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Risk Window for Next Week & Don't Believe Your Lying Eyes


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#1 Douglas

Douglas

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Posted 08 June 2024 - 03:52 PM

According to my risk summation system, the window next week with the highest risk of seeing a turn in or acceleration of the current trend in the DJIA stretches from the afternoon of Tuesday June 11th through Thursday morning June 13th with the peak in risk on Fed day Wednesday June 12th.  A wide window I know, but as I'm fond of saying, it is what it is.

 

Last week the Monday risk window tagged the low before the grind higher into Friday.

4ItEa4u.png

 

When average Joe complains that the economy is punk even though the economic stats look good, the news media asks, who you gonna believe, your own lying eyes or what we tell you?  How is this possible?  A trillion dollars in funny money being printed every 100 days running up against snug interest rates is how.  How much is a trillion dollars you say?  It will buy every single family home listed for sale in the US and still have money left over to hire more than 7 million workers for a year at the average salary and benefits in the US, that's just how big a trillion is.  The elevated interest rates, not high historically at all, do drag on the economy acting like a decent sized boat anchor being tugged down the highway by a Mustang at full throttle, clunking and clanking down the road but still at a pretty good pace. 

 

The problem with this little experiment in Modern Monetary Theory is sticky inflation.  The interest rate anchor just isn't quite big enough to slow down Sallie's Mustang enough to drag inflation back down.  The Fed is in a box, at least until November 5th.  After that the unlucky winner of the election will inherit a Fed who has failed pretty miserably at its inflation mandate headed by a guy who is worried about his place in history, who swears up and down that he's the reincarnation of Paul Volcker and who's the chairman until May of 2026.  You think he might just go out and get a bigger anchor?  I do.  

 

If the stock market looks ahead by six months as is commonly said, that means the effects of that bigger boat anchor should have started to be felt in May just where I show the "B" wave top in the DJIA in my EWave count.  If my count is correct, and that's a very big if, the drag of that future bigger anchor should really start affecting the DJIA in the coming weeks.

 

Regards,

Douglas



#2 Douglas

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Posted 08 June 2024 - 04:08 PM

A little chart that confirms my top call for May is shown below containing the VIX futures open interest.  The idea for the chart came from a Tom McClellan article back in 2019 where he noted tops in the market coincident with peaks in the VIX futures open interest which is related to the total short interest in VIX.  You got to be a pretty big bear to short volatility.  The value back in May was the highest in my data set which I've kept since Tom's article.

 

nXdK595.png

 

Regards,

Douglas


Edited by Douglas, 08 June 2024 - 04:11 PM.