Get started

M2SL

Abnormal DistributionGoing against the norm. Modeling stock markets using non-normal distributions. That is the only way to take into account the massive volatility that markets can reach. arxiv.org Laplace Distributions manage to analyze prices better than normal ones. It is, as if, stock market is not normal, as in abnormal. As if it defies all physics. 2020 surely suggests that. Rest assured, 2020 was not the worst violation of "normal" physics. The 2020 Swan may have made headlines, but 2008 is surely unforgettable for young and old alike. It is an example of how deep and unpredictable a crisis can become. Before the crisis, a plausible risk assessment would give us the following region. This assumption would end up catastrophic. A 2-sigma difference may not seem much, but it ended up being a 40% gap. The 2020 crash shown before, reached a 6-sigma deviation in a shorter timeframe than the following ones. Comparing apples-to-apples with the other charts, 2020 was less than 2-sigma on 300-month length. Suddenly, 2008 looks, and was in fact, more painful than 2020. Sticking to the same interval (monthly) of analysis and with the same length, we go back in time, in 1980s, just after stagflation ended. Once again, investors were baffled to see markets grow and grow, above all expectations. Curiously, Black Monday occurred on the exact 4-sigma limit on the 300M length. Moving swiftly on, we reach the "Roaring '20s". Spoiler Alert, the same happened. Price reached above any possible expectation . An investor in 1926 would do an analysis based on their historical data. They could not have known the future price action. The 2-sigma channel we drew in 1926 ended up deviating up to 6-sigma. As we all know, The Great Depression followed up. That was a similar >6-sigma event. Price reached below any possible expectation . If you believe 2-sigma is all that Dow can do, don't think twice... ...think quadruply (as in 4-sigma) The 2-sigma limit was dwarfed... ...from the scale of the events that followed. After all, stock markets must go in places where nobody believes possible. No second thoughts must flood our minds to reach the top. All hope must be lost to reach the bottom. Extra Charts: A small-looking but deadly bear trap could be all it takes to create a massive bubble. Dividing by M2SL reveals that equities are not that overpriced. They are sitting comfortably at the mean. Has Big Tech grown enough? For 20 years, consumers were the result of the growth of these companies. Now, governments need digital payment systems, digital identities, IoT. All of these will come mainly from existing corporations, not so much from government production. The .com bubble was uncharted territory for technology. Now, supply has developed, and believe it or not, we are still in charted territory. The IXIC/SPX ratio (technology dominance) hasn't even managed to make an all-time high. Tread lightly, for this is hallowed ground. -Father Grigori
DJ:DJI
by akikostas
9
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
DJ:DJI
by akikostas
23
How to break a channelOur bodies tend to grow as we age. Our minds and skills also tend to grow as we age. Some skills however, never grow. A child may draw a line. It can be squiggly, but still, a line. It doesn't change much as we age though. An analyst can pretend to be a pro, just by drawing a single line. Crazy right? Two lines, one straight, one curvy. Both lead us to the same conclusions. That markets are high. An evolution of the simple line could be a pair of parallel lines. Analysts, being human, always revert to such naive assumptions as to how markets work. Hand-drawn, subjective channels are now science for some reason. At times, such assumptions have led to the most massive of traps. With a single stroke, we have managed to trap ourselves two times, and in a massive way. It is us who may set the traps and/or fall in them. Quote of the day: Channels don't spawn naturally, only candles do. You don't have to look that far back to see traps like these. NVDA a few years ago, broke out of a bearish channel. IXIC as well. Selling back there you would have missed the .com bubble. We have become like CJ and The Truth, where we see patterns everywhere, and we trust what we drew ourselves. The definition of insanity? An arbitrary trendline may mislead you. Suddenly, another line has showed up. An analyst must be careful, as to whose signals they trust. Let nature and science do the talking. You just have to stop talking, and start listening. Charts are mute. An analyst must avoid using charts to convince. This is trap-setting. A chart must be left alone, in quiet, to pass on its message. Tread lightly, for this is hallowed ground. -Father Grigori.
INDEX:BTCUSD
by akikostas
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.
Editors' picks
TVC:DXY
by akikostas
95
BTC | Let NDQ Go Bust!Bitcooooooins... UP! In the recent history, we have had two perma-bull trade-ables, NDQ and Bitcoin. No-one in their real mind would dare to short these 2 years ago... So what if, we could compare these two bulls? Who will survive in the years to come? Who is the record keeper? The answer is NOT as simple as it might seem. Read until the end to find out... 2022 will be marked as the worst year "ever" for equities (except The Great Depression of course). Money got much more precious last year compared to equities. Just by having money, you got "richer" last year. So compared to money, equities did get worse. Items like Bitcoin suffered even worse. A 73% drop compared to SPX is a monumental way to break the crypto mania. Bitcoin has been an over-leveraged, perma-bull trade-able item. I don't know if it is a currency, a commodity or something else, so I call it a simple item. The majority of Bitcoin's gains were thanks to derivatives (trading). The same happens in Equities, but not to such an extent. NDQ is another perma-bull market full of stocks like AAPL and TSLA (everyones' favorites for some reason) Bitcoin is on a whole new level of rapidness... However, there is an exponential cousin to NDQ. That is SQQQ. So how does it compare to NDQ? Since SQQQ is basically 1/QQQ, we will plot the QQQ*SQQQ chart to see the outcome. This reminds me of the diminishing nature BTC_ADDRESSES showed. We can raise SQQQ to the 0.2 exponent to bring it down to reality. SQQQ is moving at the 5th exponent of QQQ. Incredible speeds really... So how do these two lightnings (1/SQQQ and Bitcoin) compare?? I told you that the answer is not straight-forward. And some short technical analysis: This chart above describes the popular over-leveraged period when everyone traded Bitcoin. There is a longer-term ticker showing the entire history of Bitoin ( INDEX:BTCUSD ) It shows us yet another perspective: If these charts are true and breakout as intended, what could this mean for equities? Just how big of a bubble are equities in? Tread lightly, for this is hallowed ground. -Father Grigori PS. The popular knowledge is not the truth, it is just a famous lie.
Editors' picks
INDEX:BTCUSD
by akikostas
43
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.
NASDAQ:IXIC
by akikostas
Inflation Wins, We LoseThere are two kinds of inflation, the normal one and the dangerous one. Printing money creates inflation. The kind however which is not dangerous to the foundation of the economy. With money printing, currency loses value and prices react accordingly. Nobody gets wealthy from money printing, and in a sense, "nobody" gets poor. By nobody I mean the economy as an average doesn't really get hurt. Inflation however widens the gap between poor and wealthy. Poor get poorer while rich get richer... Inflation analysis can be very simple. If one believes in simple support/resistance levels from consolidation patterns, then the following picture can be drawn for the standard inflation chart. For further validation, we can try analyzing commodities like oil. In the main chart, crude oil value is divided by the "total value of money in circulation". The value of money is the yield percentage. A massive consolidation pattern formed in 1986-2002, on which we are now supported. I believe that price cannot drop much lower than the point we are in. Dips can be expected, but in macro scale the chart is bullish. From the chart above, we conclude that oil prices (inflation) will grow compared to yields themselves. Each increase in yields (inflation fighting) will lead to higher oil prices (higher inflation). Charts like these prove the Catch-22 phenomenon we are in. This is the bad kind of inflation. This inflation is un-fixable. There is a plethora of charts that prove what I say, that inflation is unfixable. One of these charts is GOLD*PPIACO. @SPY_Master used the GOLD*DBC chart as a measure of inflation. Gold*PPIACO can be considered as another very-long-term inflation measure. Commodity production cost is bull-flagging against money supply itself. So okay, we all expect more inflation. And surely, equity prices have priced this in, right? Wrong. Equities have priced-in that the FED is controlling inflation. Investors expect both inflation and the FED to calm soon. So, equities have priced-in something that will never come. An investment can suffer when the investor judges the situation wrong. An investor who has understood the situation, "cannot" go bankrupt. Equity prices show that markets ignore the FED. In the chart above, DJI is divided by the yield curve as an attempt to measure the ability of equities to grow in a progressively tighter economy (falling yield-curve, negative yield curve). Even with all that money destruction and yield increases, equities are making all-time highs. The markets are very stubborn. The yield curve may describe the "ease" the market shows for equities. In normal times, the yield curve is positive, long-term yields are higher than short-term ones. This encourages short-term borrowing and stimulates the economy. As the yield curve steadily lowers, short-term money borrowing is less and less interesting for investors. (In the Spaaace!!! idea linked below, you can find more information about the DJI/yield-curve chart) High inflation and stubborn markets by themselves don't render equities as worthless. After all, equities survived in the stagflation period of 1970s. While the stagflation outcome can play out, there are things that may happen before it. There are some charts which are very concerning for equities... We tend to talk about the crypto bubble, and ignore the equity one. Equities have been consistently growing for the last 15 years. But thanks to what? Are companies in a "better shape" than they were in 2010? Sure technology has evolved, but from dependable devices we are now filled with unstable gadgets. Consumer devices as well as corporate ones, are more vulnerable than ever before. Security gaps are now appearing from big-tech companies to banks. Sure, issues like these were commonly occurring throughout history. But let's consider, is the immense equity growth representative of the dependence we can have on companies and their products/services? Are equities growing because of actual innovation, or from the easy way of derivatives? This chart shows the diminishing nature of derivatives. They are exponentially losing value, but their effect is much bigger than their cost. A purchase of cheap derivatives can bubble-up anything you can hope for. Where does this chart lead us? This chart attempts to calculate the effect of derivatives in QQQ price. Before 2020, QQQ consisted of a "stable" amount of derivatives. Price moved in the channel. In 2021 a bull-flag formed and launched the chart in incredible new highs (where we are now). It is one way to visualize the immense effect of derivatives, especially in big-tech stocks. (More about this chart in the "who would you trust with your money" idea linked below) Even if Bitcoin is "overpriced", it will be the winner if this golden bull-flag breaks out. Bitcoin seems to be beating many investments. Even if it may not be considered a commodity, it certainly behaves like one. Even if equities grow, each upwards move for equities, will lead to much higher prices for Bitcoin. Just like Bitcoin is bull-flagging against the most powerful of equity bubbles (QQQ Derivatives), commodities are bull-flagging against the most stable of equities (DJI) Not all equities are grim though... We may be witnessing a massive wealth transfer away from US corporations. In this idea, I attempt to analyze the massive shift of balance that we may be witnessing. While much harm has come to Europe from the war, almost everything is priced in. If the chart is correct, it means that every upwards move for US equities will push Germany further upwards. Germany has been enjoying a massive influx of money from the entire EU. After swallowing the entire European market, it is now forming a bull-flag against Europe and other countries. Germany as well as emerging markets prove a significant challenge for the US. These are bad news indeed for US equities... Tread lightly, for this is hallowed ground. -Father Grigori
NYMEX:CL2!
by akikostas
6
MV=PQ RevisitedHistorical data can be hard to compare against modern ones. The longer back an analyst goes, the better the results of their analysis. 100 years of yield rate analysis may seem enough... 5000 years of interest rates however is a whole new story. Money has been as cheap as it has been for the past 5000 years. Incredible numbers... Source: www.trustnet.com Fun Fact: Banks have existed since the early days of humanity! Unsurprisingly, trading is not a modern invention. Many agree that yield rates have been too low and equities too high. Some go against the flow and suggest that the stock market bubble has yet to come. I have been looking here and there, trying to find the reason the .com bubble was created in the first place. With that in mind I hoped that I would find when the next one will come... Price has just skipped through the previous ceiling, and is now in a new territory. The drawn channel suggests that SPX hasn't reached the top of its channel. There are many more comparisons that may suggest that equities haven't peaked. By comparing DJA with one of its subsets (DJI) we have concluded that the DOW hasn't saturated yet. This analysis above is as classical as it gets. While many thought equities would die ... ... the Bane of Traders has trapped many of us, myself included. Big-Tech dominance inside Nasdaq Composite suggests that a .com bubble may be brewing inside IXIC, just like we saw in SPX/CPIAUCSL in 1994. Onto the basics of financial now. MV=PQ is one of the foundations of how economies function. For more information read my previous idea: For simplicity reasons, we merge PQ. I don't have financial data for each one of them. PQ for the US is considered as the GDP. Another example of GDP can be SPX, which extends beyond the limits of US soil. GDP has been slowing down... USGDP is the total cost of all products produced in the US. A slowing GDP means a slowing net-production of the US market. If productivity hasn't changed significantly in the past decade, a slowing GDP may be due to falling prices. And with yield rates nearing zero in 2020, we can safely say that inflation has turned negative in the US. A slowing GDP may also mean that equities have slowed down. This gives more importance to the incoming-equity-bubble scenario. An equity bubble may come for some, but not for all. The tide has turned in favor of NDX against IXIC, and DJI against DJA. Charting suggests wealth accumulation in a smaller part of the main idices. GDP may be breaking out. With money velocity (main chart) in record-low values, we can expect faster money flow in the years to come. That means increased productivity/inflation/GDP. As expected, long-term inflation may also be breaking out of its decreasing trend. Don't forget: High inflation may be a problem for some. An increased GDP growth caused by high inflation will certainly help the chosen big-ones. There cannot be high GDP with nobody profiting from it. To get rich you must inherit or steal. -Aristotle Onassis In the end, trading hasn't changed at all in 5000 years. There are still pirates, kings, queens, emperors and peasants. Markets will march upwards with or without us. Tread lightly, for this is hallowed ground. -Father Grigori
FRED:GDP
by akikostas
1
SPX | Balance of PowerNot all is equal. And nothing is static. Entropy is the foundation of our world, and it is the bane of a rich man's existence. You collect in one spot, then nature comes up and spreads your work around. Entropy is the unbeatable power of justice. In the end entropy always wins. One has limited amount of time to temporary evade it. Panta Rhei - Heraclitus Everything flows. Money just like water, tends to move around. It is what it is meant to do. Rich men need poor ones to collect from. In the end, there is nothing else to collect from the poorer ones. But the cycle must continue. No rich man could ever possibly give out wealth for free. Instead, they let nature do its trick and rebalance things. I will now try to make a rough model of the changes in markets. Divide markets in distinct periods so as to have a better understanding on the progress of a bull market. Energy Conservation Money and entropy tend to spread out. When the stock market was "invented", few had the stocks and many had the money. Trading is a way to manipulate entropy to our advantage. We let nature spread what we don't need, and as a repayment we accumulate what we need. The stock market is like a free energy machine . The invention of the stock market resulted in a massive wealth transfer, and ended with a painful crash; The Great Depression. The peak of the Roaring '20s was the peak of wealth accumulation from the few. In the post-Great-Depression economy, money spread out again. From the few to the many. In these decades, DJI (the big 30) stagnated while SPX (the 500) progressively got stronger. But the big-30 had an ace up their sleve. In trading the game must always go on. There is always a way to get richer. And so, commodities became the new place for wealth to accumulate to. From all of the above we have come to realize that bubble tops come when the few have accumulated the maximum possible from the many. DJI/SPX measures oligarchy, while the inverse SPX/DJI measures democracy in the spread of wealth in stocks. Many bubbles and many crashes have followed after the Great Depression. The .com bubble crash and the GFC are memorable to young and old alike. And they all exhibit the same base structure. It is all the same, with one crucial difference. The 2020 economy is vastly different from the 1920 economy. The role of SPX and DJI has changed in the last few decades. DJI used to represent the companies that shaped bubbles and SPX the ones that followed. Now NDX and SPX are the indices that represent fast growth while DJI has taken the role of the "index of stability". The modern balance-of-power measure is the following: SPX-equal-weight divided by SPX-market-cap. www.tradingview.com Since I couldn't find an SPX-equal-weight index in TradingView, I have constructed a similar chart using two ETFs, RSP and IVV. The RSP/IVV chart is a good analogue to the standard chart. And so, where do we conclude? After much analysis we can say the following in retrospect. The 2008 bubble was quick but with big repercussions. Money democracy shows signs of impeding financial weakness. And as for the post-2009 Bull Market... We realize that it progressively turns into a bubble. While there is no definitive way to "normalize" SPX, SPX/M2SL proves a good candidate for absolute SPX cost. Yield rates tell many tales. Usually yield rates increase as the wide economy needs them. Strong economies need a lot of money and they can withstand high yield rates. And contrary to popular belief, yield rates are positively correlated with yield rates. Now however, the wide economy refuses to absorb such high yield rates. High production cost and high rates can destabilize the economy. Money Democracy is Positively Correlated to Yield Rates. Now we witness the wide economy refuse to absorb these yields. This has resulted in unprecedented wealth accumulation from the few. Speculation Chart: While this type of analysis is subjective, it is interesting to see patterns repeat. Composite Chart: An experimental chart attempts to calculate the scale of the derivative bubble we are in. We realize that equity prices are now lying. They are simply too inflated and riddled with derivatives to believe in. All of that was quite complex to follow through, and even harder to make a conclusion. In the end, the simplest analysis might be the best. A massive bearish upward channel has formed. Now price has rejected once again off the ceiling. The real recession may have not even started yet... Tread lightly, for this is hallowed ground. -Father Grigori Bonus Charts: Have we reached a golden ceiling?
AMEX:RSP
by akikostas
4
The Dow DilemmaWe are at a crossroads. As if we have nothing to invest in. Gold is, in absolute terms, highly overpriced. Gold is more than 50% above the 24 year average. And highly diverging... It still is the massive elephant in the room. Yield rates are the small rat in the room. Due to fast rate hikes, the bond market has suffered incalculable losses. Gold (elephant), just like many people, are afraid of rats (and yield rates). Current consensus is that yield rates are to grow forever, pushing dollar in all-time highs. But consensus cannot take us far... Dollar is showing signs of weakness. The rate hike party may not last long... And equities are still problematic. With massive amounts of money printed in the last 3 years, surely the problems are yet to come. In the main title I talked about a dilemma. DJI divided by Money Supply is warning us. But who is listening? Everyone seems to have disappeared. I am walking around with a lantern in my hand, looking for people, just like Diogenes the Cynic did. This is the micro view. Let's see at the macro view. DJI is joking to us. Short-term it shows clear weakness signals. Long-term it shows the most bullish of signals. My opinion? I expect short-term problems in the equity market. But the problems that may come could be smaller than anyone expects. A relentless equity bubble may form, trapping investors who brace for a downwards impact. In the end, things are not as simple as we may think... And all we are left with is a dilemma. Tread lightly, for this is hallowed ground. -Father Grigori
DJ:DJI
by akikostas
7
Find The Swan!Nobody was prepared the time when the 2020 Black Swan came. But the location of the Swan is very interesting: First, SPX: Not very interesting of a spot... In the middle of nowhere really. Now, DJI/M2SL There has been an impenetrable ceiling for more than 10 years. We almost hit it a third time since 2008, and then the crash came. Long-term Inflation (Gold*PPIACO) divided by money earned from bonds (modified-yields*M2SL) Note that this chart above does not include equities. DJI/(modified-yields) This chart above measures the rate equities become worthy compared to the cost of money. In a sense, as the chart increases, equities take more of the form of "gold" compared to bonds. More about this in the following idea. These charts above show that the Swan occurred in a significant ceiling. A lockdown does not necessarily lead to massive wealth transfer to big companies, and an immediate crash. This chart below shows that the Swan came as an LPSY phenomenon, in the short-term recession no-one remembers. DJI*(modified-yields) vs DJI So in a sense, long-term charts prove that there was not much room above when the Swan occured. And the short-term chart proves that the event occurred at the absolute last moment , when there was no "supply" left (LPSY). The crash was so fast because there was not much volume left in circulation. So the sell-off was quick. The recovery was immediate because the 2020 Swan by itself didn't create structural issues in the economy. Tread lightly, for this is hallowed ground. -Father Grigori PS. I could get my account banned for spreading conspiracy and misinformation. I really don't care.
TVC:DJI
by akikostas
4
Return To BaseA "back to the basics" analysis. Let's leave behind the stock markets and look at the slow and deep fundamentals of the worldwide economy. Today I will attempt to make a simple analysis using GDP. This is the net profit of one country. The miracle of China caught the West in the sleep. It outperformed the largest economy of the world. And by incredible speeds. Many use the "stochastic" indicator, and rightfully so. The word stochastic may be coming from the Greek word "stochasmos" which means "thought process". To get a new perspective on these charts we must let nature think for us objectively. The mind of nature spoke. The miracle of China is fading. And the same happens when compared to the "treasure" called Taiwan. Many are willing to fight for it. For experimentation, let's compare the US with the Eurozone. For some unknown-to-me reason, GDP has embedded in it the relative strength of currencies between the two countries. Do note that all GDP is measured in USD. In a sense, relative GDP growth is another way of comparing currency strength. We have gone from comparing equities, to comparing GDP. We concluded that comparing GDP is simply comparing purchasing power of two countries. Currency strength comes from yield rates. The power is given from those who make and define money. Supply + Yields. Power = Money Supply * Money Strength MV = PQ Tread lightly, for this is hallowed ground. -Father Grigori P.S. You want to see an Easter Egg? Consider the following equations: MV = PQ Q = GDP M = M2SL V = FRED:M2V P = "price level" 1 / P = "currency strength" Currency Strength = Q / MV In the end, it is up to the FED to decide the future.
FRED:GDP
by akikostas
SPX | The Big OneThe Big One. The big question. Buy or sell? A question is easy. An answer can be hard. Most of us here trade because we believe we have a grasp on the answers. And we have several methods on our toolkit to reach a conclusion. One of these methods is belief . That's what we gamble upon. Belief on indices, stocks, ETFs, currencies is what makes us buy them and sell them. Belief aka. Psychology/Humanity Another one is instinct . You know, the thing that we follow when we are completely lost in a mountain path. Instinct aka. Survival A final one is persuasion . The well and tested kind of making an answer out of nothing. It's what politicians have to use, lawyers and figures like Elon. Our friend who, in two separate days in 2022, posted about both the next recession, and the next bubble. Constructive Argument aka. Business Perhaps we can add to these science. But in the end, science unfortunately tends to get mixed up with all of the above three. But science can be much more than that. A scientist must admit that they cannot give definite answers to anything. So for me to come out and give you definite explanations would be business. To answer where SPX can go, we must first orient ourselves. Remember, we are gambling on a mountain with Musk. So this is SPX, and I let an algorithm draw a channel around it. And this is SPX again, but this time I let a monkey draw a line. Humans tend to stop being humans, and let algorithms draw channels for them like the first one. And if you look closely at the second chart, It resembles the main chart. I basically took the SPX price, calculated its trend, and custom plotted the deviation from its trend. It is "safe" to assume that we are below one of the infinite trends. And here comes the dilemma. So where are we? Above trend like the regression told us, or below trend like the mountain monkey said? Elon, being a gambler, told both. So there must be a way out of this conundrum. Until Musks satellites can give us reception in the forest, no help can come. We must resolve this situation the hard way. Even if SPX is going faster than the log-regression tells us, it loses against Bitcoin. But what can that mean? More questions! SPX is comprised of the largest 500 companies. And they are LARGE. The Big Questions are for the Big Companies. And these guys are high stakes poker players, they don't mess around. It is safe to assume that besides being participants, they are the masters of investing. And of course they follow current investing methods like the Modern Portfolio Theory (MPT). So where am I going with all of this? BlackRock is proposing making the first Bitcoin ETF. So for the first time since its creation, Bitcoin can be a tool of MPT. We can assume that if such a proposal comes to fruition, big players can enjoy the benefits of crypto for the future growth of their companies valuation. In the end, the answer is a question by itself. Which came first, the chicken or the egg? Bitcoin is an instrument of Big Tech. Will the creation consume its creator? Or will Bitcoin be sacrificed for the greater good? Tread lightly, for this is hallowed ground. -Father Grigori
SP:SPX
by akikostas
9
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
Editors' picks
SP:SPX
by akikostas
47
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
SP:SPXLong
by akikostas
13
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.
SP:SPX
by akikostas
6
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.
FRED:WM2NS
by akikostas
9
SPX | Spaaace!!!Spaaaaaaaaaaace! Let's make a quick party, also bring a cake to celebrate! Make it quick, because it's late and I am tired and I should be sleeping by now. We have reached the top of the world. Well, equities have. It is time for them to lose value big time. Their successor is here, bonds. I have talked about it extensively in my last idea. This is an urgent idea I wanted to post. It seems that day-by-day we might be witnessing the peak in equity price. And this idea is dedicated to the person who gave me the crazy idea to analyze something like that. The idea is simple. We all know the immense yield inversion, it is definitely ugly... What if we found a way to analyze SPX based on the yield inversion itself? That is the idea of @CryptoTaoist and I am very thankful for it. All credit and all the likes this idea gets, are dedicated to this person! Yield curve is a way to calculate money creation (normal times) and money destruction (inverted times). Green is good for money, red is bad. No wonder dollars are green but flammable! We also know that yield inversion is strictly bound to recessions. I will naively try to add these two together, equities and inversions to get an idea of when the recession is actually beginning. Me and others have posted about how the US isn't in a recession yet. This can be seen if we multiply SPX by yields. In a sense, this year we had no recession for the US economy. Please bring a real cake, not this lie... The next part is analyzing whether SPX is performing good or bad considering the current rate of money creation / destruction. In a sense, dividing SPX by the yield curve. If you calculate the yield curve as US10Y-US02Y you will have trouble analyzing it compared with SPX. Captivity of Negativity. Zero values for the denominator make a mess of the chart. You could instead opt for a bodge, to fix the denominator by adding 1. While this works, it is not harmonic enough for my liking. I will create a new yield curve, but instead of standard yields I will calculate it using modified-yields. More about the modified-yields in this idea below. The new yield curve (in blue) is following the standard yield curve (in orange). So it can be considered a satisfactory replacement. Do note that on the numerator we have modified(US10Y). On the denominator we have modified(US02Y+1). I add this +1 so as to further normalize the chart. In normal times US10Y and US02Y have a difference of ~1%. To conclude, we divide SPX with the modified yield curve and we see the following: A surprisingly smooth chart shows us what we expected, that the US isn't in a recession yet. It is also incredibly straight, from 2010-2022 and today. This means that yield curve and SPX correlate very well, if we modify them appropriately. In a sense, dividing SPX by the yield curve calculates the following: How much SPX increases as money gets destroyed? If SPX can swim against the tide (money destruction) this means that it is very strong. A strong economy can hang on even when money is destroyed. US hanging on even with that immense of money destruction, means that it was (and perhaps still is) a very strong economy, which can withstand a heavy beating. Note: DGS2 is a good replacement for US02Y if you want to analyze old historical data. Feel free to notify me of indicators that calculate even older yields of the 2 year bond. But where is the ceiling in this chart? While the 2.0 Retracement proves a significant resistance point, it is inconclusive of whether it is the terminal ceiling. One answer may lie in the following chart: (I knew the cake is a lie!!!) We have divided by M2SL and multiplied by 10^12 to bring numbers to measurable scale. A normalized chart appears, and we also observe a curious ceiling appearing. Price obsessively tries to penetrate this ceiling, just like DJI/M2SL did in 2018-2020 Are we witnessing the very last weeks of the equity bubble? Tread lightly, for this is hallowed ground. -Father Grigori Captivity of Negativity is a reference to Bagwell of the Prison Break TV Series.
SP:SPX
by akikostas
11
M2 Money Supply versus Global Net LiquidityM2 is getting a lot of attention, but is it really driving markets? M2 is the Federal Reserve's estimate of the total money supply including all cash hand, money deposited in checking accounts, savings accounts, and other short term savings. The rate of change for M2 over the past 3 years has been the steepest incline and decline in the M2 rate of change in history. However, global net liquidity, which is driven by fractional reserve banking and credit expansion from cycling credit between central banks and the private sector, as far greater impact on markets and is more strongly correlated than M2. In the fall of 2021 the Federal Reserve announced the end of quantitative and monetary easing, marking the top of the market for risk assets. Other central banks followed suit and interest rates increases and liquidity tightening started in the beginning of 2022. This contraction is highlighted in the red box in the center of the chart. The white line in the center marks the liquidity bottom that we observed in the fall of 2022 which also marks the bottom for risk assets. The green box highlights the expansion in liquidity that begins immediately after with a correlated and coincident rise in risk assets. Note that M2 has continued to contract and interest rates hikes have continued during this time. Michael Howell regularly tweets timely and insightful updates on global liquidity. I highly recommend following him @crossbordercap twitter.com Thank you to Codi0 and to dharmatech for their work on the liquidity indicators. These are fantastic editions to macroeconomic and monetary analysis.
SP:SPX
by Ben_1148x2
SPX vs Monetary Supply: SPX to all time highs... but not really.A chart i will be watching. I am bullish until SPX breaks the red line. Will be bearish if we near the yellow top. If we break the yellow top i think the stock market will truly be in bubble territory. Money will be made but that will be a real crash in the markets. This chart is very interesting as it shows the game that is being played where numbers go up on the USD chart; but our stock market valuation is just stagnant at the 2008 ATH. So we could get an all time high in the stock market if monetary supply increases. Real valuation would be weak. *****Also worth noting that US is not the only country that can inflate or contract its monetary supply ******* my opinion is that Monetary Supply will continue to dominate the investment space. Valuing assets against this shows things that would otherwise be hidden on a normal USD chart. The idea has all kinds of implications and speculations for those who study macro economics and financial markets.
SP:SPX
by SnarkyPuppy
3