I will cut to the chase since those of you who have seen the video know that I think these market participants will play into the belief that “free (after the rate of inflation is deducted) money” until it cannot. The real question is, when will that event occur? Without tight curbs on spending and an abandonment of the printing press the Federal government has become addicted to, we will be headed toward some sort of a Weimar Republic-like ending and the American economy will be swept into the dustbin of history like so many others before it. We have far too much debt and far too many debt derivatives and unfunded liabilities to survive without total jubilee, and even then, commodity pricing will become impossible to control, particularly if the U.S. Dollar ceases to be the world’s reserve currency. Neither half of the Uniparty wants to stop the printing presses, and only one-side claims to care about fiscal restraint, and even it does nothing to promote it.
Debt impasse could nearly kill or distressfully impact the US Economy
If there is a default, we could see 4 quarters of negative GDP growth, and even though there could be disinflationary or deflationary effects from the slowdown, rates would remain high, and the cost of everything from mortgages to cars would be more expensive. This article covers those scenarios.
Even though food inflation seems to be dropping, even the USDA admits that food inflation ( a key to consumer spending, as one must eat before buying other stuff) will still be running at 8.3% (look at pages 13-18 of this USDA report). Gasoline prices will seasonally rise also. This data seems to confirm shadowstats.com ‘s estimates of what street-level CPI is, as it was calculated in the Carter administration before gerrymandering by the Federal Reserve:
Haver Economics doesn’t even need a debt impasse to call a recession in the next 12 months, it looks at the difference between the 3-month forward Treasury rate beginning 18 months ahead and the 3-month Treasury bill. They see the odds at near unity. Are they right? Who knows? Everyone has a forecast, but no one knows anything with ABSOLUTE certainty. Rate decisions will force extremes in either direction to occur, given the manic attitudes of current trading participants.
Do The Technicals Suggest A Correction?
Is Tom DeMark right? Is the consecutive-price-highs indicator giving rise to a period of price exhaustion for the NASDAQ? It may look that way to him, but as of Friday, VXN NASDAQ 100 volatility was bottoming out basically at 19.68.
When you look at my video, there is still room to move to an expanded VWAP target at 14945.75 before any other real price resistance gets in the way.
AB=CD patterns can end shallowly at a 38.2% retracement of the last down move, or the rally could extend to the 61.8% retracement before a reversal occurs. There seems to be enough room for MNQM23 to run to such a level if buyers persist.
Are Price Valuations Extreme?
If you look at the $SPX, the PEs are indeed about 13% above average. That is indeed overvalued, but not necessarily historically so. (for more information on how to use the GuruFocus tool, look here). If you look carefully at Warren Buffet’s estimates of growth to global GDP, both measures are overvalued, as growth will be below the rate of current inflation, or somewhere between 1.9 and 3.1% per annum going forward. If interest rates continue higher, then there would indeed be a significant correction in stock values.
My Conclusions
I still believe based on the pattern analysis I have done, and looking at general valuations (which are for the most part overvalued) that we can continue to see a rally in MNQM23 to that resistance line at 13944.75, and after that, all bets are off. It is difficult for me to see another massive rally when the Federal government continues to print relentlessly, driving savings values into the toilet and prices reflecting the degree of printing. It could in fact make a massive rally to roughly 21000, but I think future returns would or likely could be negative for several years after that until risk-free rates of return are reestablished.
I am completely agnostic as to direction. I can be long or short MNQM23 and other markets to meet the current conditions at the time. I think there will be headwinds ahead from fiscal and monetary malfeasance, banking difficulties, war, and general political and social insanity. Traders and investors need to be prepared to meet the challenges as they arise.
That is all for me for now. The projection for extreme highs and lows are presented below. Have a great rest of your weekend!
Extreme bullish projection for MNQM23:
Extreme Bearish Projection for MNQM23 assuming exhaustion at 14944.75:
These are simply estimates and nothing else at this point!
