(Note that I did not lock down the scale perfectly in the video, even though I did in order to mark the VWAP lines previously). I was more interested in writing this commentary than to make further target estimates. Those will come again soon!
In the video, I describe how it is now possible for for MNQH23 to rally to 14132.50 to perhaps even 14815.50. I used the weekly charts to describe where VWAP resistance might be in the future that would restrain a futher rally before a true new high breakout might happen.
I still think a rally in these markets is somewhat disconnected from reality, despite so-called improvements in GDP and perhaps in unemployment claims.
Here is why I am not completely bullish:
Volume:
The one that disturbs me most is the general lack of volume required to push prices higher on a weekly basis. Volume there continues to fall below the 50 period moving average. Daily volume IS improving, but it needs to push forward or any potential rally away from the bearish trend of late could be muted and rather weak.
The consumer is in a spending free fall:
Disposable income is diving in the USA. People are not going to buy things they once did when they struggle to pay car payments and higher prices for food. 8% food inflation ( which is about 5.5 x the average annual food inflation in past years) is going to strain the average middle class family.
Potential for regional war and even world war:
If you go to the foreign press (where you have to go to these days to find unbiased real news), American military officials think we could be at war with China in 2025.
I realize that is out outer bound event, but if you are watching American military buildup in Ukraine, NATO seems to be wanting to start war with Russia, which could easily escalate into a world conflict. If the USA were actually intent upon a ground war in Russia and Ukraine , what do you think the People’s Republic of China’s first response would be? If you guessed to invade Taiwan, you would probably be right.
What would that do to our seminconductor business and most technology and industrial business in the United States? It would utterly cripple it. We need to be aware that our tech industries are vulnerable to forces we have not dealt with diplomatically (except perhaps to have our politicians owned by them). The risk of downside cannot be underestimated if the USA continues down the path of global conflict.
Federal Debt And Interest Rates
There is a problem with that, and that is with spending and printing of US Dollars that have no value and that will drive all prices higher. When U.S. Democrats want to remove the debt ceiling completely (in Zimbabwe-style fashion) and Republicans only want to restrain spending, there is no hope of restoring fiscal controls and monetary stability.
When your borders are open and the possibility of 160 million new illegal migrants want to head this way over the next decade, and your government is willing to give them all $800, a free trip to the interior or the USA, and welfare and medical benefits, that is not a recipe for rising wages of fiscal restraint.
Conclusion:
Until we regain the ability to use and market our own natural resources, cut spending, truly grow domestic jobs, and restrain to an absolute maximum immigration in the United States, the economic foundations of this country will not sustain business value or equity value of any kind. Since 2008, we have sustained equity values with a printing press. We are rapidly straining the credulity of that strategy every day.
That does not sound like a strategy that will get us to a new high in MNQH23 of greater than 16995.75.
I feel very much like Tim Knight when it comes to equities. When we knew what a risk-free rate of return and a true present value of earnings was, we really knew where we stood in terms of the price of equities. Those days died forever (or at least until sanity returns) in 2008. We must all strive to make sure they return soon, or the republic is very much in trouble, in my opinion, and I WILL SHARE IT :).
Thank you so much for supporting this blog. More will come soon!
