Monday, March 28, 2022

SPX and Food Supply Update

Last update maintained the short-term bullish stance we've held for the past week-plus, but we still remain in the ballpark where red 3 of blue 3 of the presumed C-wave rally could peak, which will then send the market into a corrective fourth wave -- ideally afterwards, it will rally again to complete blue 3 of bull C, then correct again, then rally one last time to wrap up the corrective wave C of a larger expanded flat correction.

After that, presuming that read is correct, things will start to get ugly -- potentially very, very ugly.  Until then (or until we have reason to think the presumed wave C might be cut short, at least), I continue to believe bears would be wise to be patient.  The equities market needs a last hurrah.  If the rally does indeed continue, bears should view it as an opportunity, not a source of frustration. 

Just as bull markets are said to "climb a wall of worry," bear markets are described as "sliding down a slope of hope."  Especially in the early stages of a bear, the market does not believe itself to be in a bear market, and there have to be rallies along the way for investors to maintain hope.  In the final analysis, bear markets will provide numerous trading opportunities in both directions for the nimble and discerning trader -- waterfall declines followed by blistering rocket-launch short-covering rallies.  Bear markets never go "straight to zero," nor would we want them to, because it's hard to compound one's principle during a linear move. 

In related news, President Biden just told us to expect food shortages:

That would be a first for my lifetime.  And probably for yours, as well.  But it sure fits with the idea of a Supercycle bear market.

Further related:  The price of ammonia, which is the key foundation of fertilizer, is skyrocketing:

We won't even get into the global bond market (which vastly eclipses the size of the US equity market) today, which just suffered the fastest decline it's seen in decades -- but this is a big deal.  Bond traders tend to be "smart money."  And if the bond market gets "sick," equities cannot be far behind.

I keep hearing equities bulls say things such as "What's the issue?  Rates are still near record lows!"  As I mentioned on the forum, I believe this is the wrong framework.  The relevant question isn't "How do rates compare to historic averages?"  The relevant question is: "How much of current economic activity is predicated on continued low rates and Fed pumping?"  My suspicion is:  A great deal of it.

So the table is set here, fundamentally, in a way we haven't seen since 2007 or so.  And really, the potentials are far worse than 2007 in many ways (as we'd expect, if my belief that the "Great Recession" was actually a lower degree bear than the one we're about to enter is correct).  For example, if we were to start suffering food shortages in America, where does that lead?  Mass rioting might be a start.  Total chaos in major cities, if it continues.  Hungry people do crazy things.  Even otherwise good people will break laws if their families are starving.

So again, bears should be patient here.  And maybe, if they take a broader view of things, they should even take a moment to appreciate what we still have, while we still have it.  How long until the title I gave this piece is more than just words on a page?  

Trade safe.

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