My feelings are that…..we’ve reached a major low in the U.S Dollar.
With this in mind, some major “MAJOR” questions come to mind as to the near term direction in markets, but much more importantly – the longer term view.
U.S equities have been stretched “beyond stretched” on the seemingly never-ending “Fed pump” but as we’ve seen recently – are most certainly showing the “final signs” of exhaustion.
What happens in the next two weeks is 100% completely irrelevant as to the forward direction of markets.
My take is…….we’ll see “some kind” of relief rally in risk, when the U.S finally get’s its act together ( if you can even call it that ) – but that’s all it’s gonna be. A relief rally.
If “incredibly” equities stretch to make a “higher high” ( which I seriously doubt but don’t rule out ) it will be “blow off” in nature and extremely short lived. New retail investors will undoubtly believe that “all has been saved” and buy the top with reckless abandon – as Wall Street hands off the bag.
We know interest rates can “go no lower” so……anyone with half a brain in their head should recognize – we are entering a time of contraction – not expansion!
Quietly, behind the scenes several other countries are already “hinting” at possible rate hikes ( Great Britian as well as New Zealand) as the writing is cleary on the wall. The big boys are preparing……as it’s now painfully clear that the U.S.A money printing efforts have done nothing to bolster a “true recovery”, and that the U.S government itself….is in no position to “govern” much.
What we are seeing unfold is a considerable shift in “investor sentiment” – and sentiment drives markets. People are now losing faith that “even the never ending printing / easing” can pull the U.S out of it’s current downward spiral.
I feel very stongly that at “some point” the Fed will print more – but the kicker will be…the markets just won’t buy it.
Charts and more in part 2.