The image above was my rather amateur attempt to have a mythical “Buffalo Trader” throw up his hooves in disgust over trying to figure out how the QQQs, NQs, and even MNQM24 can continue to rally despite all evidence of Fed-and-Congress driven interest rates, the seeming debauching of the U.S. Dollar, the scary nature of business among the now-called “Magnificent 7”, and the messy nature of what is called U.S. employment.
Instead of grinding into minutia the way I might otherwise, let’s look at monthly swing targets and monthly long-range targets for MNQM24.
The Near-term Swing Target:
The Long Range AB-CD target ( based on December 26, 2018 low in this contract):
If the swing extensions play out, that near-term bullish target will likely be 19941.25. If the long-range AB=CD pattern plays out, the ultimate bullish target will be 21767.75. I will not attempt bearish targets presently to save time, even though pullbacks could happen if world and economic events take a dark twist, something entirely possible even in the short term.
How in the world can this be? Even though we might see a top in weekly charts, we still have not created a pivot in the monthly MNQM24 charts yet. Let’s look at other data.
Valuations
Y-Charts were down as I pulled up moving standard deviations from the mean, but in terms of trailing 12 months’ earnings, the P/Es of the QQQ and NQ in aggregate are elevated but not at historical nosebleed levels at 21.92. During the ”covidiocy” fade-away, they did reach above 29, but were nowhere near extreme levels of December 1999.
The Potential Rise of the Not-So-Magnificent 7
There are some disturbing elements within the “Magnificent 7” however. TSLA is not exactly setting the world on fire with production numbers. The reason for this is two-fold. Raw material prices, many of which are sourced from the People’s Republic of China, combined with elevated finance rates, make them unaffordable for most Americans. The second reason is that China and other countries are producing more affordable vehicles than Tesla can. Regardless of what the Biden administration does to ban the use of internal combustion vehicles by 2035, the inescapable economics of electric vehicles is that not only are they not “green” but they are also economically impractical in an inflation-ravaged economy.
While NVDA 0.00%↑ may be riding the wave of artificial intelligence (AI) with its state-of-the-art chips, some seedy things seem to be happening about their accounting practices even beyond the rather intense mania for AI at every corner. There are several questions regarding accounting practices and demand declines for NVDA products. Instead of writing a novella about this topic, head over to Nobody Special’s YouTube channel and explore these videos about NVDA.
As for the rest of the Magnificent 7, deploying capital is becoming an issue, and having tons of cash can be burdensome when the Federal government is planning anti-trust cases against companies like Apple and Amazon. Apple seems to have the biggest target of any corporation on its back, particularly if the American Uniparty takes it all in November 2024. If that happens, the lawyers (lawyahs as we say in South Carolina) and their associated politicians could feed from anti-trust and bureaucratic legislation against these companies as the EU has.
What about the interest rate environment?
If you have followed CPI and PPI lately, you know that inflation is still above the 2% target and seems to be wanting to remain at or above 3.5% currently.
Federal Reserve Governor Kashkari’s statement of a complete pause in rate cuts sent a shockwave in markets last week, as the free-money brigade ( most banks, institutional, mutual fund, and retail investors ) panicked. What most still refuse to understand is that inflation IS A MONETARY PHENOMENON.
Instead of ranting about what happens to interest rates and my rants about BTFP facility as it relates to Treasury purchases, I think Luke Groman’s discussions about deindustrialization as it relates to U.S. Policy something that affects semiconductor manufacturing, a key part of the tech industry, is the best way to understand what I think could indeed happen. That is not positive for tech in the long run for the USA. Gold, as Groman discusses, is looking better and better every day. Take a look at this chart.
What about employment in the USA?
Even though unemployment is supposed to be practically non-existent, just as Luke Groman mentioned in his video, tech companies cannot hire people here because the skill levels of the most able (young people) are absent. Not only that, but our economy has shed 1.8 million full-time jobs in the last year. As correlates to Luke Groman’s comment on unemployment, even as unemployment remains lower, an ever-increasing number of people remain out of the workforce as indicated by U6. Those people will likely claim entitlements and will burden America’s debt load.
The largest gains in employment were in government jobs, which adds to the deficit, as they produce nothing and are paid for with printed money. Even more disturbing news than the above for American citizens is that foreign-born workers have gained more jobs than American citizens since December 2019. My own Congressman, William Timmons, supported legislation making that statistic possible. That is why I will vote him out of his position in the June primary.
I could pull other data, but you can do that on your own. A lot of employment is now for part-time work and many of those jobs are held by the same worker holding multiple jobs. The manufacturing powerhouse this country once was is in peril.
Other Exogenous Conditions
Commercial Real Estate: As many loans were expended into 2024, given the possibility that rate cuts (if any ever occur) will not happen, what happens to commercial real estate and the health of regional banks if rates stick or go higher? That prospect could become quite scary. Only time will tell.
Oil Prices: As Israel blew up an Iranian consulate, the entire world seems to be cutting oil shipments just as our SPR dives to its lowest levels ever and the world prepares for war from many directions.
The Prospect of World War: Now that even leftist rag Politico Europe now admits that Neo-Nazis are behind the regime of Vladimir Zelenskyy, one would think that the United States would pull back on the idea of fighting on the side of the evil scumbags their fathers, grandfathers, and great-grandfathers fought against in World War II. They would also not support the inclusion of a fascist regime in NATO, which is what this current administration wants to do. (Remember folks, Nazis are national SOCIALISTS, not “right-wingers”, whatever “right-wingers” means). We are sleepwalking right into a world war with a nuclear-armed power with technology that may indeed surpass ours. Iran may also go to war with Israel and that could spark a similar expansion to the war with Ukraine.
I urge everyone to watch Ukraine On Fire to understand why the Ukraine War is so insane and proof of American corruption. Also, watch this interview between Tucker Carlson and Rep. Thomas Massie. (I have my own beef with Massie, but I may discuss that later).
I didn’t once mention China in this discussion. I would write a multiple-post series on that, but not today. Perhaps I will later.
Possible Currency Event With The Japanese Yen: Could Japanese rate increases cause pressure on the U.S. Dollar and create a currency crisis worldwide? Michael Gayed and Johanthan Matthews discuss this possibility in the podcast posted this morning while I was at the gym. I am not sure Mr. Matthews has ever had a job other than of a trader, but his perspectives are quite interesting nonetheless.
Conclusion: What do I think?
Markets are gonna do what markets are gonna do. As long as the perception of rate cuts being imminent exists, QQQ and other markets will continue to rise and those crazy targets I have can happen. What I have listed above however and tons of others are acting as headwinds and potential brickwalls for a Wile E. Coyote event in U.S. and global markets. It doesn’t take a “super-genius” to figure that out.
If you liked this, give me a like. I may turn this Substack into a monthly gazette to cover stories on NQ, MNQ, and tech stocks from technical analysis and fundamental perspectives. I am still trading MNQ and will continue to do so. My other businesses continue and I must devote time to them in ways that prevent daily writing.
Give me your comments below about such a prospect. If I can turn this into a valuable resource to readers, then I can perhaps charge for it and keep it running!
I will return soon! Thank you all once again for supporting this Substack!