Reality Bites The Fed

Ya think? 😕

Source: ZeroHedge.com

Kind of obvious, isn't it...even at a glance...and something I've warned about recently in this post regarding U.S. Banks, as well as in other articles on my Blog.

What Do Tesla, The Keystone XL Pipeline, And $100.00 Oil Have In Common?

Tesla, Inc. (TSLA), gained a whopping 353.68% in the past 12 months. Its percentage gain is slightly under the combined gains of the 8 U.S. Major Indices, as shown on the following graph. 

It could be a stand-alone index at this rate!

The following 5-year daily chart of TSLA shows that price is hovering just above its 50-day MA, following a volatile, feeble, whip-saw rally since its low on March 5.

Price is at a critical juncture, in that the RSI has tentatively risen just above 50.00, while the MACD and PMO have just formed bearish crossovers.

A failure of TSLA to hold above both the 50-day MA and the 50.00 RSI level, could see a hefty pullback occur in short order to the 200-day moving average at 567.46, or lower.

However, if it can hold above the 50-day MA and the 50.00 RSI, and if we see bullish crossovers form and hold on the MACD and PMO, it could, concievably, retest its all-time high of 900.40, or spike higher.

With Tesla's Q1 2021 earnings report out now, we'll see whether buyers step back in...or not...in view of lowered analyst sentiment and a decreased yearly EPS forecast for fiscal year end December 2021, following two back-to-back quarter misses (-61.9% for Q4 2020 and -11.36% for Q1 2021).

Furthermore, the following news may put a damper on bullish enthisiasm. And, if that becomes a pattern among car buyers, we could see WTI Crude Oil reach $80.00, or even $100.00, in no time (monthly chart below), unless OPEC increases production to avoid runaway inflation and voter backlash against world leaders, especially U.S. President Biden. 

Perhaps Joe's cancellation of the Keystone XL pipeline project through the U.S. on Day One of his administration (together with his frenetic fracking bans to please out-of-touch-with-reality jet-setting world climate zealots, particularly those who may be or were invested in oil stocks) was catastrophically short-sighted and ill-advised...and every day's delay in its construction will see costs skyrocket, especially if Oil spikes.

We'll see what happens...and whose hotline rings first. Prime Minister Trudeau, are you paying attention?

Source: ZeroHedge.com

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Candy Matheson

Strawberry Blonde's Market Summary

President Biden's First 100 Days

Presented without comment...

Link to tweet

From This Week's "Smile File"...TGIF! 😊

The best is yet to come...😊

Twitter Jitters

* See UPDATE below...

The historical "mean" value for Twitter (TWTR), sits at 40.00, as shown on the following monthly chart. It's had difficulty holding above that level since its IPO in November of 2013.

In the space of 11 months (from March of 2020), it went from 20.00 to 80.75. During that time, it censored and permanently banned the sitting Republican President of the United States (Donald Trump) from its social media platform, as well as a huge number of Republicans and Conservatives...and alienated half of Americans in the process.

Twitter's leadership is showing no signs of hiding its political and racial bias against half of Americans anytime soon (many of whom are of differing races, ethnicities and religions). That was especially highlighted on Twitter's platform, following President Biden's address to Congress and Republican Senator Tim Scott's rebuttal last night, as described in this Daily Caller article. Several editorial articles assessing the President's speech can be found here and here.

So, what merits this parabolic spike in price in less than a year...apart from a purely speculative FOMO (fear of missing out) buying frenzy?

I wouldn't be surprised to see a retest of 40.00, or even major support at 30.00, sometime in the near future, as a consequence of Twitter's embrace of biased "cancel culture."

N.B. This is what happened to TWTR in after-hours trading today, following its release of Q1 earnings and growth outlook...

Source: ZeroHedge.com

TWTR reached an after-hours low of 57.55 and closed at 57.60 (an 11.51% drop)...Source: Nasdaq.com

* UPDATE April 30...

How TWTR ended the day and month...

What's Different About Emerging Markets This Time?

With the historical "mean" value of the Emerging Markets ETF (EEM) around 30.00, it's had a difficult time attracting barely any interest to sustain a serious rally above 44.00 during its trading tenure, as shown on the following monthly chart.

I'll wager that we'll see price fall back to 44.00, or lower to potentially 36.00, in short order...simply because, what's, fundamentally, different about these markets at the moment, or even in the next 6 or 12 months, that would sustain a push higher from the top of an already-parabolic spike that began a year ago...especially, as it's almost at major resistance (the high of 2007) before it got caught up in the 2008 financial crisis and market crash?

Dr. COPPER's Feverish History

In a nutshell...straight up...straight down.

Is this time any different?

Historical "mean" value is around 2.50, as shown on the following monthly chart, while it's had difficulty remaining above 3.00 and, especially, above 3.50 for any length of time.

What has actually, fundamentally, changed today since March of 2020 that suggests the current sky-high price is warranted and that it will remain so in the long term...versus pure speculation for some kind of uncertain future demand? 

While the writing of new political policies may be quick and a knee-jerk reaction to some people's fanciful wishlist and perception of reality, passing them into law and quickly implementing them without cannibalizing and destroying one's economy in the process is another reality.

Dr. Copper is likely caught up in such a feverish drama and headed for a nosedive sometime soon. The question is, will it drop below 3.50, or even 3.00?

SPX:VIX Ratio ALERT

If these new MACD and PMO crossovers hold, and if the RSI holds below 50 on this daily SPX:VIX ratio chart, we could see a decent pullback occur in the SPX.

Such a scenario may, also, negatively impact U.S. Bank stocks and ETFs, and, possibly, Bitcoin, as described here.

US BANKS: Parabolic Blow-off Top Coming?

Can US taxpayers afford to fund another government bailout of the US Banking Sector, if we see a catastrophic blow-off occur at the top of their respective parabolic spikes, especially...

• in the wake of the Biden administration's spending spree, to date, together with their monumental proposals of rebuilding or "re-imagining" America, post-COVID-19 pandemic, at a cost of $Trillions more (e.g., the "Green New Deal"),
• if negative consequences occur after Biden's proposed tax hikes are passed by Congress,
• as taxpayers try to cope with the rapidly-escalating costs associated with the unprecedented influx of hundreds of thousands of illegal immigrants flooding across the southern border each month (many of whom have COVID), as well as drug cartels and drugs, gangs, sexual predators, terrorists, and human traffickers, that began post-Biden election and is now described as a humanitarian crisis, a national health crisis, and a national security crisis by border agents, Governors, mayors, and sheriffs of bordering states and towns, as well as members of Congress...attributable to Biden's new border and ICE policies. It's being completely ignored by the President and Vice-President (VP Harris was put in charge of this issue by Biden), and neither one has even bothered to visit the border and speak to these front-line experts about this catastrophe,
• etc., etc., etc.

The National Debt is already over $28 Trillion, and rising fast, especially with President Biden's out-of-control spending agenda, costing trillions of additional dollars.

I can't predict the timing of such an event, or identify it catalyst, but I think we'll see another catastrophic blow-off top happen in the banking sector in the not-too-distant future...judging by the steepness of, and rabidness associated with, the current parabolic spikes. The risk is there..."caveat emptor." 

Of note, these three global threats are bubbling in the background and may produce major fireworks sooner than we think. How will Joe Biden respond...indeed?

.

The following charts show that the rapid increases in the price of these bank ETFs and stocks formed during the full throes of the pandemic, from March 2020 (when the economy, jobs, healthcare, personal spending, etc., tanked, and hundreds of thousands of people died from the virus and other health problems resulting from mass lockdowns across the country and around the world). 

Time will tell whether these parabolic price rises were attributable to sound judgement based on assumptions of a quick, sustainable economic rebound, or whether it was shaky speculative investing based on an overestimation of a rapid recovery...e.g., did they invest heavily in Bitcoin (check out the parabolic increase from March 16, 2020 to the high in March of this year..."The Emperor wears no clothes!").

BTC/USD monthly

KRE monthly

XLF monthly

JPM monthly

GS monthly

The following monthly chart of the S&P 500 Index (SPX) contains the SPX:VIX ratio in histogram format at the bottom. 

Typically, over the past four years, when the price on this ratio reached its current level, the SPX, either paused and consolidated, or pulled back...sometimes dramatically.

Furthermore, the SPX has spiked far above the +5 standard deviation of the long-term uptrending regression channel...a sign of extreme equity frothiness.

Keep an eye on this ratio for clues as to strength or weakness in the SPX in the coming weeks.

SPX + SPX:VIX Ratio monthly

SPX monthly

In the meantime, I expect volatility to increase, as FOMO (fear of missing out) traders spike prices even higher, before we see any kind of substantial pullback or parabolic plunge.

Stay tuned, as the US Federal Reserve and Biden's administration continue bloating markets, the federal deficit, and, ultimately, inflation (keep an eye on the 10-Year Treasury Yield in this regard, as described in my latest post).

It's also worth tracking market action in the MSCI World Index, Japan's Nikkei Index, and the FNGU ETF, as outlined in my recent posts here, here and here, for evidence of global equity weakening.

* UPDATE April 20...

ALERT: Price is now sitting on the neckline of a bearish Head & Shoulders formation on the daily chart of KRE today...and just above support on the monthly chart, as shown below. We'll see what holds and what breaks in the coming days/weeks...but, it's currently at a critical level.

Any drop and hold below its current level could be swift, accompanied by some major overall equity market volatility...keep an eye on the SPX:VIX Ratio, as outlined in my latest post today for clues on market direction.

* UPDATE April 28...

The U.S. Federal Reserve may not be concerned about inflation (or the National Debt), as confirmed in today's latest press release (following their monetary policy meeting), but 87% of Americans are...the Fed continues to live in a fantasy world of its own, unshaped by reality, that is supportive of bloated stock markets, federal deficit and inflation, as described above.

Meanwhile, supply chains are imploding...

Source: ZeroHedge.com

"Froth," indeed...

Source: ZeroHedge.com

Etc...

It looks like the Fed is getting nervous...read more here.

* UPDATE May 10...

Hyperinflation is looming...

Source: ZeroHedge.com

May 17 

May 17

* UPDATE May 17 (1:42 am ET)...

BITCOIN continues its freefall...after it topped out on May 14 at 64,374.

N.B. Further BITCOIN updates can be found here.

"The Emperor wears no clothes!"

Somebody finally noticed. 😏

* UPDATE July 23, 2022...

The XLF (et al) blowoff began in January, as shown on the following monthly chart.

Near-term suppport sits at 24.00...long-term support lies at 16.00...with 20.00 serving as a median/pivot-support level.

Price has had difficulty remaining above 20.00 since 1999, so, we'll see what happens this time. A sustained breach of this level could be catastrophic for the U.S. banking system and equity markets.

N.B. Read further IMPORTANT DETAILS on banks here.