This post will not be terribly technical today, but it will cover the craziness currently in the economy to help you see what might happen in the future.
For emotional context, let’s relive some of the opening seconds of “Blazing Saddles”. I happened to miss the 50th Anniversary showing of the unedited version and I had to change plans, but this will do for now:
Let’s take a look at the monthly and weekly charts for MNQZ24, monthly first
Monthly Chart
We have fallen short of the projected high of 22264.5 so far by about 1034 point, but it nearly snagged perfectly the 127.2 expansion the last bullish swing. The ultimate question everyone has now is “what that the high for this bull run?”
Weekly Chart
My answer to that question is “I have no idea with certainly”, but take a look at this chart.
This look a bit crazy, but the lowest green line is the last true uptrend line for MNQZ24, with one tiny exception. The A to B swing VIOLATED the previous trend line that touched a swing low at 17610.50 a few weeks prior. For violating that sacred rule of breaking the first primary trendline, the late great Arthur Sklarew would cast me into a firepit and fire up the bellows. I did that for a reason though (and had I been writing regularly I would have demonstrated why I did.
The reason I did is because the Federal Reserve is now continuously in the game printing money whenever if feels the need to create it, and as a result of various issues (including the Donald Trump assassination attempts), the Fed would stand at the ready to add liquidity. That wasn’t such a big thing in Sklarew’s day, but the excessive Covid-19 era spending continues to this day, and now we are sinking into debt at a rate nearly 500 billion USD a month. I realize that the reference is to a Reddit link, but Fluent In Finance is an excellent Reddit account. If that rate continues annually, you are talking about added 6 trillion USD a year to the national debt. That is bat guano crazy on the scale of Venezuela or Zimbabwe.
If the current weak and sloppy market continues, MNQZ24 could end up at an AB=CD swing low of 17151.25.
By the same token, it could bounce off of that trend line near volume profile support and price support and rally further. Why? The free money is still flowing. If you are not following Luke Gromen on X, formerly Twitter, you should. He has an excellent grasp on the horrific difficulties the Federal government is having and will have controlling the debt while not steering our entire economy into a deep bigger than the Great-Depression-sized ditch.
What else looks negative?
Warren Buffett’s pile of cash is at all-time highs as he sells a huge chunk of AAPL 0.00%↑ and BAC 0.00%↑ (Apple and Bank of America stocks). If he is hiding cash at record levels, would you not be skittish, or if you are a smart investor, start to look for bargains to see if the stocks call become even cheaper in a correction? I may get deeper into that next time, as I touched on it briefly in the last post.
What is REALLY wrong currently? Watch this video from Joseph Brown on X.The Reverse Repo Buyback facility is heading back to ZERO again. Now that tightening has ended, the Fed will no longer pay reverse repo note a special interest rate if given back to the Fed, that means that the buyer of last resort for Fed Paper, that Reverse Repo buyback facility is about to RUN OUT OF CASH. What are the twisted “geniuses” at the Federal Reserve going to do? They are going to finance the debt with short-term paper (T-bills). That means that interest rates at the short end will revert to ZERO %, costing them nothing as they pile on the debt. That debt will be repaid at long-term rates at some point in the future when needed, but at the short end there will be endless financing. That means that spending will increase, debt will rise, prices will rise for goods and services, and inflation will rise.
What does that mean to you? You need to hold hard assets and hedge any positions you have in equities or other securities. To me that means gold, silver, and land, and to you it may mean all those and Bitcoin. I have serious issues with Bitcoin, and once again my CPA who is well versed on trading Bitcoin and other alt-coins tells me to hold back until after the election. That is NOT advice, I am just listening to people who have similar tolerance for risk. I trade futures, so I am not averse to risk. Perhaps in another post here, I can discuss those ideas as well. You do what you think is right for you and your tolerance for risk.
What does that mean for stocks? As long as free money and earnings continue to flow, and we don’t hit a recession, we could indeed hit new highs in the short run (perhaps 6 to 9 months or more). Once we hit the headwinds of recession stock, however, prices could fall precipitously.
We are seeing a rise in VIX, and that could be presaging an issue with stocks. Given what I just discussed about the Reverse Repo Facility, I think it is best to see both sides of the VIX issue. Bravos Research has a great video discussing it here. Markets could indeed drive higher, but once a recession hits, the mean reversion could be quite severe (I do not recommend nor purchase Bravos Research services, I just like their macro and sector analysis a lot.)
There is a contentious election on Tuesday that will probably lead to weeks of tumult. We are still on the very brink of World War III and kinetic nuclear war over Ukraine, and now even the North Koreans, whom we are still technically at war with, are fighting for the Russians. If the Uniparty Democrats win, we will likely see world war in 2025. In other words, there are any number of crazy things that can happen.
If you are young and smart, you would begin to look for bargains in the event that the shirt hits the fern (to be polite to the anti-profanity crowd) and markets get crushed like they did in 2000 and 2008. Guys like Doug Busch do that and he is literate in technical analysis also. You can check out his Substack. He has been seen on CNBC and quite a lot of other media. I have known him since the early StockTwits days. Those faded quickly for me personally.
I am still investing in real estate and trading futures along with a couple of side ventures. Depending on the results of litigation in a private investment, I will have to make some very large decisions again about where to structure a portfolio of assets. It is not guaranteed, but I will have to make decisions about it when the results come out next year. I would hope the equity markets would correct substantially because I am a technical analyst who is also a cheapskate. I will not overpay to own even the residual asset like stocks. I will also have to reallocate some resources back to real estate at some point. I am not going to count the chickens before they hatch, but I am going to keep my eyes open as world and market events proceed in time.
The key for you is to have a plan that both protects your wealth through hedging or real diversification and can still look for areas of growth, either here, where asset prices are exceedingly high generally, or overseas if the markets and political climates are stable enough.
That is basically it for me. In a few days I will write about where I want this Substack to go and what ideas you may want me to focus on. Stay tuned.
Speaking of Slim Pickens, I really don’t want to see this kind of scene happen in 2025, so please make a good choice for President, OK?
More will be coming soon! Thank you for reading the Buffalo Trader’s Writing Desk.