SPY
REMAINS A STRONG SELL! ANALYSIS METHOD: FIBONACCI & WAVE THEORY W/ A DASH OF FUNDAMENTALS
SPY has completed a 5 Wave Cycle and is now in a correction phase. The market has been held up by unsustainable monetary injections from the Private Federal Reserve. This has caused SP500 to essentially be range bound for almost 2 years. It is my opinion, that the Private Federal Reserve is now out of monetary ammo since it can no longer raise interest rates and is forced to cut rates in an objectivley 'good economy'.
I have been tracking the 'Wave Count' since I warned about the completion of the 5 Wave Cycle in July 2018. After the Terminal 5th Wave we had an 'Irregular Correction'. An 'Irregular Correction' is when the B Wave exceeds the Terminal 5th Wave. After the B Wave, the C Wave retraced the SP500 down to approx. $2,300. When the C wave completed, the market made a 3 Wave move to new highs which signals a 'Complex Correction'. 'Complex Corrections' are sequences of ZigZag's or Flat Corrections. Also, 'Complex Corrections' insinuate that a very strong move will occur when the correction sequences are complete.
Monthly Wave Count:
THE PERFECT STORM
1. Private Federal Reserve
-Modern Monetary Theory
-Fiat Currency
-Loss of Credibility
2. Global QE (UK - Eurozone - Sweden - Japan - Switzerland)
Quantitative easing (QE), also known as large-scale asset purchases, is a monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to inject liquidity directly into the economy. An UNCONVENTIONAL form of monetary policy, it is usually used when inflation is very low or negative, and standard expansionary monetary policy has become ineffective. A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other financial institutions, thus RAISING the prices of those financial assets and lowering their yield, while simultaneously INCREASING the (Fiat) money supply. This differs from the more usual policy of buying or selling short-term government bonds to keep interbank interest rates at a specified target value.
Expansionary monetary policy to stimulate the economy typically involves the central bank buying short-term government bonds to lower short-term market interest rates. However, when short-term interest rates reach or approach ZERO, this method can NO LONGER WORK. In such circumstances, monetary authorities may then use quantitative easing to further stimulate the economy, by buying specified quantities of financial assets without reference to interest rates, and by buying riskier or longer maturity assets (other than short-term government bonds), thereby lowering interest rates further out on the yield curve. (In other words, manipulation of the money supply)
3. Global Supply Chain Reset
- The World's Supply Chain Reset (Trade Deals)
- Blockchain Technology
4. Geo-political Tensions World-wide
-Governments refusing the will of the people
a. Brexit
b. Hong Kong
c. Spain
d. Italy
5. US Constitutional Crisis
-Impeachment
WHY IS THE MARKET GOING TO CRASH?
1. The Private Federal Reserve:
The Test (1961): The Federal Open Market Committee action known as Operation Twist (named for the twist dance craze of the time) began in 1961. The intent was to FLATTEN the yield curve in order to promote capital inflows and strengthen the dollar. The Fed utilized open market operations to shorten the maturity of public debt in the open market. It performs the 'twist' by selling some of the short term debt (with three years or less to maturity) it purchased as part of the quantitative easing policy back into the market and using the money received from this to buy longer term government debt. Operation Twist: Through Operation Twist, the Fed was moving investors away from ultra-safe Treasury's into loans with more risk and return. Demand for Treasury's was still high, thanks to concerns over the eurozone debt crisis. By intentionally lowering yields, the Fed was forcing investors to consider other investments that would help the economy more.
The Execution (2008): The U.S. Federal Reserve System held between $700 billion and $800 billion of Treasury notes on its balance sheet before the recession. In late November 2008, the Federal Reserve started buying $600 billion in mortgage-backed securities. By March 2009, it held $1.75 trillion of bank debt, mortgage-backed securities, and Treasury notes; this amount reached a peak of $2.1 trillion in June 2010. Further purchases were halted as the economy started to improve, but resumed in August 2010 when the Fed decided the economy was not growing robustly. After the halt in June, holdings started falling naturally as debt matured and were projected to fall to $1.7 trillion by 2012. The Fed's revised goal became to keep holdings at $2.054 trillion. To maintain that level, the Fed bought $30 billion in two- to ten-year Treasury notes every month.
In November 2010, the Fed announced a second round of quantitative easing, buying $600 billion of Treasury securities by the end of the second quarter of 2011. The expression "QE2" became a ubiquitous nickname in 2010, used to refer to this second round of quantitative easing by US central banks. Retrospectively, the round of quantitative easing preceding QE2 was called "QE1".
A third round of quantitative easing, "QE3", was announced on 13 September 2012. In an 11–1 vote, the Federal Reserve decided to launch a new $40 billion per month, open-ended bond purchasing program of agency mortgage-backed securities. Additionally, the Federal Open Market Committee (FOMC) announced that it would likely maintain the federal funds rate near zero "at least through 2015". According to NASDAQ.com, this is effectively a stimulus program that allows the Federal Reserve to relieve $40 billion per month of commercial housing market debt risk. Because of its open-ended nature, QE3 has earned the popular nickname of "QE-Infinity". On 12 December 2012, the FOMC announced an increase in the amount of open-ended purchases from $40 billion to $85 billion per month.
On 19 June 2013, Ben Bernanke announced a "tapering" of some of the Fed's QE policies contingent upon continued positive economic data. Specifically, he said that the Fed could scale back its bond purchases from $85 billion to $65 billion a month during the upcoming September 2013 policy meeting. He also suggested that the bond-buying program could wrap up by mid-2014. While Bernanke did not announce an interest rate hike, he suggested that if inflation followed a 2% target rate and unemployment decreased to 6.5%, the Fed would likely start raising rates. The stock markets dropped by approximately 4.3% over the three trading days following Bernanke's announcement, with the Dow Jones dropping 659 points between 19 and 24 June, closing at 14,660 at the end of the day on 24 June. On 18 September 2013, the Fed decided to hold off on scaling back its bond-buying program, and announced in December 2013 that it would begin to taper its purchases in January 2014.Purchases were halted on 29 October 2014 after accumulating $4.5 trillion in assets. en.wikipedia.org/wik.../Quantitative_easing
The Planned 'Super' Hikes: money.cnn.com/2015/1...rate-hike/index.html
Yellen: "I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households, and domestic spending," Fed chief Janet Yellen said during a press conference. "There are pressures on some sectors of the economy, particularly manufacturing, and the energy sector...but the underlying health of the U.S. economy I consider to be quite sound."
Investors were pleased to see that the Fed expects "only gradual increases" in rates next year and that the committee explicitly said it would take into account "readings on financial and international developments."
Note: We did not get 'Gradual Increases' - We went from 0-100 in 60 Seconds
October 11th: Repo Crunch = No Liquidity?
How can financial markets lack liquidity when the Fed between 2008 and 2014 created literally TRILLIONS of dollars in reserves, the basic stuff of all market liquidity, and in the years since has removed few of them? Banks still hold abundant unused reserves. Yet for a brief period a few weeks ago the shortage of liquidity was so profound that repo rates jumped from 2-2 ½% to 10%.
With the federal government running huge budget deficits and selling billions in new notes and bonds, markets hardly faced a shortage of collateral. At the same time, banks had ample reserves laying idle in deposits at the Fed. Some 90% of the reserves, almost $1.5 trillion according to Fed statistics, were uncommitted. It would seem that some of these funds could have easily served the system’s cash needs, especially as repo rates rose during those few days of the scare. But as it is, the Fed had to inject yet more money into the system.
Incentive NOT TO LEND: New policy tool, it began to pay interest on reserves held by banks above the amounts required by regulations, the so-called “free” or “idle” reserves. So now banks not only are inclined to ingratiate themselves with regulators by holding more reserves then are required by law, they also get paid for doing so. True, the rate comes no where near the 10% briefly offered on repos, but earning even a small amount on reserves makes bank managements that much less eager to commit their them to a repo or any loan for that matter. - www.forbes.com/sites...es-a-deeper-warning/
Original Idea: Jul 27, 2018 - SP500-SELL-BUY PUTS
Idea: I was expecting a C Wave to break downwards, instead the B Wave climbed above the Terminal 5th Wave creating what is called an 'Irregular Correction'.
Original Idea Updated: Oct 5, 2018 -SPY-SHORT-UPDATE
Idea:-AMEX:SPY has completed a 5 Wave Cycle and is in the midst of an Irregular Correction. Irregular Corrections have a phenomenon which Elliot called, "Double Retrace". Irregular Corrections most often manifest after a 5 Wave Cycle. An Irregular Correction occurs when Wave B goes above the terminal point of Wave 5. Double Retracement corrects Wave 5 and then the entire wave sequence.
PART 1: Nov 19, 2018 : SPY-CRASH IMMINENT-UPDATE
PART 2: Jan 27, 2019 : SP500 SHORT - THE CRASH - PART 2
PART 3: Mar 7, 2019 : SP500 - THE CRASH - PART 3
PART 4: Sep 24, 2019 : SP500 - THE CRASH -PART 4
www.tradingview.com/...SPX-1-HR-Wave-Count/
