Let us start with the chart:
You can click on it to increase the size of the image. I decided this time to use monthly and hourly VWAP control lines to show you where most of the commercial interests are, and then to scale an AB=CD pattern on top. If there is complete price symmetry in the correction, one might expect a first target to be 17356.75. That would be very near “top-bottom support” of 17309 back on September 1, 2024. If that fails, then the next real control point on the daily chart is 16706.25 roughly. That means we could easily see another half a handle peeled off the MNQM25 chart by weeks end (or even days end of panic ensues).
People should not be surprised that this is happening unless you are a FOMO junkie who thinks markets can only go up. The Fed and the U.S. Treasury have been printing money like insane people for damn near 15 years, and holding interest rates at zero or below (after inflation) until just recently, when inflation, A MONETARY PROBLEM, not an economic policy problem, was created during the “Covidiocy” era when the Trump stimulus of 2020 (probably a really bad idea) was turned cancerous by the Biden Administration to fund every crony on both sides of the Congressional and Senatorial aisles. It also funded a failed war between the USA and Russia using Ukraine and NATO nations as proxies. Even more money was stolen by politicians and other NGOs through US AID (The U.S. Agency for International Development) for various nefarious funding arrangements, too numerous to mention here.
That printing and that stimulus was conducted while our industries were stripped of manufacturing and sent overseas. With their exit, hundreds of thousands of jobs were lost domestically. This didn’t start with Biden. It started with George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama. The pièce de résistance was ushered in by the Joe Biden administration, as millions of illegal migrants poured in, powered by free Social Security cards and all sort of benefits, including free food and free housing. When his administration blew up a million jobs in manufacturing, he allowed many illegal migrants to apply for work and to vote, thus causing a crisis for American citizens looking for work, often needing two or three jobs to replace the income they lost through the loss of manufacturing jobs.
Back in 2023, the Fed jacked rates to over 5%, and suddenly the banking system began to crack, as most bank asset portfolios, filled with 10-year U.S. Treasuries at lower interest rates, began to collapse as the prices sank dramatically with rate increases.
I have my problems with President Trump, but he was handed a load of crap to repair in the current U.S. economy. He cannot cut spending, as some of that is the money needed to support those who cannot work in this environment of diminished quality of employment. If he doesn’t cut spending, it will be impossible to fund even the interest payments we are paying now, let alone pay off the debt, as receipts are not sufficient to do that. If taxes increase, then consumer spending (already in a state of caution) will dry up more, and the economy will fall further into recession (and we have probably been in one for almost a year, if any of the data was honest in the previous administration, which it probably was NOT).
The only way to permanently reverse this mess is to slowly reduce spending, while negotiating with businesses foreign and domestic to bring critical industries back to America. Using tariffs is the method that President Trump is trying to use both to bring jobs back and gradually reduce the trade deficit by expanding our exports where they have been blocked by even more aggressive foreign tariffs. That strategy could create new employment for exported manufactured goods and for other manufacturers to compete for overseas trade.
I got a bit pissed off this morning when I watched this rant from Peter Tushman, a retired trader. This guy is younger than I am and he looks like a refugee from a six-foot-deep hole. He was once referred to at the “Einstein of Wall Street” because of his hair. Now he seems to be reduced to a weakened imitation of Bruce Dern in the movie “Nebraska”. He is upset that Trump has no idea what tariffs will do to the economy. What this “Einstein” doesn’t get yet is that they are not fully implemented, and that in one case, the implementation of tariffs have brought immediate response to possibly remove all tariffs by the nation of Vietnam. Will it happen? I don’t know, but there is now an ability to negotiate a better deal for the United States. That is the entire point of the tariffs.
Anyone who thinks printing money into eternity was a good idea, has to be straitjacket material. FULL STOP. That is about all we have seen since 1989, but most certainly since the QE debacle that began in 2008.
The USA is going to have to reserve the insane policy of globalization (or really, global fascism) that has led to our critical material manufacturing base to be decimated. We cannot have national security if all the materials needed to keep our military in top shape is made overseas. We cannot secure pharma products or semiconductors if they are held hostage by foreign manufacturers as they are now. That is only the beginning of things we need to onshore for our defense and future growth of our economy.
The other thing you have to realize is that as valuations are reformulated based on what should be realistic hurdle rates that are some multiple of a rational (and hopefully positive) prime rate of return on short-term assets. Anyone holding a stock at a 119 P/E ratio (which Tesla was sporting prior to the correction and the leftist attacks on their dealership) should be placed in a rubber room if they think that stock goes up forever. Rates will have to be normalized again at some point when balanced budgets are prescribed and met and the end of money printing by the criminals in Congress, The Federal Reserve, and the U.S. Treasury stops. We need to get back to the point at which businesses can be rationally valued based on real profitability and real rates or return and not on amped cash flows from below-inflation and below-rational market rates of interest. The whole idea of FOMO is the idea that the stock market is just a cash grab (as is cryptocurrency, as I hope to get to as soon as I get other projects done) and that wealth is simply having a “bigger number than the other guy”. Wealth was once based on aggregate asset value with income and positive cash flow that was actually MEASURABLE AND TANGIBLE. Not the zombie company forward earnings projection horse manure of a vast majority of Russell 2000 companies over the last decade.
The reason I largely vacated stocks in 2008-2013 is that I saw this day coming, and NOW IT IS HERE! What I did was shift into undervalued (at the time) real estate assets and made money refinancing impaired properties to give people a chance to own housing at lower than bank rates. That worked until 2020 and 2021, and I ended that for the time being. I was not happy with what I saw with QE’s giant money pump to banks and institutions that pumped the worthless money into stocks. To me, everything past 2010, basically, is a mirage. That MIRAGE is going to fade, and many will be hurt by it. Those who are patient, if President Trump and other non-fascist/non-globalist American leaders can restore monetary and fiscal balance and stability. It will be a hard task to balance spending, cut waste fraud and theft, and to restore the American employment base destroyed the the RNC and DNC Divisions of the Uniparty fascists in Washington, D.C. and many state houses.
I will get more into tariffs and other fiscal items at some other time, and I will also deal with Bitcoin again soon as well. My hands are full at the moment. If you want a better understanding of the pro-tariff perspective, listen to this podcast with Scott Bessent. I am not always a big fan of Glenn Beck, but his take is also helpful. His guest is Kevin Roberts of the Heritage Foundation.
As I close this post, I see NQ has opened and has just held to that lower target, 16786.25. If that fails, you can possibly see a 15 handle in MNQH25 in the short to intermediate term, but that is still relatively normal given the insane history of the NASDAQ. When all elements of fiscal policy are in flux, everything is in the air, panic will happen. When panic based on insane valuations and even more demented governmental policy, you can throw all your “behavioral economics” out the window. Because I believe that in the long run, value REALLY does matter, you can throw all your “behavioral economics” bullshit in the trash. We are in the debt “death quadrant”, and that could mean hyperinflation and the total disruption of the American civil society, what there is left of it. There will be a reckoning, and it has to hurt because we kicked the can down the road in 1913, in the 1930s, in 1971, and again in 2008. If you don’t get that, you are non compos mentis. We must restore currency stability and stable value and we must balance the Federal budget and avoid deficit spending at all costs!
Thank you for supporting the Buffalo Trader’s Writing Desk! I will return when things settle down, and I will finish the Bitcoin series shortly! Have a great week trading and with life in general. If you like what you read, give this post a like and subscribe!