We are getting ready to enter Stage 3 of this Inflationary Bear Market.
History has shown us that in order for inflation to cool down, interest rates must surpass the inflation rate.
Currently, FEDFUNDS is @ 5% and US inflation (YoY) is at 6%.
Looks like, Inflation may have peaked but since mid-March, USOIL has gained 25% off the lows on news that the OPEC cartel decided to cut the output/supply by 1.5 mln bpd and NATGAS has just started to show some strength based on its seasonality. APRIL is generally the strongest month for equities and we have mega tech + bank earnings coming by end of the month.
Despite the recent banking crisis in the US and EUROPE, the index and global market has somewhat remained resilient. it was only due to LIQUIDITY provided/injected by FED to save depositors money. Also, the rise in global liquidity too has helped from PBOC after China reopened its economy. Hence, markets have somewhat remained strong. But that is about to change soon, in my opinion.
Stage 3:
China is already started to enact its oppression on Taiwan to invade. its a matter of time when but by latest activities, it would be at the horizon as US has also send its milatry troops to TAIWAN.
Increase in energy prices will add to the Inflation.
Food prices have not been able to decline despite slowing inflation.
If and when the invasion occurs, we could see the price of energy and metals surging.. In fact, it will skyrocket. XAUUSD can touch $ 2300-2500 / oz with USOIL above $100/ bbl.
Apart from this, the unemployment rate and jobless claims have just started to rise in the US which will force FED to not go aggressive with rate hikes but at the same time, if we do see a sudden surge in Inflation then FED will be between a rock and a hard place.
In this scenario, markets will first sell off hard and then ask questions because markets don't like certainty and big boys are positioning for the big short according to COT and CFTC data.
The push in the markets from the last week of MARCH until now is also due to hedging activity done by the dealers who went net positive on the markets. Now, they have started to trim their longs.
Therefore, we could soon see the carnage in the markets but before that, we need an irrational exuberance kicking in and a capitulation happening on the speculator's side who are still net short by a huge margin.
4300-4400 is an area of interest technically to short by taking out the buy-side liquidity which also coincides as a golden pocket right from the start of the sell-off from 2022 top to the bottom of October 2022.
History has shown us that in order for inflation to cool down, interest rates must surpass the inflation rate.
Currently, FEDFUNDS is @ 5% and US inflation (YoY) is at 6%.
Looks like, Inflation may have peaked but since mid-March, USOIL has gained 25% off the lows on news that the OPEC cartel decided to cut the output/supply by 1.5 mln bpd and NATGAS has just started to show some strength based on its seasonality. APRIL is generally the strongest month for equities and we have mega tech + bank earnings coming by end of the month.
Despite the recent banking crisis in the US and EUROPE, the index and global market has somewhat remained resilient. it was only due to LIQUIDITY provided/injected by FED to save depositors money. Also, the rise in global liquidity too has helped from PBOC after China reopened its economy. Hence, markets have somewhat remained strong. But that is about to change soon, in my opinion.
Stage 3:
China is already started to enact its oppression on Taiwan to invade. its a matter of time when but by latest activities, it would be at the horizon as US has also send its milatry troops to TAIWAN.
Increase in energy prices will add to the Inflation.
Food prices have not been able to decline despite slowing inflation.
If and when the invasion occurs, we could see the price of energy and metals surging.. In fact, it will skyrocket. XAUUSD can touch $ 2300-2500 / oz with USOIL above $100/ bbl.
Apart from this, the unemployment rate and jobless claims have just started to rise in the US which will force FED to not go aggressive with rate hikes but at the same time, if we do see a sudden surge in Inflation then FED will be between a rock and a hard place.
In this scenario, markets will first sell off hard and then ask questions because markets don't like certainty and big boys are positioning for the big short according to COT and CFTC data.
The push in the markets from the last week of MARCH until now is also due to hedging activity done by the dealers who went net positive on the markets. Now, they have started to trim their longs.
Therefore, we could soon see the carnage in the markets but before that, we need an irrational exuberance kicking in and a capitulation happening on the speculator's side who are still net short by a huge margin.
4300-4400 is an area of interest technically to short by taking out the buy-side liquidity which also coincides as a golden pocket right from the start of the sell-off from 2022 top to the bottom of October 2022.