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
Apparently Jerome Powell’s comments on potential interest rate hikes stifled what might have been an extended stock market rally and caused MNQZ23 and other stock and futures markets to retreat yesterday. The U.S. treasury markets were also rattled by a hacking incident which slowed bond trading. All of that activity probably lead to a snap in the recent bullish trading action.
I still think that the Fed is totally oblivious to the fact that price increases are a large factor in perceived GDP growth and that wages are not keeping up even with so-called “mildly elevated” inflation numbers. Interest rates should be a reflection of business risk and present value of future earnings and not political expediency, as that is, in my opinion, what drove zero interest rate policy (ZIRP). Bankers and corporatists made money on the spread as they invested in risk assets that also chased free money, absorbing it as risk assets spiraled higher. Savers and young investors were made poor by either not investing or by setting price level “hurdles” too high to cross over. When you see the zombie companies on the Russell 2000, it makes Fed governor Austin Goolsbee’s commentary seem a little strange.
When your currency has no value and your rates cause entrepreneurs and business people to take insane risks, rates should be the check on them. That should be the case regardless of how broken the economy is, especially when governments created the entire “free money” concept, particularly since the U.S. Dollar was taken off the gold standard.
On the ground, as mortgage rates, rents, and general costs of living seem out of the reach of many Americans, some Americans are basically spending any savings they have on life experiences, including travel. The pressure of producer inflation and rising consumer prices are a choke point on economic growth. The currency needs to be shored up and the money printing ended.
In the world of global competition, the United States is trying to catch up to China in production of rare earth metals, and it might have found the mother lode in Wyoming. What is most disconcerting is the fact that rare earth metals are used in EVs, which are probably the environmental equivalent of heading west looking for sunrise. Not only is there not enough copper on the planet to build required charging stations, the power infrastructure will require many more power poles. That will of course lead to reducing forests to make those poles from trees. That likely means a near-term lumber price collapse may be avoided, at least until such time as governments (and the public long before government) figures out that the cost of EVs is not worth the effort (economically or environmentally) to pursue.
China seems also to be on a path that leads to conflict, as it literally dominates manufacture of goods that are vital to the national security of other nations, including the U.S.A. Since the U.S.A. and other nations seldom makes steel for construction and for defense purposes, pharmaceuticals, and other items with national security implications, there will be pressure to make those products domestically, even if China subsidizes them for export. If the world implemented tariffs on China at higher rates, their economy would destabilize. Trade conflicts are often the precursors of military conflict. We will see how this works in coming years.
Let’s leave this discussion for now and look at the charts.
If MNQZ23 can rally above 15310.50, it has a decent chance at rallying back to 15380.50, and back to the swing high of 15453.25 by Monday. I am uncertain as to whether we rally back to 15520.25 or 15605.50 by Monday, but if buyers get aggressive, the lack of commercial holdings at those prices could make it easy to achieve those targets. If MNQZ23 fails to rally beyond 15310.50 and falls below 15209.50, it could be a quick trip back to 15140 and perhaps 15054.75 by Monday.
I got bounced for 10 NQ point loss per contract going short as volume was indeterminate until later in the session. I will saddle up again today and see if any trades meet my trade plan.
I hope everyone has a profitable and productive Friday! I have much to do this weekend, but if something significant shows up in the charts, I will write about it this weekend.
Today’s Economic Data Courtesy of Trading Economics dot com. Be sure to refresh the date at the top left.
