In the last update, we looked at the approaching downside inflection zones (zones where turns can occur), and SPX dropped down to the first inflection and bounced:
Intermediate term, the market still faces resistance:
In conclusion, bulls held the first inflection, which is the market's way of confirming that (previously-theoretical) zone as near-term support. Bulls still face intermediate resistance, so no questions have been answered yet. Trade safe.
Most people know something's wrong. They feel it in the air, so they turn on the TV, or click through the internet, trying to figure out what it is. Many of them eventually settle on what they believe must be the "explanation" for their unease -- because it's human nature to search for reasons.
But most of them have it wrong. I know this because everyone feels it, but ask 10 people what the problem is and you'll get 12 different explanations. Some will say it's Covid. Some will say it's Trump; yet others will say the exact opposite. Some will say it's something else entirely. These explanations are usually not compatible with each other. In fact, they're often diametrically opposed... but the funny thing is, most everyone agrees that SOMETHING -- whatever that something is -- is seriously, seriously wrong.
Is it possible we sense something brewing at a more instinctive level, the way animals sometimes do, but since we are not "wholly instinctual creatures," we're blindly searching for a rational explanation to justify our instincts? In other words, we're "reasoning" backwards: We sense that things aren't right, so we're all trying to put our fingers on why... then eventually settle on something, and keep blaming "that" -- when really it's bigger than "that."
What I do know for certain is that our problems are bigger than one or two things. People who are hoping things will return to "normal" if/when Trump is out of office are in for a massive letdown, in my view. I think things are only going to get worse, though they'll likely be presented in a way that's superficially more palatable to the masses. And most people are so tied up by their own day-to-day existence and survival, which is no joke, that they don't have the time or energy to dig into existential problems -- and I guess perception is reality in that regard, so maybe "superficially palatable" will be enough, and those folks won't be let down after all.
But I think, even if the unease abates briefly for some, the belly of this beast goes much deeper.
And when I look toward the long-term horizon, I don't see a storm dissipating... I see a massive storm advancing.
*****
Chart wise, SPX has continued to bounce along the underside of intermediate resistance like an upside-down ping-pong ball:
In conclusion, SPX has continued to run at intermediate resistance, but has yet to break through, which leaves the intermediate picture in the same place it was last update. Trade safe.
On Friday, SPX rallied up to tag intermediate resistance again:
This remains the main game in town right now. In terms of implications, if the market gets soundly rejected or (conversely) sustains a breakout, no change from Wednesday -- except to note that the 3640 level was good, and SPX held it and rallied:
If bulls can sustain a breakout over intermediate resistance, SPX has a good shot at running another ~100 points (or so) higher. If bears can make a lasting stand here, they could push SPX back toward ~3500 next. Near-term, the very first downside level appears to be 3640ish -- while a breakdown there wouldn't necessarily take us to 3500, it could be good for a trip toward 3608-3620, and is thus the next thing bears would like to see. Of course, the fact that it's a level means that it's also a support zone, so there's no guarantee bears will break it at all, and the market may instead choose to rally right from the open.
Not much else to add at the moment... except just a random thought: Bears are convinced everything is going to turn any minute, and maybe it will -- but nevertheless, the market continues to reserve the option of an extended fifth wave. How could that come about? Well, if the market were to get a whiff of inflation (hard to imagine after all these years, but as I showed a few updates back, we are printing like mad and planning for more -- so there's that), then we might expect to see asset prices react accordingly. That's not a prediction at all -- it's just a note that we can't rule anything out entirely yet, nor should we.
Of course, that brings us back to the present, and the first thing bulls need to do is prove that they can break through, and maintain trade and closes above, intermediate resistance. Trade safe.
Before we get into the charts, I have extremely disappointing news for everyone: We were unable to book Spiro Agnew for an interview today. I know, I know. The good news is, his agent assures us that Spiro's schedule is completely open several decades ago.
As far as the market goes, we remain in almost exactly the same place we were on Wednesday:
Bigger picture:
In conclusion, the market hasn't moved since last update, so no change since then, and feel free to refer back to it if needed. Trade safe.
Have you ever wondered "exactly how much debt can the system withstand over the long haul?"
Seems the world is burning to find out:
But hey, those aren't even final numbers yet.
Speaking of, this next chart is from back in May (I can't find a chart that's more recent for all the World's Major Central Banks, but we'll look at the recent Fed data afterwards):
I suspect future generations will look back in horror and wonder what we were thinking, or if we were even thinking at all. We'll probably even be around to have that thought ourselves. (I suspect the same about many of our proposed "climate" "responses," which are often radically overblown given the hard empirical data. To generate public support, such radical responses rely on media hype more than real science, but then brand themselves as "science" anyway.)
It goes without saying that none of us have ever lived through an full-blown broad-based economic Supercycle crash, but I imagine such a wipeout requires participation across multiple sectors of society. Logic would suggest it can't just be financial; it will require societal and political "cooperation" as well: A perfect storm of multiple major disruptive factors converging together upon the same time and place.
I think most of the puzzle pieces are in place.
But to reiterate something I've said recently: I don't think we're there yet. I'll also add that I don't believe there's any reason for premature panic: When the trigger finally comes, it will probably be "obvious" to those of us who've been along for the whole ride. The ensuing reaction will only take the masses by surprise. (Because it must -- just as the Corona Crash did, just as the 2008 crash did, and so on.)
Chart-wise, nothing really to add, as Friday was a do-nothing session:
In conclusion, Friday did nothing, which leaves us in the same place we were then. Trade safe.
