Will we defy all logic and push towards 40,000+ points or will the bulls have their last laugh as it crashes towards 7,000 points?
Trillion dollar question for sure. Solely relying on fractals and TA, it does look like we are in a Complacency phase right now, ready to head back down as the news networks scream 'BULLISH' with bankers and hedge funds urging buyers to LONG as the US Economy Reopens. Of course, looking at everything that has been going on thus far in the world, we can easily see DOW reverse back up to resume it's bullish move, however, the virus should and probably will be used as an excuse to deflate the world's stock, bond and derivatives markets that have been in an immense bubble for the last several years.
Stay tuned as we watch the history being made on day to day bases right in front of our own eyes.
I wonder if you will keep copying all my content, and posting here on Tradingview like if it was your idea.
You are doing this for a long time already.
DatCryptoBoi
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Inflation adjusted, we can go back to the 2008/9 low. In non-inflation adjusted terms, no way, as they will print cash to prop the market up, at any cost.
Check out dow priced in gold - it shows a proxy of 'inflation adjusted' returns of the Dow. It's pretty dire.
bembel242
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@AndrewBth, why would you use "Inflation adjusted" forecast in a deflation scenario ............
DatCryptoBoi
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@bembel242, because the Dow isn't going to 8,000, there's no way they will let that happen. They will obliterate the dollar with QE. Best case scenario for the bears is Dow ranges from 16k - 25k for a few years, while the dollar loses 70% of its purchasing power.
bembel242
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@AndrewBth, the first sentence still doesn’t make sense ... “inflation adjusted” ... you can skip it totally out of the equation, as US 5y5y is falling of the cliff. Needless to say that Gold has no use at the moment, due to the fact that it lost its diversyfing effect, plus: you never own gold in deflation.
If the dollar would loose 70% and Dow trades at min 16k is not possible on global macro level.
DatCryptoBoi
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@bembel242, it makes no sense because you've not read it right, or otherwise don't understand what I'm saying? Im saying - I disagree with the OP that the Dow / SPX will go back to the 2009 lows, but the Dow / SPX priced in Gold, or otherwise adjusted for true inflation rate (note: Shadowstats show inflation has been running at 10% annually for 10, 20 years) is likely to go back to the lows. They're trying to hide economic collapse by printing money. Even since 2009, the SPX/Dow has not performed well when adjusting as I have above. If it wasn't for the printing press the Dow would be headed right down there as the OP says.
Gosh I hate arguing with people on the internet ...
bembel242
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@AndrewBth, funny...shadow inflation of 10% or 20%. BTW as an economist I can tell you that there is no way to construct a reliable outcome of either of these 2 numbers or reference points. It is however for everyone free to believe in conspiracy theories. The internet is full with weird conspiracy pages about shadow inflations, non of those calculations are of “proof”. Also: even if Shadowinflation would exist, it would be now close to “zero” as we got into a 98% standstill. It is currently impossible to value all goods as no-one knows which value each attributed good will have post the crisis. In exactly this scenario you would start a chart analysis with Bond/Equity Ratio, but not Gold. Last but not least: there is no need to be ad hominem at all, I am always looking for an edgewise discussion, but a quick glance of your answers are clearly showing that you are not factual nor counterfactual. A Macro101 book really can help - End
VovaNapas
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Great chart, especially parallel with market cycles. And congrats on being featured in the newsletter! I had a similar idea, and to be honest it is very hard to see anything different from complacency at this stage.
three6phi
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People firstly need ask, how much of the equity bubble was as a result of companies plunging massive amounts of their reserves or debt into buy backs, then ask will that behaviour be allowed to continue and or will there be a replacement capital stream - not unless the FED steps up to the plate and starts buying equities (anything is possible given their intervention as the socialist bank).
Secondly, what are dividends likely to look like over the next 12 months - plenty of companies cancelling them, so maybe people start to find satefy in other assets (bonds, cash, gold) and out of equities.
Thirdly, with all the ongoing disruption from the virus (until there's an effective vaccine), social distancing will prevail which means less people in social settings (restaurants, bars, hotels, etc) and therefore less revenue, less travel (airlines, tourism and anything related up and downstream). This impacts employment ratios, after all you don't need the same number of staff for less customer; but also the potential to add to prices in the short to medium term to recover costs - inflation - great for gold and in particular if we think about the massive FED sheet balance sheet and them trying to unwind it at some stage, but poor for equities and people searching for yield - the major gold stocks are starting to generate significant cash flow, are better managed than in the past, and have signaled a massive buy signal on the HUI, GDX, Barrons BGMI.
Lastly we have corporate debt and the servicing of it or not - the FED can save some, or a lot, but not everyone and probably not every corp (shale is the perfect example) and definitely not every small to medium business, which accounts for a reasonable percentage of total employment. Add to that corporations and medium business taking advantage to trim numbers in their fixed cost business, and suddenly we have a reasonably high risk profile in terms of where the market is today (hoping) and where its likely to be in 6 months. Push to open the USA economy based on (1) trying to ensure there's minimal econmic damange (2) the timing of the election, where the focus is acute by leadership - why start touting ludicrious solutions to the virus as bleach and detergent if not - poor testing, shocking national coordination, death's heading up, more social contact equates to a much bigger problem and consequently more shutdowns. Alternatively there's the bury ones head in the sand strategy and hope the sunshine makes it go away!
The reward / risk proposition does not look great at the level the equities currently sit at.
Ps. There's also the massive potential issue with the Insurance industry being forced to payout customers for lost operational costs - a capital bomb waiting in the midst of the above.