Anyone who has followed me for a while has already seen some iteration of this chart, but I bring it up again today because it has proven to be one of the most reliable charts to date.
It is essential to understand when we are looking at charts, sometimes it is not about the actual chart itself but rather what the data means and the implications.
We are in unprecedented times. The FED is behind the curve and now they are trying to gain back control of the Inflation Train but there is only one problem; The train has already left the station.
Prediction after prediction of Inflation is "Transitory", "Peaking", "Controlled". They even have gone as far to say Inflation was a "good" thing.
https://www.washingtonpost.com/opinions/2021/07/22/republicans-are-scaremongering-about-inflation-derail-democratic-agenda/
https://www.forbes.com/sites/georgecalhoun/2021/05/01/the-inflation-scare-doesnt-match-reality/?sh=7bcc94c71049
https://www.cnbc.com/2021/06/26/inflation-looks-bad-now-but-its-pretty-much-sticking-to-the-script.html
This one in particular used to be Titled "Why the inflation we're seeing now is a good thing" But they have since changed that to something more cryptic as if we the people are dumb:
https://www.msnbc.com/opinion/how-covid-became-unlikely-hero-our-inflation-crisis-n1283443
I just wanted to establish that before I went any deeper. Credibility is not seen in today's world.
Currently, Total Revolving Credit is at a historical all-time high by a long shot. (Please go check out a chart representing this data) It not only represents the hardship most are suffering but it solidifies the fact that most can't maintain their current lifestyle with cash. As financial situations grow tighter, it forces people to then start running their credit in the face of the "Recession".
This is not only bad for now but it condemns the future as well. Because that problem is only solved by rapid economic deceleration or by propping the market back up with Easy Monetary Policy.
But there is a critical issue here, the FED can't possibly pivot Dovish now. Their party has only just started. QE/Stimulus, paired with Macro cyclical patterns, and Geopolitical tensions force the FED to stay the course. If they pivot now, not only will no real problem be solved, but it will inherently make them worse.
Back on the Credit Delima, we have also seen the sharpest credit impulse contraction in 10 years. Liquidity runs all markets, when liquidity is dried, it causes mayhem.
Okay so what about USOIL and why is it on the chart?
Well as you can see, each time USOIL has significantly deviated from its current trend, it has led to a recession. 6 Times in the last 20+ years has this perfectly signaled economic hardship. This time is no different. Even further still, 2 out of the last 3 times, it was not until after USOIL has peaked is when the most pain was to be had.
Combine this with 50 Year High Inflation, War, FED hiking into a slowing economy, QT, Supply Chain shocks, Sanctions/Embargoes, Energy soaring, and Gas at $4-5 in every state in America for the first time in history.
Ask yourself this, if this recipe isn't enough for concern, what exactly is?
Continuing on, let's focus on a few other charts:
First, let's just take a look at where SPX & NDQ currently stand:
As you can see, both have only just now reached Mid-Channel and still have quite a ways until the bottom of the channel.
Second, let's remind ourselves of the US10Y-US02Y Curve inversion that took place a few months back. This inversion has predicted the last 6+ Recessions, just as the exponential rise in Energy has. Here is my first post explaining this correlation with SPX:
Here is an Updated View:
As you can see, it may even be headed for a second Inversion which would likely be another huge red flag.
Third, Lets look at the Tech Leader $AAPL and see where it stands. $AAPL represents the leader of the tech market and where AAPL goes, the market goes. Here is my most recent post:
Fourth lets look at the DXY and consider where it stands. It currently is in the midst of a 30+ year breakout, further proving the economic hardship most are facing. Furthermore, in times of great fear and inflation, money is usually the last thing people want but yet here we see the opposite playing out. Complete deviation of a regular historical trend:
And Fifth, let's just speculate on the worst possible outcome here, which I did a little while back when I Noticed Elon Musk somehow timed the exact top in the Market (See for yourself below):
I thought his perfect timing was really strange and led to the credibility of his words. Although the chart seems extreme now, from a technical standpoint it absolutely is possible as I've laid out.
Although it's important to consider the worst, it is critical you don't expect the worst. Many things can change between now and the end of the year which is why it is important to stay updated and pivot when needed.
I can honestly go on about specific factors such as the housing market and the VC's/Hedge Funds controlling supply while cutting out the regular buyer. Not to mention companies like Zillow doing the same exact thing, basically acting like a Broker to the overall housing market. Cutting out an entire class of buyers because theoretically, they don't ever have to sell to regular families just trying to buy a home.
Global food shocks from inflation make fertilizer unaffordable to harvest the right yield of crop. As well as the Ukraine War making it even more difficult.
China causing supply chaos because they have locked down their country again, 2 years into the pandemic.
This thesis is only valid in the scenario it takes far longer to tackle these challenges listed above. If the FED and the overall World Economy can begin to tame these challenges better than what we have seen thus far, things will begin to become more positive.
No matter what, these challenges must be solved not only for the health of the economy but for the betterment of the people.
If you've made it this far, I thank you immensely and you will be rewarded for putting in the effort now to understand the big picture.
Leave any opinions below;
It is essential to understand when we are looking at charts, sometimes it is not about the actual chart itself but rather what the data means and the implications.
We are in unprecedented times. The FED is behind the curve and now they are trying to gain back control of the Inflation Train but there is only one problem; The train has already left the station.
Prediction after prediction of Inflation is "Transitory", "Peaking", "Controlled". They even have gone as far to say Inflation was a "good" thing.
https://www.washingtonpost.com/opinions/2021/07/22/republicans-are-scaremongering-about-inflation-derail-democratic-agenda/
https://www.forbes.com/sites/georgecalhoun/2021/05/01/the-inflation-scare-doesnt-match-reality/?sh=7bcc94c71049
https://www.cnbc.com/2021/06/26/inflation-looks-bad-now-but-its-pretty-much-sticking-to-the-script.html
This one in particular used to be Titled "Why the inflation we're seeing now is a good thing" But they have since changed that to something more cryptic as if we the people are dumb:
https://www.msnbc.com/opinion/how-covid-became-unlikely-hero-our-inflation-crisis-n1283443
I just wanted to establish that before I went any deeper. Credibility is not seen in today's world.
Currently, Total Revolving Credit is at a historical all-time high by a long shot. (Please go check out a chart representing this data) It not only represents the hardship most are suffering but it solidifies the fact that most can't maintain their current lifestyle with cash. As financial situations grow tighter, it forces people to then start running their credit in the face of the "Recession".
This is not only bad for now but it condemns the future as well. Because that problem is only solved by rapid economic deceleration or by propping the market back up with Easy Monetary Policy.
But there is a critical issue here, the FED can't possibly pivot Dovish now. Their party has only just started. QE/Stimulus, paired with Macro cyclical patterns, and Geopolitical tensions force the FED to stay the course. If they pivot now, not only will no real problem be solved, but it will inherently make them worse.
Back on the Credit Delima, we have also seen the sharpest credit impulse contraction in 10 years. Liquidity runs all markets, when liquidity is dried, it causes mayhem.
Okay so what about USOIL and why is it on the chart?
Well as you can see, each time USOIL has significantly deviated from its current trend, it has led to a recession. 6 Times in the last 20+ years has this perfectly signaled economic hardship. This time is no different. Even further still, 2 out of the last 3 times, it was not until after USOIL has peaked is when the most pain was to be had.
Combine this with 50 Year High Inflation, War, FED hiking into a slowing economy, QT, Supply Chain shocks, Sanctions/Embargoes, Energy soaring, and Gas at $4-5 in every state in America for the first time in history.
Ask yourself this, if this recipe isn't enough for concern, what exactly is?
Continuing on, let's focus on a few other charts:
First, let's just take a look at where SPX & NDQ currently stand:
Second, let's remind ourselves of the US10Y-US02Y Curve inversion that took place a few months back. This inversion has predicted the last 6+ Recessions, just as the exponential rise in Energy has. Here is my first post explaining this correlation with SPX:
Here is an Updated View:
Third, Lets look at the Tech Leader $AAPL and see where it stands. $AAPL represents the leader of the tech market and where AAPL goes, the market goes. Here is my most recent post:
Fourth lets look at the DXY and consider where it stands. It currently is in the midst of a 30+ year breakout, further proving the economic hardship most are facing. Furthermore, in times of great fear and inflation, money is usually the last thing people want but yet here we see the opposite playing out. Complete deviation of a regular historical trend:
And Fifth, let's just speculate on the worst possible outcome here, which I did a little while back when I Noticed Elon Musk somehow timed the exact top in the Market (See for yourself below):
Although it's important to consider the worst, it is critical you don't expect the worst. Many things can change between now and the end of the year which is why it is important to stay updated and pivot when needed.
I can honestly go on about specific factors such as the housing market and the VC's/Hedge Funds controlling supply while cutting out the regular buyer. Not to mention companies like Zillow doing the same exact thing, basically acting like a Broker to the overall housing market. Cutting out an entire class of buyers because theoretically, they don't ever have to sell to regular families just trying to buy a home.
Global food shocks from inflation make fertilizer unaffordable to harvest the right yield of crop. As well as the Ukraine War making it even more difficult.
China causing supply chaos because they have locked down their country again, 2 years into the pandemic.
This thesis is only valid in the scenario it takes far longer to tackle these challenges listed above. If the FED and the overall World Economy can begin to tame these challenges better than what we have seen thus far, things will begin to become more positive.
No matter what, these challenges must be solved not only for the health of the economy but for the betterment of the people.
If you've made it this far, I thank you immensely and you will be rewarded for putting in the effort now to understand the big picture.
Leave any opinions below;
Comment:
As we have seen, Markets continue to weigh CPI expectations and a FED "Reversal" but price steadily ranges lower. It means in the big picture, the dominoes are still ready to keep falling. We do not seem to have reached the end of anything, and I'm still just trying to navigate the waters. It's been some time since my last few posts but believe it or not, not much has changed. If anything things have gotten a bit worse with yet another US10y-US02y inversion which basically guarantees a full-blown recession. Yes, you've read that right, we haven't even officially "Entered" the Recession yet. I see over and over "Bottom is in" or time for "Rally". I wholefully believe the time for easy money ended in 2021. What people have come to expect after the 2020 Boom, has tainted expectations across the board. It's a dumb money-driven market with retail trying to front run every dip, but the thing to understand is the real money "Smart money" knows this is happening, and rather than fighting the market, they are preying on retail dip buyers. They bait them in, and then they wipe them out, rinse and repeat. Nobody knows where the market is headed, but we do know human emotions and habits. Just wanted to give a few words for an update to show where my mindset is and that I'm developing more analysis. In a time like today where we are for sure going down in the history books, I do not believe a ton of posts serve anyone any justice. It's the important, very specific details that matter. It takes a long time to develop these points and structure them in a way that is useful for the many. More posts will be coming. Stay Tuned!
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