Summer is finally (almost) over and I’m proud to say that I spent the better part of it in hyper productivity mode, putting the finishing touches on a new crypto swing trading system I started putting together back in April. We’ll get to all that in a moment but first I’d like to set the stage and prepare you all for what’s to come in the near and more distant future plus how it will most likely affect every single one among us.
Strange things are afoot again in the equities market. While the ongoing rally in the S&P lost a bit of momentum on Friday we should not underestimate the sheer vehemence of the preceding advance. The notion of an instant reversal here seems far fetched but I’m seeing a few signs that point at a possible late summer party pooper.
Last week something unusual happened that took everyone by complete surprise. The new job numbers came out and shocked everyone with a payroll increase of 528,000 in July. How did the market respond?
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The crypto sector is clearly attempting to produce a long term floor, which is evidenced by the series of higher highs and higher lows we’ve seen on both BTC and ETH. However there’s a problem and it’s a pretty glaring one. Both are distinct lagging behind the bounce in equities:
As we are slowly approaching the end game of the grandest monetary experiment of the 21st century I sometimes ponder what the Fed could do to turn things around. Throw in the towel and continue with another round of QE? Yes that may work, for a while at least if done on a massive scale. Remember that central banks worldwide are increasingly pushing on a string as every round of monetary easing requires exponentially larger amounts to have an impact.
After treating water for weeks on end bitcoin is finally on the move again – except now it’s suddenly heading HIGHER. You’d think everyone would be popping the champagne but just as I predicted the legion of shell shocked crypto HODLers just flipped from FUD back to FOMO.
Given all the FUD, noise, rumors, and ‘angst’ in circulation it once befalls onto yours truly to dispense with all formalities and give it to you straight and to the point: Strap yourself in and watch out below because the Fed is coming in for a hard landing. Meaning we’re not just heading into an extended economic recession but most likely a full blown (and utterly self-inflicted) deflationary depression.
On December 22nd, 1944, while holed up in the Ardennes Forest American General McAuliffe was sent an ultimatum from his German counterpart outside of the town, demanding “the honorable surrender” of the town within two hours. General McAuliffe’s reply was brief and succinct: “To the German Commander: N U T S !” And the rest of the story of course is now history.
“I’ve seen things you people wouldn’t believe… Attack ships on fire off the shoulder of Odessa. I watched broken dreams of effervescent markets glitter in the dark near the gates of the Eccles Building. All those moments will be lost in time…. like tears in rain…. Time to die…”
Okay let’s start with the BAD news first and then top it off with some GOOD news. We certainly could use more of the latter these days. First up the financial markets as a whole are royally screwed. Only exception perhaps would be energy and commodities right now (later down the line they’ll crash as well, but we’re not there yet).