We are financial market enthusiasts using methods expressed by the Gann, Hurst and Wyckoff with a few of our own proprietary tools. Readtheticker.com provides online stock and index charts with commentary. We are not brokers, bankers, financial planners, hedge fund traders or investment advisors, we are private investors.
The USA new administration is going to free up risk on.
TRUMP is a crypto friend, and he will remove the dark cloud of legal attacks on the industry. This will allow scared and new money to come back into crypto.
Ethereum is a sleeping giant, price action since Trump election win is supportive of a good rally ahead.
China is warming up stimulus to escape deflation. This means Chinese M1 is a priority number to watch.
Chart 1 - China is still in deflation and she can not stay there.
Wall Street bankers have stated that the PBOC must ramp up M1 (via QE) to be over M2, otherwise a Chinese (maybe world) deflation crisis in 12 months will be deeper and harder to get out of. (Reference ZH).
Extract from ZH post..
Goldman's Borislav Vladimirov, who makes a very simple case: China now has no choice but to activate QE - just as we have been saying all along.
If it doesn't, M1 will fail to grow faster than M2, and the government "will spread the monetary crowding out to more weak borrowers in the economy", since the winners will save the impulse and kill the multiplier, resulting in an even bigger hole for China 12-18 months from now, and global deflationary destruction.
On the other hand, if China does do QE, oil will soar, and bitcoin and gold will be orders of magnitude higher once Beijing triggers then next global reflationary tsunami.
Chart 2 - Chinese M1 swings correlates to the GDP Deflator index above.
Chart 3 - When China does QE, it will affect oil prices and world inflation (green arrows). So forget about inflation being transitory, as a decade of sharp hot and cold inflation cycles is here to stay. Any period of hot inflation will be elevated risk for countries with very large sovereign debt levels (like the USA), another reason for elevated gold prices.
Chart 4 - US PMI does well with exploding Chinese M1 (with a 5 month lag). Manufacturing around the world does better. An inflationary boom is near. That is rising world GDP with rising world inflation. Of course, just how fast inflation vs GDP rallies will be the hot issue. 2024 gold prices say inflation will be a very hot issue.
The last 100 years USA debt to GDP has exploded on the back of wars and crisis.
The first chart shows how and when this came to be.
Chart 1 - US Debt to GDP%.
The US Debt to GDP% ratio can be fixed in a few ways:
1) Revalue selective assets on the USA balance sheet higher: 8,000 tonnes of gold is currently valued at $34 USD an once. This could be revalued to $10,000 USD and once.
2) Massive production miracle to boost GDP from some new technology.
3) Cut spending and pay back the debt. Very hard politically and a world wise depression may result.
4) Inflate prices higher while debt stays the same (just like Israel did after several wars). Most likely!
Chart 2 - How Israel fixed its debt problem. Israel inflated the debt away.
Short Answer: Higher inflation and suppressed interest rates are coming to the USA very soon, to simply deflate the debt away.
Currently USA debt to GDP% is around 122%. This can still go to +150% before Congress deals with the debt. The may be a election issue in 2028, as the interest expense costs becomes too much to bear.
Is the fuel for the markets coming from private investment or public investment?
Here are some charts investors should know about.
Chart 1 - Fiscal policy via US Congress
Government spending is exceeding revenues and is fueling the US economy more than private investment. Fiscal policy is dominating monetary policy, as it simply has more influence in the economy and unfortunately crowding out private investment.
Chart 2 - Federal Reserve Balance sheet
Since the stock market lows of the 2009 GFC the Federal Reserve's (FED) balance sheet has grown, and this growth has supported the equity markets.
Chart 3 - Department Of Treasury Funding Accounts.
The Dept of Treasury (DOT) has been using the TGA, Rev Repo, discount window, and other short term funding tools to massage liquidity into the markets. Add to this issuing new debt as ready cash short term T Bills, and also changing rules for domestic banks to allow 'more' treasuries on the balance sheet relative to their reserves.
The red line below shows the consolidation of both the FED and DOT actions. The green line is the difference between the two. As you can see, the FED dominated actions from 2009 to 2019, but since 2020, the DOT has played a major role in providing liquidity. In fact, the DOT is the dominant player over the FED.
The point: US Congress fiscal policy combined with Dept of Treasury funding actions simply over powers any monetary policy via Federal Reserve actions. Therefore markets are held up by public actions and not private actions.
Here is why the lower and middle classes struggle to achieve considerable wealth over a life time.
Chart 1 - The US M2 money supply growth has been incredible over time. The greater the supply of money there is, the less the purchasing power of that money. This chart shows the folks with the most wealth do better than those with less, or, in other words, the folks who are closer to the creation of the money are better informed on how to maintain their wealth while the money itself suffers diminishing returns. Simply put, it's the informed vs. the uninformed, and the informed are winning!
Chart 2 - Here is why the money supply must maintain its rapid growth rate. Money must be created to allow the exploding US federal debt to be absorbed by investors. When the US federal debt could not be absorbed by investors, the Federal Reserve bank purchased the excess (or money printing, BRRRR!).
Chart 3 - Here is how the informed defend their purchasing power against the exploding creation of money supply (and Federal debt). The informed invest in gold and the stock market. Investing property has not held up well, hence why the uniformed do poorly vs the informed.
Chart 4 - Of course the sophisticated informed investor selects the better performing asset classes like the technology stocks (!COMPQ). Of course the best performing asset classes since 2011 have been Bitcoin and Ethereum, but as we know these assets swing up and down with massive volatility.
It's hard to think that those who create the massive new money supply are not informing those who know how to generate wealth from it. After all, the US election cycle depends on a massive injection of newly created money.
Here is why the lower and middle classes struggle to achieve considerable wealth over a life time.
Chart 1 - The US M2 money supply growth has been incredible over time. The greater the supply of money there is, the less the purchasing power of that money. This chart shows the folks with the most wealth do better than those with less, or, in other words, the folks who are closer to the creation of the money are better informed on how to maintain their wealth while the money itself suffers diminishing returns. Simply put, it's the informed vs. the uniformed, and the informed are winning!
Chart 2 - Here is why the money supply must maintain its rapid growth rate. Money must be created to allow the exploding US federal debt to be absorbed by investors. When the US federal debt could not be absorbed by investors, the Federal Reserve bank purchased the excess (or money printing, BRRRR!).
Chart 3 - Here is how the informed defend their purchasing power against the exploding creation of money supply (and Federal debt). The informed invest in gold and the stock market. Investing property has not held up well, hence why the uniformed do poorly vs the informed.
Chart 4 - Of course the sophisticated informed investor selects the better performing asset classes like the technology stocks (!COMPQ). Of course the best performing asset classes since 2011 have been Bitcoin and Ethereum, but as we know these assets swing up and down with massive volatility.
It's hard to think that those who create the massive new money supply are not informing those who know how to generate wealth from it. After all, the US election cycle depends on a massive injection of newly created money.
Let's review where Bitcoin can reach during this Wyckoff markup phase into 2024/25.
Historically, $BTC moves to the upper blue line moving average bands (as before, like A and B). This would be a target range of $188,000 USD to $350,000 USD. However, in 2021 (C) price stumbled and failed to mirror prior price achievements.
Chart 1 - Upper band target for BTC
Several things happened in 2021 that can be blamed for the $BTC underachieving :
1) China banned crypto (for x number of times).
2) President Trump called $BTC a scam (see video below). Also, during Trump's presidential term, Fed Chair Powell met with Coinbase CEO Brian Armstrong in May (via the Powell calendar notes), and shortly after this meeting, $BTC price smashed 30% lower. Therefore, one can assume large sell orders hit the market after Fed Chairman Powell's meeting with Coinbase, on the back of President Trump's blessing.
President Trump back in 2021 (video CNBC):
Now things have changed in 2024, both Biden and Trump camps realise that BTC capital gains help keep the US government afloat. Trump is now a fan! So maybe we can expect a target similar to A and B (Chart 1) as prior performances of $BTC markup rallies.
Chart 2 - Wyckoff Cause and Effect at work in BTC price action.
The coming US dollar liquidity wave is now arriving in the markets for the 2024 election year.
1) China is now supporting its housing market.
2) BOJ is now supporting the Yen.
3) Yellen has a full TGA account to buy US Treasuries bonds.
4) Yellen has engineered bank balance sheets to buy more US Treasuries bonds.
5) The FED is slowing moving policy to defend growth first, rather than fighting inflation first.
6) US economic funding via fiscal means is exploding (deficits are not shrinking).
So, why wouldn't BTC print a price over $350,000 USD ?
The canary warning for a possible risk off market will come from higher unemployment, with a bond market sell off, followed by a significant FED rate cut.
Jay Powell (Chairman of the Federal Reserve) said if the unemployment rate reaches +4.0% (currently 3.8% to 3.9%), the FED inflation goals will have to be sacrificed to attend to employment goals.
Confirmed employment risk will occur when unemployment continuing claims continue to rise.
A leading data point for continuing claims is the NBER small business future hiring plans survey. Recently, this has jumped higher (note: the data on the chart is inverted), and if it holds these levels, it signals higher continuing claims in the months ahead.
The 3 month and or the 10 year Treasury note can signal rate cuts are near by their immediate significant sell down. The last three FED rate cutting cycles (years 2000, 2007 and 2019) either the 3 month or the 10 year Treasury paper sold down hard before the FED cut rates. In all three circumstances, continuing claims showed a greater risk to employment by trending higher.
Not all rate cuts lead to a hard risk off recession corrections. Yes, 2007 (housing crisis) and 2019 (COVID) surely did, but 2000 started off mild and was later assisted by middle east war risks (resulting in higher oil prices). The reader should notice how late stocks reacted in all years referenced (2000, 2007 and 2019) after both the 3 month and 10 year Treasury markets sold down.
POINT: The bond market new first!
Rising rates, holding rates on pause after hikes, or even the first 75 basis rate cut are not all ways bearish for risk on assets. But when the 3 month TBill rate is falling faster than the 10 year Treasury bond (yield curve steeping) then this will be clearly seen as the dawn of risk off.
This point is keep an eye on the 3 month, 10 year and leading employment data for clues for the dawn of risk off for asset markets.
The FED at the March 2024 FOMC suggested that this rate hiking cycle has peaked.
Chart 1 - Interest rates may have peaked for this cycle. This is important as precious metals need to know higher rates are over and are likely on the way down.
Chart 2 - HUI to GOLD ratio. Shows extreme undervaluation of gold stocks to the gold metal. Confirmed by the current cycle low.
Chart 3 - Japanese Yen suggests a weaker US dollar is expected in the months ahead.
Chart 4 - The long term Dow daily cycle looks ready to extend. Gold stocks require the wider stock market to rise at the same time.
Chart 5 - Junior gold stocks Richard Wyckoff bottom accumulation looks fantastic and ready to explode higher.
The mighty US of A has $10,000,000,000 (trillion) of US dollar debt to sell this year.
It is only February 2024, and the 20 yr and 30 yr bonds are not being swamped with demand.
Chart 1 - Ugly auction, this trend will continue until Yellen bends the knee.
Chart 2 - 10 yr interest rates near multi decade highs.
It seems that with interest rates near 4.25% (10 yr) and the US dollar (DXY) near $105, this does not encourage foreign investors to buy long term US Treasuries. Therefore, either or both the interest rate needs to rise and/or the US dollar needs to fall to encourage investors to by 20 yr and 30 yr US Treasury auctions.
Chart 3 - Rev Repo has fallen from $2.2 trillion to near zero.
The US Department of Treasury has been using the cash in the temporary reverse repo to transfer US debt to investors as TBills. This will be over by April 2024. Next, they can use the Treasury checking account (TGA) for another $800M. Then what? A much lower US dollar is an option.
Of course a trending lower US dollar will fuel gold move to higher, this of course will improve the profits of gold and silver stocks.
Chart 4 - XAU building higher lows.
Chart 5 - GDXJ base building.
Also, US corporations are soon to hit a re financing wall with much higher interest rates (up 100%). Higher interest expenses will result in fewer people employed. Rising unemployment in an election year will not be attractive, hence another good reason to lower interest rates and the US dollar.
Chart 6 - Corporate interest expense to explode soon.
