EW count $ES1! with Predictions BONUS yield curve inversion
ES1!Hello all!
Just thought I would share my work here today for all those EW analysis junkies to critique. Along with some commentary on current market/geopolitical/economic conditions and where I think we are headed.
With recession on the horizon like pink clouds in the morning for a sailor, we have to get our work (profits) in and get out of the water before the storm wipes us out.
Just like the sailor our work should be done quickly as there will be little time to reel in our catch. There are warning signs abundant that our global economy is coming to a crossroads of debt, supply/demand shock, and geographic positioning for goods.
In my view China has little incentive to get manufacturing back online, just as Russia needs to "fix" it's pipelines all at once. The globe of power is quickly showing it's fault lines. (Saudi Arabia transferring payment to yuan?)
Supply is low as Americans (like me) sit at home on their computers providing endless information through the air-waves and fiber-optic cables. We have become a soft nation through decades relatively peaceful times. We demand high pay and produce less physical or tangible goods, while buying up the worlds supply.
We have had easy financial conditions that are begging to be repaid somehow. With debt over our heads (Debt>GDP) our puppet masters have used this pandemic to engineer a cheaper way to pay it down.
Flooding the economy with digital greenbacks is a win/win/risk. The risk here is that we let inflation get out of control and everyone is chasing the dollar leading to evermore inflation.
I.e. If I sell bread at the market and know that each week my supplies are increasing at an exponential rate I will raise my prices accordingly, leading to my customers to ask for raises. Who, let's say, work at the grain fields, leading to higher grain prices; creating an inflation loop that leaves all participants with a increasingly worthless tender. This is why it is so important for the Fed to speak out ahead of inflation and keep expectations in check. If the Fed can curb that inflation cycle in our mentals then I may only raise my prices to the expected inflation target and no more, effectively putting an inflationary cap on all goods and services of all participants in our great economy.
Now with that said, we have a lot of work to do to right this great ship and sail away from the depression storm. The smart money markets believe it is too late and the fed waited too long to correct. (As I said, I believe it was intentional.) The yield curve inverted in June and is a record setting inversion. Here is how the SPX reacted since the 80s to 2-10s inversions.
https://www.tradingview.com/x/oYsYez7O/
As you can see some inversions foreran the markets collapse by months while sometimes the drop coincided with the inversion and in 2006 we actually had an increase of almost 15%! while the curve inverted before dropping around 55%. 2000 being the worse with a rally after 35% drop just to see another 30% drop into 2002/2003
If recent history has taught us anything; you are playing with fire the longer you stay in this market... but history has little to say about today, which I would point to the comp pandemic which I will have to compare next time to the Spanish Flu pandemic in Pt. II.
My final question is, "we are seemingly already in a recession (although the powers that be are trying their best to redefine "recession"), is this drop that we have endured the end or do we see something greater as the historic yield curve inversion is pointing to?
Here are my near term predictions with EW counts and demand/supply zones that I am watching.
Happy Friday!
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