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The First Shoe - 6/10/22

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Stop, look, and listen, instead of reading. 

The first shoe has dropped. Now we wait for the other. Will it be a long wait?

Maybe not. There's a current 5 day cycle projection of 3980-4000 on the hourly chart of the ES, S&P 500 continuous 24 hour fugutures.  

That's not far from where we ended yesterday, and just below that are multiple lines of sport down to around 3950 that represent the Maginot Line for the bulls. The bears will just need to go around it, and it doesn't seem likely before the weekend. 

I'm just guessing of course. I don't know and neither do they. Anyone that pretends to know, and proclaims that we're in a meltup or the like, is a charlatan. Unlike them, I don't pretend. I just follow the trend. I don't fight the Fed, and know the trend is my friend. 

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Meanwhile, the 13 week T-bill rate, which is set by the market in response to the supply of money, and demand for US government short term debt is showing the Fed where it will need to rubber stamp the Fake Funds rate at next week's FOMC circus. Jerome the circus barker is rehearsing his act as we speak, preparing for the oohs and ahs of the Wall Street media crowd. While he puts on a show, the outcome has already been determined and revealed. 

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Quantitative Tightening is Here, and the Effect Will Be Devastating

While short rates are soaring, the 10 year yield had a pop last week and now is marking time as the market gets ready for the next mid month auction of Treasury coupons. This month that will total a net of $73 billion. That compares with $55 billion on May 16, and $34 billion on April 18. I don't think that this will go well, especially with the Fed pulling $60 billion out of the banking system this month. The market did not yet need to contend with that in April and May.  Read more about where this is headed and how to trade it, here.

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In the realm of things that aren't real, the craptos continue to turtle. It's easy to see on the BTC hourly chart where the short term sport and resistance lie, and where the trigger is for a rally back to 31,200, or not. Stay tuned for all the thrills, chills, and excretement, in today's episode of Crapto Park. 

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In the realm of things that are real... sort of... we turn to major currencies. The you row has apparently resumed its downtrend against the US doodah, on the heels of yesterday's ECM nonsement that it was about to really, truly, honesttagod gonna start tightening in the face of 8% inflation. No more negative rates for you! 

Now, we would expect that when a central bank announces a tightening, its currency would rally. But alas, everything is relative, as the great monetarist Albert Einstein theorized. So in the price of one currency versus another, it all depends on who is tighter. And there's no question. The Fed is the tightest shoe in the closet. 

Those who therefore tell you that the USD is trash, let me say this about that. It may be trash, but the whole financial world is a dumpsite. And the Fed's trash is the most valuable garbage because the Fed is taking out the trash and burning it. It's going up in smoke. The ECB and BoJ are preserving their trash. As long as that's so, the USD will be the most valuable piece of trash in the dump.

In fact, borrowers and investors the world over will be dumpster diving for it. They'll keep buying and buying and the USD will just keep getting stronger. It won't be a straight line. There will be bumps along the way as the charlatans lead their flocks astray. But one thing will still be true in the end. Rule Number Two. The trend is your friend. 

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Some of you are gold fans. Gold has a tough row to hoe against this strong doodah. But relative to all other assets, it will do better. and if it can buck this strong doodah it will be the place to be. But it's yet to show whether it can. I'll be watching, and I'll let you know. Follow along here. I'll even give trade suggestions for which mining picks to swing and when.

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All of which leads us to the point. If you want to stay on top of the big picture, with not only clear analysis that has been mostly right for the past 22 years, but with strategic and tactical suggestions, and actual trading ideas, check out this list of summary pieces over at Liquidity Trader. 90 day risk free trial for new recruits! 

If you're serious about the underlying forces of supply and demand that drive the markets, join me

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I think the 5 day cycle projection is now pointing toward 3900. 

Huge gap coming on the NY open. 

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So, the squiggly jumpy line has left the green and red space and is now in the purely red space.

Isn't that bad for the squiggly jumpy line?

Is there anything we can do to help the squiggly line get back to the happy green space?

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10 year movin’ on up. 
I have been watching California desert property out & around Joshua Tree for well over a decade. I believe there is a flood of property presently hitting the market there. About three months ago, many ads for places celebrated their histories as successful VRBOs… begging the question why sellers were selling. I have little doubt those VRBO empires were built on the largesse of adjustable rate mortgages, and the cash-flow no longer pencils out the way it did for many years. Now, the continued supply seems to be of junk properties from hopesters - perhaps also with ARMs - looking to cash out at the top of what has been a preposterous boom out there. They are too late to the party, obviously. My hope is some old timers with all the attributes I seek brings their properties to market at then-prevailing price, so I can finally have a place there. But as the 10-year climbs, pain and fear is going to become really dreadful for many.  
 

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I have been out enjoying another beautiful afternoon and evening here on the Cote d'Azur. Did I miss anything?

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17 minutes ago, fxfox said:

If we are below 3000 by end of August the FED will stop shrinking its balance sheet. Just a guess.

That's been my guess. By August-September, both the bond market and stocks will be trash. 

 

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So, did anything happen in the last hour. 

I took a ride around Cap d'Antibes this evening. Reminded me of Ocean Blvd. in Palm Beach, cept no mountain views in Palm Beach. And the yachts are parked out back, not out front at sea. Palm Beach yachts are pitiful excuses for yachts compared to the ones here. 

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2 minutes ago, DrStool said:

That's been my guess. By August-September, both the bond market and stocks will be trash. 

 

Yes. In Jackson Hole they gonna reverse course and once again the main stream media will cheer the CB‘s for having saved the world.

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