Everybody Wants to Buy the Dip

ZH: Here Comes The Open Revolt: A Reeling Europe Lashes Out At The Fed For "Bringing Us To A World Recession"

At least that was the case until now: because today, in a startling outcry breaching the unspoken protocol of "no dissent, never dissent", Josep Borrell, the high representative of the 27-member EU bloc, lashed out all too publicly at the Fed when he said that central banks (across Europe where the recession will be far, far worse than in the US) are being forced to follow the Fed’s multiple rate rises to prevent their currencies from slumping against the dollar, and compared the US central bank’s influence to Germany’s dominance of European monetary policy before the creation of the euro.

Of course, back then the solution to the super deutsche mark was simple: pool all nations under a common currency umbrella, even if it means misery for the less productive, and less mercantilist countries (hence the neverending European sovereign debt crisis which remains in hibernation only thanks to the ECB's bond buying). This time however, there is no simple solution taking advantage of gullible states, instead now that they've broken the seal of silence, the "leaders" of Europe admit to just how powerless they truly are when the custodian of the world's reserve currency has to do what's best only for itself, allies and friends be damned:

“Everybody has to follow, because otherwise their currency will be [devalued],” Borrell said to an audience of EU ambassadors, the FT reported. “Everybody is running to increase interest rates, this will bring us to a world recession.”

Because otherwise their currency will be devalued.

Because otherwise their currency will be devalued.

Because otherwise their currency will be devalued.

Because otherwise their currency will be devalued.

Because otherwise their currency will be devalued.

Because otherwise their currency will be devalued.

How many people who say the reserve currency status makes USD strong also realize every other nation on Earth is printing money more aggressively? The moment the U.S. starts acting in its own interest, the world squeals for more U.S. money printing. The Bank of England extended their new "temporary" QE program today...

The path to total economic devastation is becoming clear. A Federal Reserve pivot in any form will reignite speculative activity. It will reward buy-the-dip. This will produce a mind-bending rally that could wipe some bears out. Apres cette...

Crude broke down yesterday. Along with my horizontal, I'll be watching $90.50 on crude this morning. Always pay attention when as asset is behaving well with respect to chart, particularly wildly psychotic assets (chart-wise) such as crude oil. I'm quite heavily short energy after adding more weekly puts on XLE yesterday.

Gold also behaved extremely well yesterday. First it hugged my higher horizontal (from my SlopeChart) and then held the final line on this chart.

BTC is hanging on. At this point, I admit to having some doubt that it will crack, but that's why its breakdown will be part of a larger capitulation event in the market. I'm not alone in thinking that.

I don't think this line is extremely important for the ES, but this is the last line I have on the chart. Below it, the "support" is the prior 52-week low made at the end of September.

There are still shorting opportunities for aggressive investors. XLP and XLE look particularly vulnerable, as do bank stocks if their earnings reports are negative. They start reporting on Friday. Another important report this week is Domino's on Thursday. I have puts on it and McDonald's. I don't know if the stock will breakdown this week or not, but there's a monster bearish setup. McDonald's is still below a long-term support line. It's the type of setup I want a position on. If Domino's guides lower or misses because of labor costs, the entire restaurant sector has bearish chart setups.

Finally, it seems that everyone wants to buy the dip, including myself and many bears. Everyone fears a Fed pivot could catch them mispositioned. If the market makes everyone lose, then maybe something very scary is about to happen that will make everyone fear holding stocks. Or something very good will happen that catches all the bears off guard. I lean towards the former rather than the latter, but the CPI is coming this week. Be on alert.