Bonds Tank Again

There's about 1 percent to go on ZB before the inverted H&S pattern weakens. I'm out of my calls, so maybe the bottom is close at hand.

Australia PMI Plunges

If June is half as bad as May, the PMI will signal contraction:

Full report: Manufacturing recovery slows in May

Suddenly the New Leading Cause of Death

Dead Man Talking: Australia begins to reap what it has sown. It's grim.

VD: When The Reaper Calls, commenting on the above:

So, the good news is that you’re not necessarily doomed if you were dumb enough to get the Death Jab one or more times. The bad news is that you not only proved that you’re literally gullible enough to kill yourself on the basis of a government agency’s recommendation, but you’re also much more likely to die of “suddenly” or some other cause due to your genetically-altered, vaccine-compromised immune system.

It’s possible for science and the media to hide or otherwise explain away a lot of statistical anomalies, but all-cause mortality isn’t one of them.

Reload at $280

USO Thesis

1. QT will do its job.

2. What goes up fast goes down fast too. Blow off tops are rainmakers for options trades because the initial reversal is a technical move, the short thesis kicks in after. With USO (CL in parentheses), it was $74 in mid-May ($100 for CL). The move since mid-May has a parabolic shape to it.

My USO puts are at $70 because I expect if QT2 works like QT1, then oil will drop quickly. It fell 44 percent in three months in 2018Q4. If oil drops 20 percent from current levels, it gets to around $92 per barrel or around $69 for USO. However, there's a Fib right above that area, so my wager is that by mid-July USO will be closing in on the $60 level. In a nutshell, if crude does tumble because of QT2, I want to be positioned for a downward acceleration and possible overshoot on the downside. There are plenty reasons to go with higher strikes for a higher probability payoff, but I like the low-cost, "unlikely" payoffs.

Updated: Energy Maybe Yes, Thanks OPEC

I have no directional view on energy at the moment, but XLE is hitting a resistance line.

It will take a failed breakout in crude to get this going. If that happens and QT2 is the driver, the $70 strike July puts on USO don't look terrible as a lotto play.

Update: I put on the $70 strike for 60 cents and looking to add shorter term XLE puts.

Update 2: Oil Prices Tumble On OPEC-Russia Reports

...some OPEC members are exploring the idea of suspending Russia’s participation in an oil-production deal as Western sanctions and a partial European ban begin to undercut Moscow’s ability to pump more, OPEC delegates said.

Exempting Russia from its oil-production targets could potentially pave the way for Saudi Arabia, the United Arab Emirates and other producers in OPEC to pump significantly more crude.

This hasn't killed the possibility of oil breaking out, but it did reverse the breakout for today and produced an ugly candle if prices hold down here.

Aurania Finds Lost City of Gold

Aurania and Metron Find Lost City of Gold in Ecuador

Aurania Resources Ltd. (TSXV: ARU) (OTCBQ: AUIAF) (FSE: 20Q) ("Aurania" of the "Company") is pleased to report that through a collaboration with Metron Incorporated ("Metron") of Reston, Virginia, USA, the "lost city" of Logroño de los Caballeros has been found in Ecuador. The site considered to be the ancient gold camp is not on Aurania's concession block, but is downstream, and is exclusively alluvial (placer) gold. No archaeology has been found. Aurania is now on the hunt to find Logroño's source of gold within its Lost Cities - Cutucu Project ("Project") in southeastern Ecuador. The location of Logroño, as inferred by Metron, is supported by a multitude of historical documents as well as geological information collected by Aurania and the increased presence of artisanal miners in the area. Logroño de los Caballeros was one of seven historic mining areas operating during the time of the Spanish conquistadors in the land that became Ecuador. Its geographic location and that of a second site, Sevilla del Oro, have been lost over time. Aurania's Project is partly based, and is named on the premise, that the two lost cities would be within Aurania's large concession package.

Pullback or Inflation Fears Ignite?

Crude oil broke out on Monday. It was higher for three days in March because of Russia's invasion of Ukraine, but that gain didn't hold. Now it is trading at a higher average price and has broken out of a base. The target is $150 if it holds.

Bad news for my TLT calls: bonds imploded. The stock market followed.

Biden summoned Powell to the White House: Biden highlights Fed inflation role ahead of Powell meeting on Tuesday

QT starts on Wednesday. If the Fed isn't doing enough, it's possible they drop a surprise on the market this month because inflation is becoming entrenched.

WTF is Going On: School Shooter Edition

Update: The latest report says the teacher closed a door that was propped open. Teacher Closed Propped-Open Door Before Uvalde School Shooting: Police. The subheader from the story: "State police initially said a teacher had propped the door open shortly before the gunman entered the school"

Best case scenario this shooting was a total failure of government, from schools to police. It invalidates the gun control argument from the start, but also any argument for making schools safer. How is that possible when it looks like teachers and police, worst case, colluded to help the killer and best case their incompetence was akin to it?

DailyMail: Uvalde school district was part of AI program that rooted out potential mass killers and monitored social media for threats and potential shooters

Texas school officials had been monitoring students' social media prior to the deadly shooting in Uvalde Tuesday, it has been revealed - but still failed to pick up on concerning posts from the teenage gunman in the days leading up to the tragedy.

As an 18th birthday present to himself earlier this month, now-deceased suspect Salvador Ramos bought two AR-style rifles and paraded them on social media - including in ominous messages sent hours before the killing started.

The rifle used by the shooter starts at around $2,000 MSRP and he bought two of them. These are not cheap rifles that someone without much money would buy, though I suppose it is possible he spent his life savings on it if he planned to die. Otherwise, the high cost of the rifles make me suspicious of him acting alone.

CannCon: What Really Happened in Uvalde?

But before we start the timeline, we must first ask an extremely important question: How did an 18 year old man, with no known employment, whom was living with his grandmother because of an addict mother, afford:

-Two expensive firearms made by Daniel Defense ($2,000 each)

-an EOTech optic ($400-$700)

-1,657 rounds of .223 ammo ($800-1000 depending on how they were purchased)

-body armor ($500-1000)

-and over 60 magazines ($10-20 each)

for a total of approximately $6300 to $8,000? Most established adult Americans, especially after the last two years and the current economy, can’t afford a fraction of that. But this young 18 year old was able to do so with no known job and all on a debit (not credit!) card? In a border town reportedly overrun by the worst of the worst from the US Border…I’ll let you make your own assumptions.

This is the most damning part of the timeline of events. Important to know that this school, being on the border, is subject to repeated lockdowns because of border patrol events. Any time there is an active shooter or even a potential threat in the area, schools will lockdown. This school did the exact opposite, which either means they stopped following protocol (possible if lockdowns were a weekly event ands never amounted to anything) or something more nefarious at work:

1. Why did a *teacher* prop open a secure entry exactly one minute before the shooter arrived on scene?

2. Why did that teacher not close the door and ensure it was locked when they reportedly saw the accident, the shots fired, retrieved their phone, and called 911 to report it?

3. Col. McCraw said the teacher “apparently” called 911…has DPS confirmed the teacher called 911? Have they confirmed it was a teacher who propped open the door?

4. Why did the timeline shrink by seven minutes from yesterday to today when yesterday’s press conference was given based on video evidence as stated by Escalon in the presser? It was not as if Escalon responded to a question, off the cuff, with the times. It was part of his deliberate and detailed statement to the press. Are you telling me something as important as time, which he reiterates the time twice, was inaccurate on the video? Or did he just make up “11:40” when he was writing the press conference without bothering to confirm the time?

5. Where was the school’s police officer and why was he not on school property? Where was he that he was able to respond in under three minutes time but unable to find the wrecked truck and correlate the closest entry to the school to the wreck? How did he not hear the gun shots going off in his immediate vicinity when he, or other officers, were reportedly at the funeral home?

6. Why were seven officers not able to breach a room with two doors and windows to eliminate the suspect?

7. Why could they STILL not breach the room with 19 officers?

8. Why did it take a BORTAC unit and ballistic shields to breach the room?

9. Why was BORTAC even there? A federal law enforcement agency tasked with border protection is somehow on scene in a school shooting?

10. Why were US Marshalls out front of the school in adequate PPE (personal protective equipment) holding back parents and waving tasers at them, but not helping with the situation inside the school?

11. Col. McCraw reported that BORTAC used keys from the janitor to “breach” the room. Let’s be real: it’s simply called unlocking…breaching is defined as “to make a gap in by battering” according to Merriam Webster Save the “heroic” sounding words for the investigations. But I digress: If BORTAC was able to “breach” with the keys after an hour outside the room, would Ramos have been able to “breach” the classroom if the doors were locked? Were they locked and if not, why?

We now have testimony from law enforcement that a teacher propped open the entry door one minute before the accident, according to Col. McCraw. We have the teacher who propped open the door calling 911 but NEVER secured the door again. The suspects walks through said door at either 11:33 or 11:40, depending on which press conference you watched, and walks down a hall and into a room that may or may not have been locked. When it was locked by Ramos when he entered, it took BORTAC locating a set of keys to “breach”. Would it have taken Ramos the same set of keys to enter? Would it have delayed him enough that the three officers who reportedly entered moments after Ramos would have been able to then confront him in the hallway prior to entering the classroom?

When you pair all of this with the fact that an 18 year old dropout with no known job, an addict mother he left to live in a small home with his grandma, somehow scrapes up at least $6,000 to buy weapons and gear and then proceeds to shoot that grandmother that took him in...well, it’s bizarre.

The article also covers how he talked about buying guns on social media and his contacts asked him if he would shoot up a school:

Why is it that these major social media conglomerates will flag our posts, suspend us, ban us, label us “misinformation” in a moments time when we talk about COVID vaccines, the 2020 election, or Hunter’s laptop, but when an 18 year old mentions “being a school shooter”, crickets.

Many people become overly conspiratorial and thing this is all a coordinated attempt at eliminating the one thing keeping Americans free: the 2nd Amendment. It's the only amendment that still functions as intended so I can see that position being a natural outgrowth of anyone assuming there is a conspiracy against the American people. I lean more towards the fact that a subset of the gun-control movement, the gun-grabbing ghouls, spin up to full blast whenever there is a shooting, details be damned. Same thing anytime a white cop shoots a black suspect, there are the people out there screaming murder and white supremacy before a single detail emerges. The media amplifies this because it fits their narrative, giving it the appearance of some coordinated act, when it's exploitation by the usual suspects. 

Contrary to media coverage, the event is very strongly anti-gun control. One, the police are useless. Abusive policing is a problem and society abuses police. Being a cop is a no win job these days. A "hero type" isn't going to join the police force anymore. Instead, it's more paper pushers and box checkers. No surprise we keep seeing officers waiting outside while shootings take place.

Cops are no longer "peace officers" who "protect & serve", but "law enforcement officers" who are more likely to act like a traffic cop...including at a school shooting. If your plan is to dial 911 in a life and death situation, you could well die. If those parents trying to get in brandished firearms and dared the cops to shoot them, either they would have gotten in or the cops would have been shamed and gone in themselves. Nobody would have blamed the parents if they had to shoot the cops to get into the school either. The cops behaved as if they were working with the killer.

Second, if cops won't go into a school to stop a single shooter murdering innocent children, how many police are going to enter homes where they will be the target of the gunfire? BLM and other groups already talk about killing police and some nutters seems to be acting on their suggestions in some cities. Think cops with cushy jobs in low crime suburbs and rural areas are going to want to put their life at stake 24/7 to strip Americans of constitutional rights? No way, it isn't happening. There are already many sheriffs who have already said they won't comply with stricter federal gun laws. The gun control movement is dead as a door nail after this shooting. Maybe some cosmetic laws will pass, but that's it.

Third, American society is breaking down in every way you can think of, including the ruling class. Why are there such emotional explosions when these events occur, before any details come out? Government always use fear and terror to push bad laws, but why are they leaning so heavily upon emotion? It's become almost axiomatic that if you see an emotional story that seems to line up with the mainstream/ruling class narrative, wait about a week and you'll see it fall apart. Not always, but enough that people who pay attention assume government and media lie 100 percent of the time. 

My answer for why is they are losing power. The facts are so against them that hyper-emotional pleas are all they have left. As I've said, I think a logical reaction to the events in Uvalde, even if you don't care about gun ownership and the 2nd amendment, even if you are for more gun control, is to go out and buy a gun and get trained on using it because every single system that you would be forced to rely on with no alternative if you are unarmed, failed. And then after if failed, it stood by and did nothing, failing again. 

Who wants to give this system more power, more control over their life by disarming themselves? A person's status as a victim or survivor may come down to whether they can protect themselves and their family with firearms or whether they rely on public institutions. Institutions that produce teachers who prop open doors that let school shooters in while there's gunfire ripping outside and cops who stand outside while children are being shot. 

If anything, the shooting in Uvalde makes a good case for abolishing public education. Having large, centralized public schools is a magnet for shooters. Privatization would create far more smaller schools and they would have more power to arm teachers and use security measures.

Chinese Cities Now Subsidizing Home Buying

Boom-bust cycle is all that's left in China.

iFeng: 多地以财政补贴提振楼市：购房最高补贴房款2%，契税全免

Taking Yiwu, Zhejiang as an example, on May 26, the Office of the Leading Group for the Steady and Healthy Development of the Yiwu Real Estate Market issued the "Implementation Rules for Yiwu Deed Tax Subsidy for House Purchase in 2022". The detailed rules stipulate that the purchased house is a commercial house that has obtained a commercial house pre-sale license in Yiwu City, and the citizens who sign the commercial house sales contract online from now until December 31 can receive a deed tax subsidy ranging from 60% to 100%. .

Among them, from now until September 30, the first set of commercial housing will be subsidized according to 100% of the local retained part of the deed tax paid; the purchase of two or more sets of commercial housing will be subsidized by 80% of the local retained part of the deed tax paid. During the period from October 1st to December 31st, for the purchase of the first set of commercial housing, 80% of the local retained part of the deed tax paid will be subsidized; for the purchase of two or more sets of commercial housing, 60% of the local retained part of the deed tax paid will be subsidized subsidy.

Taiyuan in Shanxi also issued a similar policy. Taiyuan stipulates that from May 20, 2022, the first housing area of ​​less than 90 square meters will be fully subsidized by the finance deed tax. The first set of housing with an area of ​​90-143 square meters (inclusive) shall pay the deed tax by 80% of the financial subsidy, and the deed tax shall be paid by 50% of the financial subsidy for the area of ​​more than 143 square meters.

Energy Makes a Case for Going Long

Short but sweet post. If you're wondering what is going to lead the market, look at what led during the decline. Here we can see the evidence of this:

You'd think tech (consumer discretionary is 40 percent in Amazon and Tesla) would bounce and you'd be right, but there's energy in the mix. This looks like our next bull market leader.

Earlier this week I said the second trade of this year would be short oil, but a week like this past one makes me wonder if it won't be pushed out until September. On the bright side for bears, energy's strength is bearish for tech. This definitely looks like a bear market rally. Stll, if crude has higher to go, natural gas producers such as SWN and oil services such as TDW, NCSM are a place to be.

A look at crude oil shows the Russia spike evaportated and is now almost entirely back in terms of time. Crude only traded higher on a few days and the Russia spike took it higher for only three days. If crude can touch $117 per barrel, I will view the Russia spike as an anomaly and conclude that a new breakout is underway, with a new high above the Russia spike coming. The #GreenSwan will be here. Green and ESG policies, plus lockdowns can keep pushing crude higher even as the monetary fundamentals shift. This will send the Federal Reserve to the wall on rate hikes. There will be a terminal move in crude at some point though, because the Fed's policy plus slowing money supply growth should take year-on-year growth lower.

Takeaway: the Federal Reserve cannot and will not ease policy with crude oil in a breakout. If crude rallies now, it will be a good long trade for a few months maximum. The biggest gains will probably be in stocks that have high production costs, such as offshore oil. Crude will be a great short at some point though, and I won't get too aggressive until I see how markets react to QT. If crude declines right away, it is a good short here with a good buy-the-dip opportunity coming later this year...assuming the wheels don't fall off the global economy.

Victory Taco

Long BTC or Short Stocks

Lost support again today, but still holding that area. Very weak relatively speaking.

Relative to the S&P 500 Index, BTC is right where it was in July 2021. I thought it would breakdown there, but it rallied hard instead. Maybe a repeat is coming?

Update: Etherum has the same pattern and a similar test of its low from June to July 2021. Almost at the exact same level too, as you can see from the blue and red horizontal overlapping. Even zoomed in there's barely any space, a difference of $4.

Stocks Bounce on PCE Price Index

Stocks are rallying today based on one factor and one factor alone: declining inflation. This is mainly caused by the PCE price index. If the government economists accurately calculated inflation, then consumer spending increased at a healthy clip. Whether that was due to wages or tax refunds and consumer debt can be debated, but if the government got inflation right, then there was at least growth in activity. By accurate, I am not talking about the "real" inflation rate. I'm speaking only of the government's own formula. They revise their own numbers all the time. With supply disruptions, high inflation and so on, their models are being tested like never before. Economic growth depends entirely on the inflation calcualtion because it is small enough to where calculation errors will wipe it out. The first quarter GDP number was negative because of inflation among other factors. The rebound in crude this month will bump the June PCE deflator reading up.

It's also worth noting that the response to lower inflation is to increase the price of everything from copper to gasoline. This is not a sustainable rally. Either commodities have to selloff when QT hits or stocks have to find a low far lower than the 3800 area.

As for an upside target, the 2000 bear market peaked at a 50 percent retrace and 2008 (from Bear Stearns low)at 61.8 percent.

China Prepares for War, You Should Too

Jennifer's World 曾錚的世界:War Mobilization Meeting of the Southern War Zone of the PLA: Guangdong Province in The State of War

According to the spirit of the instructions from above, combined with the actual situation in our province, it is recommended that in accordance with the principle of a rapid and orderly Normal to War status transition, military planning, and mobilization, we will focus on the following three tasks.

First, the construction of a national defense mobilization command system

Second, the implementation of a wartime work mechanism

Third, wartime control preparation

Next, please discuss and make speeches.

First, we need to strengthen the protection in the political field. Look at the recent several regional wars, especially the Russian-Ukrainian conflict war situation. If you look at the big picture, the United States and the West will try everything to slander us, smear us, in an attempt to confuse right and wrong, to shake our will to win a just and decisive battle. We must give full play to public opinion, legal struggle, psychological war, and militia teams to strengthen the guidance of public opinion and psychological protection, and cohesion of patriotic support for the positive energy of the military front.

Second, give full play to the advantages of the people's war, fully learn from the experience of epidemic prevention and control in previous years, fully mobilize grass-roots organizations, widely mobilize cadres and masses, organize military, police, and civilian forces, launch grid control, create an atmosphere of national preparedness, improve the people's ability to withstand war and disaster, so that the enemies and spies have no place to hide.

War is coming, probably within 12 to 18 months if it's going to happen.

Gas Gouging Bill Sends Prices Higher

The Democrats extended their war on fossil fuel supply this past week with a bill against gouging, with zero evidence of any gouging because there is none. Prices are up because of Federal Reserve policy, USG stimulus which was pushed by Democrats and signed by Trump and Biden, and the Green/ESG war on plant-loving CO2.

The rise in prices this week has more to do with the Federal Reserve sounding way too dovish with some talk of pausing rate hikes in September. The market is showing them exactly what it thinks of that by blasting energy prices to new highs (the average price of crude this month will exceed that of March if the $112 holds through Tuesday) guaranteeing another bump up in the CPI. However, industries targeted for unjust political abuse are going to reduce economic activity over time. The expected gasoline prices is higher if a gouging bill becomes law.

This is worse setup than in the 1970s. Back then, Democrats were cutting regulations, but in hindsight they moved too slowly on opening the economy for Carter, resulting in a "free lunch" for Reagan as inflation imploded with deregulation and Volcker tag-teaming the supply-demand imbalance. This time, the Fed still hasn't convincingly signaled it will do whatever it takes on inflation and Democrats are escalating their attachment to bad policy.

It's Raining Apples!

I'm thinking $110 or maybe even a gap fill at $95. Assuming SPX bottomed out at 3450 (xTrends and Hartnett target areas), Apple would trade at $120 if it matched the index. If instead Apple leads the S&P 500 lower, $110 looks conservative as a target. Anyway, all speculative until the current rally peters out.

Second Trade Setup of 2022 Coming into View

Back in January, I posted: The First Setup of 2022

On a 10-year breakout. Long: value, commodities, financials, USDJPY (US dollar in general), crypto. Short: growth, tech.

On a 10-year reversal, reverse the outlook. Energy and commodities could lead the way lower in a rout of the value/inflation trade, but the ARKK-related trades probably don't do well if its a Fed-triggerd correction.

Financials only worked short-term and I quickly went bearish on them, but everything else was a slam dunk with many rainmaker options trades. Commodities moonshot, growth and tech imploded, USDJPY rocketed higher.

The next trade is the 10-year reversal.

I have the bond leg of this trade on with TLT calls.

The next leg of the trade is bearish positions on energy and commodities. There are many ways to play this with futures, commodities funds running the gamut from copper miners (COPX) to steel (SLX) and so on, but for the purposes of simplicity I'm focusing on USO. Partly because USO outperformed (for bears) during QT1 in 2018.

I'm not sold on an immediate short because it looks like another pop could be coming. The other thing that I wonder about, but will let the chart answer for me: is the current amount of liquidity along with disruptions and ESG/green policies going to prop oil up? QT2 will begin at the QT1 maximum ($47.5 billion per month is close enough to $50 billion for me). Is that enough, given everything else, to trigger a drop in crude oil and weaken inflation? In the back of my mind, the short-term shocker for the market might be no, it is not enough. If crude oil broke out from here all the talk of the Fed pausing in September would go poof. 

I found a similar setup in oil with the stochastics turning lower, but crude still rising, from spring 2000. Crude oil rose into the autumn before turning lower.

While I was composing this post, crude was ripping:

BTC Ready to Go

Something big is coming and soon.

The pattern suggests down. If I want to get cute, support could hold until $28.4k area as it did the past two weeks. And since there's a print as low as $25,835

I can't say for sure what I will do if it breaks, but shotgun shorting a smattering of assets is likely for me because a breakdown signals the capitulation sell-off is starting.

Conversely, a blast out of this level would be bullish and signal a bear market rally is underway. I don't think it would get there, but BTC can rally as far as $40k while remaining in a clear bear market.

Greens Celebrate Skyrocketing Food Prices and Shortages

All planned. First the psyop, psychologically breaking down resistance to insanely destructive policies. Now we're in the rollout phase. Enjoy the collapse everyone!

QT Officially Starts in One Week

Crude was the loser last time.

Inflation Fears Greatly Exaggerated

According to the bond market.

Time to Short Residential Real Estate?

Or go long the inflation? If prices keep rising, I want to go long bans on corporate ownership of single-family homes, bans on foreign ownership of homes, and regulations making it difficult for individuals to own more than a couple rental properties.

FWIW, the home construction ETF looks like a giant top like the rest of the market.