trouble swinging upwards, since the 1W oscillator is at it's peak and price rejected on resistance. A successful swing should be verified by many oscillators.
If you look at the 12M chart, you will understand.
2000: Stochastic begins a move downwards, RSI below WMA (resistance).
2015: Stochastic is roaming upwards, RSI above WMA (support).
2022: Stochastic begins a move downwards, RSI below WMA (resistance).
DJI is super strong, and above the cloud and ribbon
Yes it is. But for the last 20 years, DJI stood high in periods of recession.
The only exception is the "Trump run era" I made up. When Trump became president, he did made all sorts of "gifts" to blue chips.
A comparison between DJI/M2SL and SPX/M2SL in the same period.
Right now, DJI is hanging on, amidst a painful recession for most equities.
Also look at energy.
SKEW is inside a falling wedge.
Several weeks ago, it reached an all-time-low. Now, 1M and 2M stochastics are ready for prime time.
The same holds true for VIX
The FED is burning money, at any moment a liquidity crisis can begin.
Ever heard of Wyckoff Distribution? It is the most accurate analysis of stock market. It is the most fundamental behavior. Here are some distributions, in wildly different timeframes. All featuring DJI.
DJI/SILVER - 100 year distribution
DJI*US10Y - 25 year distribution
DXY*DJI - 1 year distribution
I'm out
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Tread lightly, for this is hallowed ground.
-Father Grigori
