Another Market Inflection Point?
Several readers have asked about where the market could be headed. The simple answer is? “It’s almost anywhere…”
You need to survey the currents and counters swirling about:
- This morning Jerome Powell (jefe d’ Fed ) speaks. Markets generally “play nicey-nice” while official-speak is being dispensed.
- The other Fed reveals this week will include meeting minutes tomorrow afternoon and the Money Supply confessional Thursday.
- These are “great BIG deals” because the Fed has already said (to markets) “Expect to skid along the effective zero bound to at least 2024.” Which means no growth – except a money-printing festival in an attempted to offset systemic deflation.
- This gets us to another problem: When does public “normalcy bias” break down? In other words, as the economy goes Titanic on us, how long before anyone (except’n us) realizes the Band has gotten in their lifeboats, already?
- Layoffs are kicking up, too. Worth notice:
- Southwest Seeks Pay Cuts From Unions to Avoid Layoffs Through 2021. (The “no layoff” hype has a wage sword behind the curtain!)
- New Orleans to furlough city employees, 4,000 will go unpaid over 6 days. Will their medical still work?
- Collapse is not a US-only problem. In the UK, Competition for jobs ramps up ahead of furlough scheme ending, with job applications up by 10.5%.
- With all of this, we sadly report that partisan wangling will likely prevent any more “relief money” from hitting your account until AFTER the election. Sure, Second Stimulus Check: Trump Wants Democrats, GOP To Pass COVID-19 Relief Bill…but we don’t think the republicans in the Senate will agree because if they do, things like a tough moratorium on evictions – and money – will be claimed as victories by the dems.
- If all this isn’t enough, we fully expect president Trump will make at least one more visit to Walter Reed – as his personality-type will likely drive him to “too much, too fast” and that could foreshadow a relapse.
What could go wrong? Plenty. I don’t think the market is pricing it in. We perma-bears are like that.
Market Decline #1 In Perspective
We will have the updated view on our Peoplenomics.com subscriber website tomorrow. But, as of last Saturday, from the February 2020 all time high earlier this year, comparing that with the market “rally since” it seems we could be out of harms way. (Thing is, we’re not. I’ll explain, but first eye-gobble this:)
Let’s chew-through this from left to right:
This chart lines up the all time high of the Dow (9/3/29) with the February high this year of our Aggregate Index. It also happened that the Aggregate and the S&P peaked on the same day; February 12.
Like us, the Fed was no doubt worried about the wheels coming off EVERYTHING as we sank into the March lows. As a result, as the parallel to 1929 (blue circle left) became obvious to even dumb people like me, they pulled out all the stops. Money creation went ballistic (beginning in the red circle, left).
At a minimum, the Fed wanted to retake the old market high from February. Mission accomplished, except that thanks to faster trading velocity in modern times, we “peaked sooner” than the 1930 analog.
We THINK (and this is not trading advice) that those “trading boxes” – mid chart – have told the Fed “OK, boyz, this is what $7-trillion buys.” The green oval (lower right) offers the notion that we could/should bump along. Maybe putting in something of a “lazy double-top” and then start back down in 2021, if not right after the election.
Bottom line is? Time has been bought. Expensive stuff, time!
Screwing Technical Analysis
There was one other thing the Fed got for its $6+ trillionish in direct and indirect (proxy) interventions: The death of long-term technical analysis.
The reason is simple: In Elliott (to name one) the March high should have been “IT.” Fifth wave and all. BUT, we had another high in September.
THAT shouldn’t have happened. But, the notion (which I’ve never bought into) is that Elliott Waves should (and maybe CAN) only be measured on a PPP (purchasing power parity) basis.
The reason? People don’t care about “market waves” and such in real life. But, if they notice that the price of bread as gone up 25%, then their behavior is modified. Which gets to a fascinating topic for a (bigger brain than mine) like Bob Prechter of Elliott Wave International to calculate:
That would be the “Inflation disconnection coefficient” of wave counts. Obviously, if you have a 10-year period you’re measuring a wave through, and inflation is stable (within a few percent) over the length of the timebase, then sure. Inflation’s not such a big deal.
But we’re in a period now where the money supply behind the one-year charts (previously running in the 2-3% monetary inflation range) is now up more than 35%. This is why (in my humble) we are in a period that should have peaked with a 50% or a 61.8% (Fibo) bounce, and then we would work sideways.
The Fed, though, couldn’t risk that.
Notwithstanding “Free Money”
Technical analysis still works. It’s just that it can only work when the massive portion of monetary intervention has been completed. And we MAY be there, or in that neighborhood, now. Since the market (and Fed) can coast past the election. Next spring? People will become extremely aware of the PPP change. Just not now.
What we are left with, when we apply the spreadsheet subscribers can download to tinker with,; is this view of the S&P 500 basis the September 2 high:
As you can see, when put plug in a high, then a low, the various levels to look forward to (though again, not trading advice!) is laid out. Would a lower close today surprise me? No, but the Powell Magic Show is this morning!
Thus, when I told you I expected the S&P to be under 3,000 by the time the election arrived a week, or two, back, here’s the reason I anticipate that.
In terms of “economic soothsaying” we might have a year-end down around (tosses dart) 2,850, a rally to the 3,200 area in January, but then down to ther 2,700 area in the spring?
It’s axiomatic – regardless of inflation regimen – that “You can sometimes get prices, but you can’t get time. Which is why we spend hours staring at charts instead of doing real work around here.
Newest Trade Data
You have to love the PR positioning of the trade chart. People don’t really think “OH, chart goes up – must be good…next?” Except this is one *(like the CV body count or cases chart) where going up in BAD. REPEAT: BAD!!!
The story about how the Dow Futures Turn Higher As Trump Returns to White House; Fed Chair Powell Speech in Focus, misses something. Sure, the Dow futures were up 0.29% but remember, we’re totally into Aggregates and the NASDAQ” futures were down 0.25%. This one could go down to the wire, but a lot will depend which rabbit J. Powell hisself pulls out of the hat.
We’re wondering what a Bull-Rabbit hybrid would look like…ridiculous?
On track to visit Nawlins next week:
If it heads up into our area, could bring some rain (obviously!). So we will be watching for any (call the pun police!) Delta delta….
(No yuck-yucks in Yucatan, though – coming ashore as a Category Four…)
Urban’s Dept. of Useless
Where there’s smoke, there’s Navajo? “Chaos and Cannabis: A Hemp Empire Brings Trouble to Navajo Land.” Light up some of that signal for us…
Another Vote by Mail confidence builder: Postal service investigates bundles of mail found near dumpster at N.J. shopping center. Wait – Ain’t Joisey a mostly democrat state?
CV-19 Tagging in Politics is coming. Now that Trump can be tagged, notice the appearance of stories like Boris Johnson says rumours about him having long-term coronavirus health problems are ‘seditious propaganda’. Which will lay the groundwork for the fake newsers here to load up another bandwagon…
Follow-Up: Psyche Break
Someone commented on Monday’s post:
“George…Where do you get this dumb idea of Family Olympics? His family was a complete mess. Trump has only one personality and it’s a huge disorder.“
As I explained in an email to this reader, I don’t make this shit up. Long-ago interviewed the author of the 1981 book “Overcoming the Fear of Success” by Martha Friedman (Psychiatry, New York Medical College). Here’s a key part from Kirkus Reviews:
“What, consequently, is the child’s fear: one of success in loving parent number one, or one of failure in dealing with parent number two? Still, Friedman has a background in family therapy, and she does have some points to make: in the “”family Olympics,”” sibling competition may pave the way for fear of success in later life (because of guilt about outdoing brother or sister, for example); or negative criticism may weigh so heavily that we feel undeserving of success….”
Sets up life-long patterns and odd compensatory behaviors…
My article Monday went to the point of the Trump Family internal “Olympics” with a (delayed) nod to Friedman circa ’81. (Took a while to dredge that up from the memory banks – one 20-minute interview from untold career-long thousands – and almost 30-years ago, at that. One day, I’ll have to write an article on “deep recall” but not today.)
Ham Radio Notes
Still haven’t been able to find a front panel gasket for the restoration of the Icom M710 marine radio. Note from Icom service dept. tells me “Sorry to inform you that we no longer support this model of radio. I have provided you with the part numbers and the description. I recommend that you go to eBay or Amazon you might be able to find the part there….”
No joy on that front.
The quest for gasket (seal) MP2816 continues. I thought they were still making the M710 and variants…shows what I know…
SuperAntenna-III got on 20 meters last evening for a quick “Does it work?” Oh hell yeah! With 100-watts (basefoot TS-590) it was tossing a 20-over S9 signal into Pittsburgh (1,056 statute miles on 20 meters)…which has to count as working. 40-over S9 when I turned the amplifier on…. More work to follow, but pneumatic “antenna launchers” are the solution to all ham radio antenna problems, lol. 50-60 is an easy-peasy shot.
Hmmm…wonder if there’s a market for a decibels vs. altitude antenna chart by band…hmmm…
Around the Ranch: Limb Trim
Been a busy couple of days for the power line right of way crew. We now have what looks like a golf course fairway on the lower 16-acres. No chance of me hitting a golf ball the full length of it. That’d be 1,200 feet from the “first tee” on Ure’s Rough Country Golf Course. “Cotton Mouth Creek Country Club” we call it. (3 to 5 “official holes”, 18 if you count gopher, snake, rabbit and fox holes.)
Bucket truck will be by this morning to trim the big oak up front. Couldn’t safely get the big 70-foot reach extension-blade monster through the front gate. It’s about 10’5″ wide and tires that are as tall as me (and heavier! If that don’t beat physics…).
Breakfast roundup is next, then on to work over Peoplenomics for tomorrow.
Dig that trade hole, rally that market. I gotta find a new dealer cause even with a toke, this shit just ain’t workin…sheesh!
Write when you get rich,