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[Douglas]

According to my risk summation system, this week the day with the highest risk of seeing a turn in or acceleration of the current trend in the DJIA is Tuesday June 20th. As I speculated last week, it may just be part of a two day risk window from last Friday, but there's such a gap that maybe it will stand on its own two legs.  Tuesday will tell the tale.

 

Last week the Monday-Tuesday morning risk window looked at first blush like it caught a top first thing, but then Powell inadvertently pumped the market (see comment below) and it was off to the races again. Maybe the Friday risk window caught a short term top beginning a much heralded correction to the forced march up to Nirvana.

 

Surprise, surprise, my EWave count bit the dust this past week.  Sometimes I don't know why I even bother doing them, they usually are worthless before the ink is dry, but in the spirit of hope over better judgement, below is the latest incarnation.  Basically, "B" just has more work to do.  

 

 

 

There was something in Chair Powell's speech which was lost in translation from Fed Speak to the native tongue of us mere mortals.  He clearly intended to sound hawkish, but then he shot himself in the foot with the "the July meeting is live" comment which was quickly interpreted by Chatbot to mean maybe no Fed funds increase in July, and then suddenly all the talk tightening Powell had so painfully laid out vanished in the FOMO rush to hit the buy button.  An ebullient stock market floods the well healed with even more dosh to sling around, obviously working against any tightening to restrain the inflation beast. 

 

Maybe, next Fed meeting, Powell should just read his prepared statement and then, to quote Monty Python, "just run away" before those droning reporters ask penetrating questions (not) that force him to contradict what he's trying to achieve with words instead of actions.  Although tough talk and not tough monetary policy ain't gonna get him to the promised land, at least he's trying to gum the inflation down.  I suppose all the lip flapping is better that than just letting inflation run wild in the streets.  Powell's summer pause has now reduced him to all talk and no action, or in Texas speak, all hat and no cattle.  At least the current trend in inflation is his friend and should continue to give him a false sense of security in his plan, right up until the smouldering embers of higher prices are reignited by all the funny money still sloshing around.

 

Regards,

Douglas

[Douglas]

Typo:  Last week's first risk window was Tuesday to Wednesday morning as marked in red, not Monday - Tuesday morning as described.

 

The new EWave count begs the question, how high to the top of "B".  Two of the innumerable possibilities are Larry Pesavento's AB equals CD which works out to roughly 37,500 DJIA and a 1.6 Fibonacci multiple of "A" at about 41,000 both shown below. Of course, if the Fed has really thrown in the towel on its inflation fight and the lion's share of the funny money is not vacuumed up, I suppose the sky is the limit. 

 

I like the fall of this year for the timing for the end of "B", maybe an October surprise, but that's just a pie in the sky guess.  As I noted above, I think the trigger for the end of "B" and the onset of the nasty "C" wave will be the phoenix of inflation from the smouldering embers left carelessly in the economic fire by the Fed's lame actions to date.

 

 

Regards,

Douglas

[Douglas]

I post the plot below borrowed from FRED in support of my aspersion above calling the Fed's action to date "lame".  The red line is my eyeball estimate of the long term average Fed funds rate at something like 4 to 4.5%.  Given that value, the current rate is hardly tight at all, just average, nothing compared to the scorched earth rate Volker used to stomp on his inflation fire.  The current Fed is bringing a knife to a gun fight.

 

Regards,

Douglas