Stocks are at elevated levels and I'd say in bubble territory. But in my opinion the true bubble starts now, as no matter what happens now Central banks will try to prop it up. Essentially the biggest risk is in bonds and currencies, not everything else. I do believe there will be a big sell off at some point and I do believe that over the next 6-18 months we will get a major top where everything will crash a lot. Potentially a bigger crash than the one we got in March. Have shared my view on stocks going parabolic lots of time and have made the comparison with 1998-2000 many times, which is exactly what has me thinking stocks will go up a lot before collapsing. Can and will we get several corrections along the way? Sure. But remember we had a major correction in Dec 2018, March 2020 and we had two major corrections in the Sep-Nov 2020 period.
European stocks look much weaker and I am not a big fan for now. In USD terms they might do as well as US stocks, but in % terms in EUR they probably won't. Asian stocks seem much stronger overall, especially in USD. Most liquidity and momentum is in the US, but Asia has the fundamental case for now. Asia stocks with massive breakouts and clean charts. US massive momentum too, with the top 3000 US stocks looking very clean and strong. Another very big breakout. All these explain why I see things going parabolic for now. People forget how depressed most stock markets have been globally for years (when measured in USD). Many have performed very poorly over the last 10-20 years and the global stock market capitalization has only doubled since the 2009 peak. Nasdaq is up only 170% since the 2000 peak and tech is eating the world. So yes, the true mania begun since we got the election and vaccine news out in November.
When it comes to the USD and the DXY, I think we are going to 80-82 over the next year where we could get a major bottom. For now yes we might see a major correction and a pump in the USD as sentiment is stretched, the USD is extremely oversold and at support. However most crashes happen from oversold levels, not overbought. The new US administration will print a lot, with more stimulus coming... So maybe we initially get a sell the news event because everyone is expecting it and then start going back up again once they really start taking action. Against EM currencies the USD has shown a bit of strength recently, after hitting key support. Yet it remains weak and doesn't mean it can't go lower. With Biden and Yellen I can't see how they won't do everything they can to keep the dollar low. Eventually they will fail. In my honest opinion the USD has one major cycle up before it goes away, but truth be told... for now it has many things going against in. Cryptocurrencies, CBDCs, Fed doing the most QE etc, Biden promising to be very irresponsible and so on.
Maybe this goes on until stock markets get so crazy, maybe until they are forced to hike rates, maybe they have to go negative because inflation gets out of control, maybe they tax corporations too much, maybe post covid when people have to pay back all the loan/rent payments that have been deferred we get the real crash. So this could take quite a few months before the dollar rallies. Many have seen me share my 2008 USD fractal where the DXY goes to 80-82 and then goes up again... but there is a big chance that the USD cycle has turned and things could be way worse for the USD. So yes short term I can see it go up 2-3% and stocks drop 10%, but nothing more than that. The VIX kinda agrees as it is close to key support again, but looking weak. If the VIX looks weak there isn't too much to expect from the USD as people won't really need to get in.
Finally when it comes to commodities, most are at pre-Covid crash levels or higher. Gold & Silver don't look that strong, but I don't really expect them to go much lower yet. Their main issue is real yields going up or the USD going up, so I prefer Cryptos and stocks as we are in a more risk on environment. Yes they have potential and maybe everything pumps, but actually buying Oil or Copper might be a better bet as they will be used when governments start printing to build stuff etc... If inflation is truly back, these are much better especially in environment where oil and copper supply has gone down. For oil I think there is 0 chance of going back that low. That wipe out in April has the potential to really be the cyclical bottom for inflation, even if that's for the next 1-2 years as inflation picks up before it goes down again. Personally not the biggest fan of the reflation trade, but for now that's where the momentum is so I wouldn't won't to go against it. Yes copper and oil could drop short term along with everything else, yet I don't expect them to lose their key breakout zones. Essentially everything could correct short term as yields go down again (retest breakout), Copper down (retest breakout), Stocks down (retest diagonal), DXY up (retest break down) and then continuation to the upside.
European stocks look much weaker and I am not a big fan for now. In USD terms they might do as well as US stocks, but in % terms in EUR they probably won't. Asian stocks seem much stronger overall, especially in USD. Most liquidity and momentum is in the US, but Asia has the fundamental case for now. Asia stocks with massive breakouts and clean charts. US massive momentum too, with the top 3000 US stocks looking very clean and strong. Another very big breakout. All these explain why I see things going parabolic for now. People forget how depressed most stock markets have been globally for years (when measured in USD). Many have performed very poorly over the last 10-20 years and the global stock market capitalization has only doubled since the 2009 peak. Nasdaq is up only 170% since the 2000 peak and tech is eating the world. So yes, the true mania begun since we got the election and vaccine news out in November.
When it comes to the USD and the DXY, I think we are going to 80-82 over the next year where we could get a major bottom. For now yes we might see a major correction and a pump in the USD as sentiment is stretched, the USD is extremely oversold and at support. However most crashes happen from oversold levels, not overbought. The new US administration will print a lot, with more stimulus coming... So maybe we initially get a sell the news event because everyone is expecting it and then start going back up again once they really start taking action. Against EM currencies the USD has shown a bit of strength recently, after hitting key support. Yet it remains weak and doesn't mean it can't go lower. With Biden and Yellen I can't see how they won't do everything they can to keep the dollar low. Eventually they will fail. In my honest opinion the USD has one major cycle up before it goes away, but truth be told... for now it has many things going against in. Cryptocurrencies, CBDCs, Fed doing the most QE etc, Biden promising to be very irresponsible and so on.
Maybe this goes on until stock markets get so crazy, maybe until they are forced to hike rates, maybe they have to go negative because inflation gets out of control, maybe they tax corporations too much, maybe post covid when people have to pay back all the loan/rent payments that have been deferred we get the real crash. So this could take quite a few months before the dollar rallies. Many have seen me share my 2008 USD fractal where the DXY goes to 80-82 and then goes up again... but there is a big chance that the USD cycle has turned and things could be way worse for the USD. So yes short term I can see it go up 2-3% and stocks drop 10%, but nothing more than that. The VIX kinda agrees as it is close to key support again, but looking weak. If the VIX looks weak there isn't too much to expect from the USD as people won't really need to get in.
Finally when it comes to commodities, most are at pre-Covid crash levels or higher. Gold & Silver don't look that strong, but I don't really expect them to go much lower yet. Their main issue is real yields going up or the USD going up, so I prefer Cryptos and stocks as we are in a more risk on environment. Yes they have potential and maybe everything pumps, but actually buying Oil or Copper might be a better bet as they will be used when governments start printing to build stuff etc... If inflation is truly back, these are much better especially in environment where oil and copper supply has gone down. For oil I think there is 0 chance of going back that low. That wipe out in April has the potential to really be the cyclical bottom for inflation, even if that's for the next 1-2 years as inflation picks up before it goes down again. Personally not the biggest fan of the reflation trade, but for now that's where the momentum is so I wouldn't won't to go against it. Yes copper and oil could drop short term along with everything else, yet I don't expect them to lose their key breakout zones. Essentially everything could correct short term as yields go down again (retest breakout), Copper down (retest breakout), Stocks down (retest diagonal), DXY up (retest break down) and then continuation to the upside.