Deflation is Bullish 11/16/23

[DrStool]

12 hours ago, SiP said:

Deflation is bullish, same for disinflation. Low rates will increase bigtech valuations. Same big 5,6 or seven will move markets. 

nvidia on ath almost guys. Wake up.

Liquidity is bullish. Lack of liquidity is bearish. In the last 100 years, deflation has only occurred when debt collapsed, i.e. extreme lack of liquidity. 

"Valuation" is a sentiment indicator. Sentiment gets more and more bullish when liquidity is increasing. It also helps to feed temporary liquidity increase in the form of private debt, ultimately setting up the conditions for debt collapse and deflation.

That's how it has always worked, but of course, this time could be different.  

By the way, even Fed created liquidity can be temporary, as we now know. What the Fed giveth, the Fed can taketh away. 

In the short to intermediate term, we can play the market based on TA.  It got us on the long side weeks ago. And in fact, there were bull market signals soon after the October 2022 low, which I pointed out at the time.  So yes, ignore the technical indicators at your peril. They are a picture of what is. Everything else is noise.  Swing Trade Screen Picks – Loading Up on Buys November 13, 2023, Meltup Gonna Take You Hiya November 13, 2023

For the day to day, I watch and report on the ES 24 hour S&P futures hourly chart. Traders and dealers are holding on to this uptrend for dear life. But a 2-3 day and 5 day cycle down phase began yesterday afternoon. If they're gonna take it down, today would be the day. If they stay sideways again today, look out above. 

Trend spport in the 6 AM hour in New York is at 4480, rising to 4498 at the close. If they stay above that, the uptrend would remain intact. It could lead to another launch in a day or two. Yesterday's high was 4518. If they clear that today, again, look out above. 

Even if they break that first spport trend, there are several more sport levels and trendlines just below in the 4450-60 range. I wouldn't even think about shorting unless those levels are broken. 

Over in the bond mock it, the short term trend of bond yields remains down, unless the 10 year gets back above 4.56. If they do get it back above that, then the intermediate term trend of bonds toward higher yields/lower prices will remain intact. In other words, the bear market in bonds would be reaffirmed. However, that wouldn't necessarily be a bearish sign for stocks. At least not yet. Fuggedaboutit! Treasury Supply Ain’t Going Away

Meanwhile, the yellow relic is showing some signs here that maybe all that glitters may not be lost after all. 

For moron the markets, see:

• Gold Has Lost Its Mojo and Is Now in Danger November 14, 2023
• Swing Trade Screen Picks – Loading Up on Buys November 13, 2023
• Meltup Gonna Take You Hiya  November 13, 2023
• Gold Bullish Pullback But Miners Are Doubtful November 8, 2023
• Fuggedaboutit! Treasury Supply Ain’t Going Away November 5, 2023
• Which to Believe, the BLS or Actual Tax Collections November 3, 2023

If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder.

 

[fxfox]

Alibaba and Wal Mart drop stink bombs in pre-market.

Consumer very healthy, right?

[TurdButter]

2 hours ago, DrStool said:

Liquidity is bullish. Lack of liquidity is bearish. In the last 100 years, deflation has only occurred when debt collapsed, i.e. extreme lack of liquidity. 

"Valuation" is a sentiment indicator. Sentiment gets more and more bullish when liquidity is increasing. It also helps to feed temporary liquidity increase in the form of private debt, ultimately setting up the conditions for debt collapse and deflation.

That's how it has always worked, but of course, this time could be different.  

By the way, even Fed created liquidity can be temporary, as we now know. What the Fed giveth, the Fed can taketh away. 

In the short to intermediate term, we can play the market based on TA.  It got us on the long side weeks ago. And in fact, there were bull market signals soon after the October 2022 low, which I pointed out at the time.  So yes, ignore the technical indicators at your peril. They are a picture of what is. Everything else is noise.  Swing Trade Screen Picks – Loading Up on Buys November 13, 2023, Meltup Gonna Take You Hiya November 13, 2023

For the day to day, I watch and report on the ES 24 hour S&P futures hourly chart. Traders and dealers are holding on to this uptrend for dear life. But a 2-3 day and 5 day cycle down phase began yesterday afternoon. If they're gonna take it down, today would be the day. If they stay sideways again today, look out above. 

Trend spport in the 6 AM hour in New York is at 4480, rising to 4498 at the close. If they stay above that, the uptrend would remain intact. It could lead to another launch in a day or two. Yesterday's high was 4518. If they clear that today, again, look out above. 

Even if they break that first spport trend, there are several more sport levels and trendlines just below in the 4450-60 range. I wouldn't even think about shorting unless those levels are broken. 

Over in the bond mock it, the short term trend of bond yields remains down, unless the 10 year gets back above 4.56. If they do get it back above that, then the intermediate term trend of bonds toward higher yields/lower prices will remain intact. In other words, the bear market in bonds would be reaffirmed. However, that wouldn't necessarily be a bearish sign for stocks. At least not yet. Fuggedaboutit! Treasury Supply Ain’t Going Away

Meanwhile, the yellow relic is showing some signs here that maybe all that glitters may not be lost after all. 

For moron the markets, see:

• Gold Has Lost Its Mojo and Is Now in Danger November 14, 2023
• Swing Trade Screen Picks – Loading Up on Buys November 13, 2023
• Meltup Gonna Take You Hiya  November 13, 2023
• Gold Bullish Pullback But Miners Are Doubtful November 8, 2023
• Fuggedaboutit! Treasury Supply Ain’t Going Away November 5, 2023
• Which to Believe, the BLS or Actual Tax Collections November 3, 2023

If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder.

 

Dr., about six months ago you made some written (in a publication piece not chat)comments a couple times like 'financial plates are having tectonic movements unlike any in 95 years' - paraphrasing of course but the remarks clearly indicated a 29-30's sort of ultimate outcome. I recall them because they were a statement not typically seen; they also probably a source of some jabs you got from the early summer rally just after. Is that still your expected type of outcome(or was that somehow a misreading)? Tanks.

[BreakOut]

“Always the low price”. 

[DrStool]

4 hours ago, TurdButter said:

Dr., about six months ago you made some written (in a publication piece not chat)comments a couple times like 'financial plates are having tectonic movements unlike any in 95 years' - paraphrasing of course but the remarks clearly indicated a 29-30's sort of ultimate outcome. I recall them because they were a statement not typically seen; they also probably a source of some jabs you got from the early summer rally just after. Is that still your expected type of outcome(or was that somehow a misreading)? Tanks.

In terms of my specific longer term analysis and outlook, I can only refer you to the conclusions I have reached in my current reports.  

If you can find the quote about tectonic plates, it might jog my memory and perhaps I could embellish on it, but I don't remember it too well. What did I mean? Why did I write it? What was the context? Do the same conditions apply now as when I wrote it? 

I do not remember forecasting or meaning to imply a 29-30s kind of outcome. That would be a 90% wipeout. I can't imagine that.  

I have talked about similarities that I've seen with the 70s. Secular bear markets. That I can imagine. And I can also imagine cyclical bull markets within secular bear markets. I cut my teeth in the markets in that type of environment for 15 years or so. I remember bull markets that lasted 18 months - 2 years during that time. That's plausible today.  

I do clearly remember writing about a 4 year cycle low in October2022 because that has been an active, ongoing issue in the cycle analysis. Also, whether the up phase might be failing early. And most importantly, when and where should we be looking for the next top and down phase.  

Anything is possible, but in Liquidity Trader reports I'm interested in divining what is reasonably likely over the intermediate term.  Then how do we play it?  

[DrStool]

Carnage in the earl patch. 

[DrStool]

Marbles time

[Takachi-1]

Feels heavy to me like everybody's waiting for the next leg up.  I got out of yesterdays SPXS even at the end of the day.  I'm dead even on 1200 SPXS from mid morning waiting to see if it breaks down  There is thet big AM gap up from a couple of days ago and I still believe in some version of the revision to the mean!

[WTF]

Worldwide demand for oil is down... even with cuts by Saudi Arabia, oil is going lower... Global synchronized recession.  (Geopolitical risks could cause higher oil... but let's hope that doesn't happen)

XOI closing below 1795 confirms more trouble ahead... first area of major support 1600.

It always looks like a "soft landing" until invariably it is not... but no worries, "this time it's different"...

[fxfox]

Doc,

please have a look at the Italian 10 year. Seems like below 4.20 it is Sayonara time?

 

[TSlim]

Sip is the new Windy Surfer guys. 😁 This is TSlim by the way. Hope Doc and all the Stoolies are well.

[TurdButter]

3 hours ago, DrStool said:

In terms of my specific longer term analysis and outlook, I can only refer you to the conclusions I have reached in my current reports.  

If you can find the quote about tectonic plates, it might jog my memory and perhaps I could embellish on it, but I don't remember it too well. What did I mean? Why did I write it? What was the context? Do the same conditions apply now as when I wrote it? 

I do not remember forecasting or meaning to imply a 29-30s kind of outcome. That would be a 90% wipeout. I can't imagine that.  

I have talked about similarities that I've seen with the 70s. Secular bear markets. That I can imagine. And I can also imagine cyclical bull markets within secular bear markets. I cut my teeth in the markets in that type of environment for 15 years or so. I remember bull markets that lasted 18 months - 2 years during that time. That's plausible today.  

I do clearly remember writing about a 4 year cycle low in October2022 because that has been an active, ongoing issue in the cycle analysis. Also, whether the up phase might be failing early. And most importantly, when and where should we be looking for the next top and down phase.  

Anything is possible, but in Liquidity Trader reports I'm interested in divining what is reasonably likely over the intermediate term.  Then how do we play it?  

I believe it was a couple times in mid-May, same general comment maybe different words.

I think a deflationary crash is certainly possible, we've gotten debt levels to absolutely crazed levels with the frenzy of the last few years and in no way is there enough cash flow to continuously cover it, and that will get worse in a secular trend of rising rates. And the economy of the last few years would certainly seem to fit a crack up boom. I remember the 70's as a kid, didn't get started on money mangling until literally a month after the big 1982 low. That's probably the preferred outcome by the  them, but at this scale it may be real hard to avoid deflation- and I think Central Banking overall is the biggest bubble still standing.