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What Does The Fear Part of the Bear Look Like?
David Frost
October 23, 2023
⚾PRE GAME WARMUP
Happy Monday...
Wake up to fresh new lows as the overnight crew is "doing it again," and the rubber band gets into the snap zone...
Let's get straight down to business...
If there were to be a rescue operation at any point, it starts with getting above [Login here] and then Fridays closing price of 421.21.
If they can, the door will open for a rebound up to the 423.00 neighborhood...
If they're headed in that direction, we'll provide additional numbers above as and if needed...
What's down below?
We've got [Login here] as an important number. Just below is the convergence of the fifty and one hundred period moving average around [Login here] give or take...
Sometimes they come up short, other times they'll spike em' through, but that area is important and should create a bull bear battle if reached...
Below will be a real time type posting situation for the next important lower stuff...
🎬THINK IN PICTURES
Just a simple reminder that the IWM head and shoulders pattern is still active and never wavered…
The target remains around 164.00 and seems to be coming sooner than later…
Will the entire market bounce when reached, or will she “blow right on through?”
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💣RECKONOMICS
While the national debt at $33 Trillion is in the ridiculous camp, the current budget deficit tells the tale.
The US fiscal year ends in September and has just registered a negative $1.7 Trillion. In terms we can understand, that’s the amount spent, over what the gov’t took in from tax revenue.
Here’s the rub. The Fed is trying to slow economic growth which means employment will rise, leading to lower tax revenue. What’s more, the deficit means we have to borrow money (sell bonds) to pay the bills.
Let’s break it down. The Fed flooded the system with dollars created out of thin air to keep the band playing on until the point where inflation started rising faster than a Spacex rocket.
Consumers were saddled a “hidden tax” where everything costs more, but wages didn’t follow along. Then in an effort to ease the pain of inflation created by the Fed, the same group of people are now charged with solving the inflation problem by increasing interest rates.
Across town at the Treasury Department, the accounts payable department has to borrow money every week to keep the lights on.
Hold on. You’re saying one gov’t entity is raising rates and another has to borrow money, and pay more? Yea, and the tax payer, John Q. Public has the foot the bill, on top of the extra tax from the inflation the same gov’t entity created in the first place. Pretty interesting program….
🩺PSYCH WARD
Where are we now?
Let’s take it from the top. The run up into the end of the year 2021 where nobody believed markets would ever come down again, the Fed’s monetary policy was “accommodative,” and everything was clicking on all cylinders.
Let’s fast forward to October 2022 lows where a big rescue operation ensued, sending prices back up in the direction of the former highs around the front end of the summer of 2023. This was at the point where everyone believed new highs were coming. (just read the headlines back then…)
If you look at the chart below and compare if to a chart of the S&P 500, we can certainly make a case the October 2022 was the “bull trap” demarcation point, leading to the “return to normal” phase that ended in July 2023.
Are we in the fear part of the slide now? We’ve got rising rates putting a damper of growth, a war in the middle east, and a whole lot more bricks in the wall of worry to chose from. Fear is in the air, for sure…
🏆MEMBERS SAYIN’
One of the most valuable things we start the day with is the “pivot.” How do you know where it is every day? Blaine C.
You were right, eliminating the mid day torture trade has changed the way I approach the market each day. Sara M.
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DISCLAIMER STUFF: Nothing found in this communication is financial advice. This newsletter is strictly educational and not intended for or should be thought of as investment advice or a solicitation to buy or sell any assets or to make any financial decisions whatsoever. Please be careful and always do your own homework.