The Russell 2000 has a basing pattern with a target a bit above support, about 100 points away or a 5 percent move. The perfect move would be a failure at resistance, failing to fully complete the measured move. That would be a great spot for shorting.
A similar bounce in Nasdaq can take it to 14800 as a conservative (for the bears) target which is the December 20 low. A fail at the October 4 low would be more bearish, only a 4 percent rally and that is almost half over this morning. I'm of two minds: Nasdaq should outperform on a bounce, but if it doesn't, that would be a signal that the next wave down will be led by Nasdaq again. I'd be looking at shorts on Google, Amazon, Apple, Tesla, Netflix, etc.
The December 3 low in the S&P 500 is where a rally could terminate. I'm less concerned with the S&P 500 here.
The strongest asset in this correction was crude oil. The strongest index in the March 2020 correction was the Nasdaq. If this was a correction now completed, crude oil is all cleared for takeoff. I will be vastly expanding physical gold and platinum holdings and going all out on energy stocks and crude futures if there's even a hint of Fed dovishness that ignites animal spirits.
The mother of all patterns is ZB. If the 40-year bond bull market is over, this will be a more destructive event than 9/11, 2008 and the covid lockdowns combined. Destruction is warranted because much of the economy is unsustainable, fake, propped up, politically favored sectors and companies. But it will be destructive nonetheless.
I haven't seen this discussed much. Some people who understand what crude and inflation mean for markets get it, but almost everyone else thinks the Fed has some kind of out. The only out I see is if crude oil falls because of macroeconomic factors. Otherwise, they'll have to tighten more to sink it. Or they're going to make an error so large it will require "going Volcker" to stop.
There are various scenarios that are possible today. I have no idea what is coming, so I am ready for anything. Good luck to everyone.
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"The mother of all patterns is ZB. If the 40-year bond bull market is over, this will be a more destructive event than 9/11, 2008 and the covid lockdowns combined. Destruction is warranted because much of the economy is unsustainable, fake, propped up, politically favored sectors and companies. But it will be destructive nonetheless."
ReplyDeleteAgree, except for the "destructive" part. It will actually be constructive to the real economy as the parasite class/industry will be mostly eliminated (many in dramatic, kinetic fashion), and the loss of support from the normies will cause FedGov (and a lot of state/local) support to shrink to the point where governments actually help society/community rather than hurt it.
This is because governments are like fiat currencies, they only function when the people have confidence in them.
Most of the Western governments (and especially the US), are about to achieve the level of confidence they actually deserve.
I expect this to take several years to completely play out.
Yes, I had written and deleted, that it will be no solace to the millions of laid of workers that the destruction of their jobs is a good thing. It will destroy businesses, lives and families because unemployment drives divorce rates, deaths from addiction, suicide, and so on.
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