2022-04-21

QE, QT and Why Stocks Will Implode

Every time QE happens, stocks went up.

Every time QE ended, there was a significant correction in stocks, commodities or both. Stopping QE tanked markets.

The one time QT was tried, Volmageddon hit and then a 20% correction occurred when QT maxed out at $50 billion per month from Oct-Dec 2018.

This time the Fed will try ultra-QT of $95 billion per month, QE in nearly full reverse.

The only outlier time period was Nov 2016-Jan 2018, Trump's election led to huge corporate tax cuts. Jan 2018 is when QT starting picking up and Volmageddon hit in early February.

I see the inverted H&S pattern on the chart, but for the life of me I cannot think of any reason why it should complete other than a Black Swan emerges after or bulls have gone totally insane. I don't see anything visible that says a bullish resolution is coming in the next six months, at least not until the bottom of what I see as an inevitable QT correction. Any bullish scenario with the market at new highs involves at least a 20-percent correction from here.

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