I'm definitely going to take a lot of heat for this one. I'm seeing significant long term weakness in the DJI. After reviewing several oscillators on longer term time intervals (ie. 2W, 1M, 3M 1.55% ), I have come to the conclusion that liquidity is drying up significantly in the market, and this has not been priced in. Looking at the broader macro economic climate, this theory is confirmed by the recent behavior of central banks, as many are raising rates and unloading their balance sheets.
In the US specifically, I am concerned about the national debt that has accumulated in conjunction with the Fed's hawkish monetary policy . While conventional wisdom believes that US debt is not an issue, I believe people are overlooking the fact that a significant portion of the national debt is financed in the form of short term US treasuries that are rolled over. As interest rates rise, the cost of servicing the national debt will comprise a larger portion of our GDP, meaning that either consumption, investment, or government spending will need to reduce to accommodate the increase in debt service. Since the government has not shown signs of slowing spending, I believe it must be some combination of consumption and investment that must slow to make room for the debt service.
Should you take on this trade, I would recommend thinking long term and dollar cost averaging into the position, rather than entering the position all at once. I am seeing upside risk at roughly 2% of the time of this post, and I would set a stop loss at roughly 26250.
I will follow up on this trade and monitor its performance. Please comment and let me know of your thoughts. Cheers.
In the US specifically, I am concerned about the national debt that has accumulated in conjunction with the Fed's hawkish monetary policy . While conventional wisdom believes that US debt is not an issue, I believe people are overlooking the fact that a significant portion of the national debt is financed in the form of short term US treasuries that are rolled over. As interest rates rise, the cost of servicing the national debt will comprise a larger portion of our GDP, meaning that either consumption, investment, or government spending will need to reduce to accommodate the increase in debt service. Since the government has not shown signs of slowing spending, I believe it must be some combination of consumption and investment that must slow to make room for the debt service.
Should you take on this trade, I would recommend thinking long term and dollar cost averaging into the position, rather than entering the position all at once. I am seeing upside risk at roughly 2% of the time of this post, and I would set a stop loss at roughly 26250.
I will follow up on this trade and monitor its performance. Please comment and let me know of your thoughts. Cheers.