2022-05-20

Bear Trap or Bombs Away, Bitcoin Awaits

Major support broke. The bears have it and can run with it. The only asset not following yet is BTC.

Bulls Will Be Wiped Out

Summary: necessary conditions for a Federal Reserve bailout of stocks are not in place yet and far from being in place.

Anything can happen in the short-term, of course bear market rallies happen without any Fed intervention.

Having said that, here is a paywalled article at ZH:

ZH: "80% Chance Of Dread": Every Time This Happened Before, The Fed Bailed Out The Market

Unless inflation risk is eliminated, the Federal Reserve cannot save the stock market. Or it could save it in nominal terms, but it would hyperinflate the U.S. economy. With the protests outside Supreme Court justices over Roe v Wade...it's frankly absurd to even think the Fed would try to do it. They are stupid, but not that stupid.

The only way it can be done in current conditions is direct buying of stocks. If they went the traditional QE route, bonds would collapse in a panic and the stock market would be below 1000 by next year. The Fed would have to print enough money and pump it directly into stocks such that stock prices outrun double-digit inflation and brush off soaring interest rates.

Maybe a bailout is coming. Maybe the world is still trapped in the QE-economy 2008—20?? That scenario involves a collapse in commodities and stocks ahead. Since commodities have barely moved yet, the major indexes would probably have to test March 2020 lows at a minimum. If inflation/commodities don't come down, then it is a bear market for sure because no rescue is coming.

Turkey

Defund the Police

People who scream loudest about racism, do things that lead to lots of dead black people. Or why I don't care about racism at all anymore. It's a word devoid of meaning.

China Rate Cuts are Bearish

ZH: Futures Jump After China Cuts Main Lending Rate By Most On Record But $1.9 Trillion Op-Ex Looms...

Markets may bounce for whatever reason short-term, most likely no reason. Yet longer-term, Chinese rate cuts are unequivocally bearish.

Here We Go

Symmetry on the ES.

2022-05-19

10-Year Reversal

Can bonds turn the corner? Seems unliekly tonight, but a sharp drop in equities would probably complete this incompete inverse H&S formation.

Fed Still Blowing the Housing Bubble

Can't make this stuff up. Wish I could, wish it was a conspiracy. Destruction of the economy in plain sight. Sure, there will be a housing crash, but by blowing it bigger, it only makes for a larger crash. They're supposed to be fighting inflation and yet still inflating housing credit. The Fed should be abolished. Period. It had a good run and its time to go. To paraphrase Jackson, kill the bank before it kills America.

Double Bottom Holds, But Weak Bounce

The S&P 500 is about 1.6 percent away from making a new low. Next upside target around 4000 or about 2.2 percent away.

Monkeypox Spreading in the Homosexual Community

iNews: Monkeypox: Gay and bisexual men warned to take precautions as experts fear virus transmitted through sex

Back in 2018, I wrote in Socionomics Alert: Avoid Norwegians to Avoid STDs:

Socionomics theory says rates of STD infection should rise in periods of negative mood. Along with a general rise in disease/pandemic risk, the periods of negative mood also correlate to looser sexual morality.

The last major period of negative mood produced the AIDS virus and the subsequent rise in mood in the 1980s and 1990s saw a major effort towards combating it. This period of negative mood will be far more negative and last far longer than the 1970s decline. Antibiotic-resistant STDs and their rapid spread is one sign of negative mood.

The post was created by a domestic advertisement that upset Norwegians because it implied they have high rates of STDs. I wrote:
The key point here is not the ad itself, but what the people creating the ad are thinking about. During periods of falling mood people shift from social concern (such as banning smoking, attacking junk food, making life healthier for everyone) to a personal concern. This ad is clearly a sign warning you to protect yourself from everyone else. Social mood has turned.
Sure fits with what we've seen the past couple of years, no?

HYG Gap Filled

I used this as a shorting signal today, added puts as this completed. Occurred simultaneous with a huge spike in the indexes to the high of the day.

Double Bottom on ES

These are the gut-check times because if there's to be a geyser in VIX, there have to be a lot of trapped bulls who throw in the towel. To get there, there has to be enough doubt among bears too.
There is a spike in junk bonds, but HYG has a gap at $76.44...
The euro is rallying.
Treasuries are rallying, but that doesn't tell me anything because I expect bonds will rally alongside a sell-off in stocks, as happened yesterday.
Is this bullish?

Not Buying It

Maybe it's time to short wheat (alogn with most of the ag complex). I do see problems on the horizon, but maybe it's all overpriced in and food supply won't be as bad as expected.

Positioned Short, Thinking Long

My plan for today is to sell what I expect will be a rip and buy Monday puts. I'm going to be going through all the junior mining charts and preparing stink bids.

2022-05-18

There and Back Again

How high will the next wave go? The 10-year divided by 2-year yield.

Industrials

Newell

Right to support.

Wayfair Update

Most of the market will go back to the March 2020 lows eventually. What I like about charts like Wayfair is the symmetry. Very easy to trade. I'm not currently shorting W though because the puts have been too expensive since February.

Reversal Patterns Busted on Major Index

All the inverted H&S patterns on major indexes are busted at this moment. The Russell 2000 Index was the strongest index today and the last to break support.

Today's Losers

A lot of moves to support areas.

S&P 500 Back Again

Back to support. The line is at 2014 on the ES.

Energy and Tech

The ratio of XLE $83 to XLK $138 is 0.60 currently. I predict it will get to at least the 1.5 area by the time this bear market completes (or this phase of it if it lasts for many years).

The ratio has almost doubled this year with XLE rising over 50 percent and XLK down about 20 percent.

Below is a chart with a blue line at the 1.50 ratio along with a table showing various XLK prices for given XLE prices. As a rule of thumb, there is still around 40-percent of the S&P 500 Index in tech and companies that trade like tech stocks despite being in other sectors. XLK has a flat return if XLE gets to around $200 and that ratio, a doubling of XLK requires XLE at $400 or better than a quadruple. 

If one expects structurally higher energy costs moving forward, the outlook for tech is grim and/or the outlook for energy is very bullish. There is no reason to be investing in tech or in the major indexes with their massive tech exposure, unless one doesn't expect inflation/higher energy. A return to the 2009-2020 economy.

Bonds are Everything

The theme for the past 18 months or so hasn't changed: higher interest rates will crater the stock market.

Chinese Yields Slide Again

There is some optimism around China reopening, but I'm not buying it yet. The Chinese 10-year yield went negative again relative to the U.S. 10-year. This puts pressure on the yuan because it diverts idle dollars away from China (such as exporter earnings), and longer-term the Chinese and emerging markets funds are correlated with the direction of this rate spread.

2022-05-17

Another Prediction Moving Forward: Call to Boot Turkey from NATO

IICS: Turkey and the West Still Diverging
It seems like no matter which way the West goes, Turkey finds itself in conflict. I still expect it will eventually be expelled or voluntarily leave Western organizations such as NATO.
CNN: Putin's useful allies are throwing a wrench in the works
So, what to do about these toxic delays being forced by Hungary and Turkey? The answer is sadly simple -- play the same game Putin's been playing for years. When you can't win by traditional rules, go around them.

In this case, do carve-outs. Make Orban and Erdogan irrelevant. All 26 other EU members should simply implement the oil embargo. And NATO should simply pave the way for Sweden and Finland's accession.

What's the worst Hungary or Turkey could do -- sue? Pull out? There was a lot of thought given toward banishing Turkey from NATO anyway -- especially after Erdogan bought Russian S-400 air defense systems from Russia three years ago.

Perhaps now is precisely the moment simply to stand up to these lone strongmen who have managed to burrow their way deeply into democratic institutions.

Coal Runs to the Full Fib Extension

The fruits of green labor. Ther 1970s was inflationary, but you could buy stuff. This inflation is going to be more like a Soviet Union grocery store. You will be lucky to find what you need, no matter what price you're willing to pay. That's before considering any potential war with China that cuts off a massive slice of the U.S. supply chain.

The Great Replacement

IM-1776: IRREPLACEABLE: AN INTERVIEW WITH RENAUD CAMUS
Benjamin Braddock: Which do you think is the greater threat to Western European countries: the masses of immigrants themselves, the political and economic interests that encourage them to come in, or the apathy of a society that gives in to a hyperbolic egalitarianism that swallows them whole?

Renaud Camus: This is a most excellent question, to which I find it impossible to answer, except by saying that the three threats you very adequately circumscribed are not only equals, but each the conditions and the result of the other two. When Christians were in the Roman arenas, it was of little use, for the rare disapproving witnesses, to incriminate the lions and their butchery behavior. Great Replacement, as I have said a hundred times, would not be possible without what I have called “Little Replacement”, Le Petit Remplacement (it is the title of a fat collection of six essays): the substitution of cultural industries to culture, of entertainment to the Corpus, of popular and mass culture to high culture, which amounts more or less to the disparition of culture just as Great Replacement amounts to the disappearance of indigenous peoples, cultures, and civilizations. Hebetude is the condition of the successful and peaceful process of genocide by substitution. A specific feature of the present colonization of Europe is its triangular structure, very similar to the triangular structure of the old Transatlantic slavery: the people who accomplish it are not the forces or the mechanisms which most want and promote it. In global replacement there are the replacists, who want and organise the replacement, the replacers, who accomplish it, and the replacees, who are its victims. The masses of immigrants are obviously the most pressing threat (they are more than a threat, since they are already in place, and more often than not citizens). We can resist some of their specific actions, but to castigate them on principles would be just as absurd as to castigate the lions in the circus. And to castigate the machines, the mechanisms of global replacism and the Machination, it would be essential not to be machines ourselves, or computers. But it is indeed global replacism, or davocracy, which is the archenemy.

Fantasyland Economics

Stocks cannot rise unless "inflation" goes into financial assets and not commodities.
Dividends could grow more like 10 to 15 percent with inflation of 5 to 7 percent, but then the S&P 500 yield will probably also be moving towards 5 percent as it did in the 1970s. If I put in 15 percent annualized dividend growth, year 5 at a 5-percent yield results in SPX at 2300, an inflation-adjusted level of 1800.

The Fed Doesn't Have Control

If energy and commodities don't stop rising, if bonds don't rally, then the stock market collapses in all scenarios. It doesn't matter what the Fed does. The Fed cannot save the stock market unless it can permanently kill commodities inflation. Since green regulations and ESG have created a sticky rise in prices and supply is still constrained, there's nothing the Fed can do. Their hands are tied. Economic activity will collapse. The bullish scenario is that commodity inflation implodes as in 2008, 2011, 2014, 2018 and 2020.

Spruce Point's Latest

I'd only go a month out for options, so timing is critical. The way the market is behaving, it looks like the energy/commodities complex won't crack until QT starts. Alpha Metallurgical Resources, Inc.

Greens BTFOd Again: Solar Increases Emissions, Toxic Air Pollution

The West has tapped a vast well of stupidity.

North State Journal: Duke Energy application points finger at solar for increased pollution

Duke spokeswoman Kim Crawford confirmed that increased solar power on the state’s electric grid is increasing emissions of nitrogen oxide (NOx), a dangerous air pollutant. She said that reductions in carbon dioxide (CO2) emissions could also reverse if current solar growth continues without policy changes.

Climate advocates blame increases in manmade gases like CO2 for global warming and have promoted solar power as environmentally clean.

An increase in emissions triggers the need to rethink national energy policy, experts say.

Crawford provided measurements showing that even on sunny days — when solar power is at its maximum output — more NOx pollution is released into the air than would occur if no solar electricity were used and natural gas were used instead.

People working on real, tangible, specific problems are doing good work. Ocean acidification, micro plastics and so on, conservationists saving natural habitats. The focus on climate change and alternative energy has sucked up money and attention though, and here is yet another piece of evidence that they are giant scams.

If solar is indeed increasing emissions, then my confidence in "madmade climate change" being a 100-percent false rises above 90-percent confidence. This would be the killshot for me because my chief complaint about solar was that it doesn't create enough energy, and not enough reliable energy. The switch to solar didn't make sense because it was going to increase energy costs and harm the economy, when nuclear would lower energy costs, help the economy and also eliminates emissions:

That’s because traditional power plants — including cleaner burning natural gas plants — must scale back electric generation to accommodate solar energy surging onto the system when the sun rises, and power back up when the sun sets and solar energy dissipates. That starting and stopping reduces efficiency and incapacitates emission control devices, increasing pollutant levels.
If alterative energy increases emissions, which it obviously does with Germany talking about how a return to coal may be necessary, how come the people making computer models didn't know that? If you have climate models predicting emissions and you think Man is making the emissions, then you need to model human behavior in response to various policies. They don't do that accurately though, in fact it looks like they have the sign wrong. The next question is, what other variables are they screwing up, weighting wrong, assuming is geometric or arithmetic when it is vice versa, or ignoring entirely?

Man does clearly impact the environment. Concrete-coated cities have their own microclimates. Dams and manmade lakes, ocean pollution, air pollutions and so on exist. But when an entire movement and industries are built on computer models selling the climate change narrative and those very same people push a solution that makes things worse, not better, then one must call the entire effort into question.

It was a joke in the 1990s that greens were watermelons because international socialists who lost their sinecures and/or credibility when the Soviet Union collapsed moved into environmentalism. Soviet central planning and Green economics with solutions like wind and solar grew from the same intellectual branch. Many people were surprised by the Soviet collapse, so they are again as Western economies are being seriously hobbled by the same line of thinking. 

The goal has always been rip roaring inflation that destroys developed economies. Nations and peoples can only be made equal in misery. 

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