How to break the markets
Updated
In a fortunate turn of events, inflation has calmed.
For equity bulls, more good news. Yield rates have probably peaked.
To stop inflation, you must cool down a HOT economy. Overconsumption tends to increase prices. In an unfortunate (?) turn of events however, the markets haven't calmed down. Some charts suggest that the markets haven't felt at all the decisive rate-hike schedule.
A question arises: Are markets so strong not to feel current yield rates? Or is there some kind of lag we must take into account? When will equities suffer, and how much? These are important questions right now that need serious answers.
A custom indicator was invented to calculate the average-rate-of-return of equities against yield rates. It attempts to answer the following question:
How much better do equities perform YoY against the "safe" US 10-year bond investment?
Some interesting charts come up from this analysis:
In 1951 yield rates broke out of their long-term bear market. At the same time, the equity market exploded in even higher strength. Note that at that period, equities managed to perform better than the ever-increasing yield rates. It was after yield rates ~tripled that problems arised.
Moving to today, we only recently witnessed a breakout in the equity and the yield-rate-schedule. Judging from the '60s, we could even witness a decade of yield rates trying to catch up to the equity market.
A simultaneous breakout can make sense. A massive amount of money has flown out of the bond market and had to enter the equity market.
Equities may be forced to grow, for now. An incoming drop in yield rates from a pause in the rate-hike-schedule will almost certainly create an outflow from equities and back into bonds.
Be prepared. The weakness in the equity market hasn't showed up yet. At any point, the steep upward trend can collapse. A crash will certainly come. But at a time when nobody expects it to. Remember, rates of ~7% managed to break irreversibly the equity market back in the '60s.
Ask yourself and wonder. How tight of an economy can opportunistic equities handle?
At what point will stability become more important for us than growth?
Tread lightly, for this is hallowed ground.
-Father Grigori
For equity bulls, more good news. Yield rates have probably peaked.
To stop inflation, you must cool down a HOT economy. Overconsumption tends to increase prices. In an unfortunate (?) turn of events however, the markets haven't calmed down. Some charts suggest that the markets haven't felt at all the decisive rate-hike schedule.
A question arises: Are markets so strong not to feel current yield rates? Or is there some kind of lag we must take into account? When will equities suffer, and how much? These are important questions right now that need serious answers.
A custom indicator was invented to calculate the average-rate-of-return of equities against yield rates. It attempts to answer the following question:
How much better do equities perform YoY against the "safe" US 10-year bond investment?
Some interesting charts come up from this analysis:
In 1951 yield rates broke out of their long-term bear market. At the same time, the equity market exploded in even higher strength. Note that at that period, equities managed to perform better than the ever-increasing yield rates. It was after yield rates ~tripled that problems arised.
Moving to today, we only recently witnessed a breakout in the equity and the yield-rate-schedule. Judging from the '60s, we could even witness a decade of yield rates trying to catch up to the equity market.
A simultaneous breakout can make sense. A massive amount of money has flown out of the bond market and had to enter the equity market.
Equities may be forced to grow, for now. An incoming drop in yield rates from a pause in the rate-hike-schedule will almost certainly create an outflow from equities and back into bonds.
Be prepared. The weakness in the equity market hasn't showed up yet. At any point, the steep upward trend can collapse. A crash will certainly come. But at a time when nobody expects it to. Remember, rates of ~7% managed to break irreversibly the equity market back in the '60s.
Ask yourself and wonder. How tight of an economy can opportunistic equities handle?
At what point will stability become more important for us than growth?
Tread lightly, for this is hallowed ground.
-Father Grigori
Note
Many Americans hate Chinese.Many Chinese hate Americans, and everything they make. They hate American capitalism, stock markets, humanity. Everything they don't make.
Stock market, being an American + Japanese invention is the enemy of China's regime. It is especially bad for them when it shows them that they are weak.
There is a big elephant in the room of China. And there are many empty rooms over there right now, and so, many many elephants. A housing bubble larger than anything we have seen before is brewing over there. Empty properties that could house 3Bn more people.
I haven't seen a worse chart for an entire country.
I wish good luck to Mao's descendants...
Note
There are more of them! If you zoom in the mini elephant, you will see a micro elephant. We have reached inception levels here...Luckily, Russia is in a much better state. The original Babushka may live long and prosper. I wouldn't necessarily bet against a country that has just won a war. (Ukraine)
Note
Dollar is not exactly looking alive however.This indicator simply compares how many positive and how many negative renko bricks appear.
Note
Dollar Bull Market is probably over...It's a little hard to see, but after price steps on channel, it signals the end of the bull market. The Lin-Log Regression shows that we have reached a significant upper limit.
Note
The .com bubble burst we expect, may be already priced-in.IXIC/SPX has formed a perfect double top to the peak of the .com bubble.
The future ABC pattern is drawn for illustrative purposes. No specific targets were selected.
Note
The following chart may get a little overwhelming.1970 --> 2000 = 1990 --> 2030
Does technology play a larger role than it did in 2000?
Big Tech had consumers as customers. Now entire governments are customers.
Note
You know, nothing stops Big Tech from swallowing all other markets once again. It did in the previous cycle.Impossible as it may seem, everything is possible.
Note
QE until 2030 is, indeed, possible.No bank rushes to cut rates.
They only rush to hike rates.
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Is WALCL a measure of how much are markets broken?If the economy is alive thanks to massive purchases by FED, what will happen when they bail out? Right now, the FED is reducing their assets, effectively stepping out of the economy.
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This is what happens when a stock breaks down, but it pretends it hasn't.What it says happened:
What really happened:
Note
There are contraband charts that validate this breakdown.It is unfortunate however that many of my indicators have seemingly vanished.
Note
History tends to repeat itself.The equity market has found support.
The bubble we talk about hasn't been born... yet.
Note
Is the profit of an active investment equal to what it would be if we closed it today?
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