Price, Price Spread, Lagged Price/Volume Spread, and Binary Price/Volume Indicator
Price and Total Volume With 50-period Moving Volume Average
Fibonacci Price Scale With Targets
Yesterday’s IP glitch was strange as it happened after my first draft was written. I try as best I can to get this out by 0630 EDT so it can be read before the market opens, but it was not to be. For the 90% of you who are still hanging with me, that trading set-up video is coming. Demands on my time with personal things and shifts in business take time to deal with. I will get there. I can also add nuance to how to use Fibonacci patterns and scales with volume profile.
The key theme of yesterday’s write-up that applies today is that with rapid rate increases, the decisions for asset allocation are once again dynamic the way the old business cycle used to be before corporate cronies switched jobs in government into private business and vice versa.
There’s a ton of things I could write about, but I am only going to cover the bigger topic areas. Monday’s Chartbook on Substack covers a great deal of the changes in comparison to returns on stocks and bonds.
All of a sudden, equity dividend yields are lacking. Depending on your age and your use of funds, clearly the decision dynamic has changed. Even as malfeasant as the Federal Reserve and the U.S. Treasury are, the aura of “safety” still hangs with it until the world order of currency dominance in world trade shifts. There is, at least for now, a partial reprieve from inflation, depending upon what the true rate of inflation is.
Yields on U.S. Treasuries of all maturities are higher than the dividend yield of the aggregate S&P 500 index. You can now understand why many near retirement are choosing to move into U.S. Treasury bonds for higher return. What is dangerous, as rates continue to climb, is that a long duration portfolio can get killed in this environment. Either picking a ladder of short duration treasury bonds or a money market fund may be the answer, though these days even money market funds may not be all that stable. Caviat emptor. That kind of data will also put pressure on investors to make decisions regarding stocks.
Another issue is that with Russia seeing a collapse in the ruble and having to raise rates, the entire mess associated with embargos and trade disruption has caused chaos in the central bank interest rate environment. My innate bias as an Austrian economics supporter still hopes that currencies will be backed again to prevent the rush of bubble events, but as long as fascists in the EU, China, and the US continue to direct action for the enrichment of their leaders and cronies. These events will continue. This chart shows how central banks are reacting, and those reactions are all over the map (pun somewhat intended):
There is even more evidence of currency contagion from the ruble. Because the ruble’s value is dependent on world trade and trade stalls, it forces the bank of Russia to raise borrowing rates if inflation, which has happened in Russia via consumer spending increases. The so-called “trade ban” enriched Russia by black market deals for oil that it could make while our domestic markets got more expensive because of drilling restrictions. What could ultimately hurt the West is if China, India, and Russia push for a BRICS gold and commodity backed currency to compete with the SWIFT system. We will know more about that on August 22, six days from now.
Because of cavalier monetary policy by the Federal Reserve and the U.S. Congress, homelessness is skyrocketing as the cost of housing and the inevitable post-covidiocy-lockdown rent moratoriums end. The costs are killing new investors also, as seen in this video. The problem is NOT that rates are rising, however. Its that RATES were cut to zero to begin with. Banks, and I mean money center banks, should have been allowed to fail in 2008, so that the pain of the destruction could be dealt with directly, instead of kicking the can down the road, creating more bubble scenarios. Now, in the midst of that gentleman’s (and everyone’s) crisis, we see this about Federal Home Loan Banks. It’s now a slush fund for Silicon Valley billionaires that when bankrupted (as it pretty much is now), you the taxpayer pay for.
The path to conflict with China seems closer as US venture capital companies pull back from Chinese investment. Since the US has literally handed industries critical to our infrastructural and technological survival to China, as outlined in this Doomberg article, which related only to so-called “green” technology. In steel, pharma, and most importantly in semiconductors, made in Taiwan, agression by the Chinese could critically damage the USA. On the other hand, with China’s rather crushing real estate debt and youth unemployment seem to be kindling for revolution. A stroke of a pen by an American president to double tariff rates would likely bring that on fairly quickly, but it would kill retailing and e-tailing kingpins in this nation dependent on Chinese trade. The decoupling has already begun. China has moved down from 1st place to 3rd place for the USA.
Things are getting crazy and uncertain indeed, but lets focus on the charts.
Asia pretty much idled prices overnight and European traders lifted MNQU23 off the decks of the 15112.75 VWAP line as we entered the 0500 EDT hour.
If MNQU23 can remain above 15112.75, it has a decent shot at getting above the 15182.50 VWAP line and tag at least 15189.75. If buyers become aggressive, then it could, after that, rally to 15259.25 and beyond to 15309 and 15372.50 by Thursday.
If that doesn’t happen, there is quite a bit of room below, particularly if sellers push beyond the previous lows of 15076. The next targets below that would be 15026 and and 14962.75 is sellers are aggressive. Those targets could be hit by Thursday.
Monday and Tuesday I made 36 NQ points long and net -5 NQ points net being long and short yesterday. I did recover from a -25 NQ point long trade that got booted in volume. The key difference yesterday was the new technique allowed me to wait for the short to clear so I could clean up 20 of the NQ points I lost. Ain’t gonna win every day, but at least I now have a way to patiently wait for a good reversal to trade.
Have a productive, happy, and profitable Wednesday! We may hit pot holes here, but we keep driving forward.
Today’s Economic Data Courtesy of Trading Economics dot com. Be sure to refresh the date at the top left.
