supere

The Great System Reset?

Short
AMEX:XLF   SELECT SECTOR SPDR TRUST
I will make one more attempt here to trace out the potential "super cycle" or "grand super cycle" bear market waves that I believe are still about to unfold. I am tired of the distortion caused by tech stocks in the S&P so will use the financial sector directly to try and map it out. Also, if markets truly continue to rise and disconnect from reality then I shall rest my case.

Basically, what I see now is the government and central bank stimulus since the onset of covid sparked an unexpected "new wave" of bullish market players. I don't know exactly who they are, but suspect many of them are associated with the Robinhood application that suddenly exploded with new clients since the March market bottom. This explosion of "belief" in the power of the FED to always "save us" should complete the second wave of the bear market (or final 5th wave of the bull market where technology is strongly present). With respect to market psychology, this should also complete the "complacency" (or Euphoria with respect to tech) stages of market, so the next stages will be the deep declines of the anxiety, denial, panic, and capitulation (although tech may still have a few strong rallies).

If the FED had only started supporting markets since covid arrived, I could see the case for a new bull market. However, they have already supported the market since 2008, including the "repo" efforts prior to covid, and their efforts have done nothing but create an illusion of success, all reflected in the stock markets. In reality, unprecedented levels debt have been created in every asset class imaginable, and wealth disparity is now wider than any time in American history.

Therefore, I still propose that in order for the socio-political and economic structures of the world to restore balance, we will have to eventually endure a near or complete system reset. Although the stock market has still been holding up, we already see huge red flags of the breakdown of these structures in a wide number of global societies (ie. BLM , massive delinquencies and business failures, civil unrest). The market represents the collective sentiment of its players and for some reason, different than other times in history, there remains an extreme sense optimism and infallibility out there. It is like a large group of "dreamers" spurred by the FED's actions truly believe the we can disconnect from reality, accumulate debt and never deal with the real issues out there.

Most traders are looking at the short term picture, but what I write about is a great global upheaval that will take at least a decade to resolve as shown in the charts. It will encompass a multitude of both enormous bull and bear waves, and possibly even complete shutdown of the stock markets.

What can we do?
Well, first look out for each other in the real world.
Second, cash will likely be better than anything.
Third, if you are a bubble player then go ahead and try to ride these rallies.
Forth, ride the bear waves with me if you have the courage. At this point it seems like a folly, so I do not suggest, but heck I try to ride them anyway.

Good luck and I'll begin creating some more shorter posts if we ever start trending down again...

Comments

excellently written !

Maybe the only thing that I don't agree with is the cash. It has been printed so much that it is worth nothing.
Maybe in a couple of years it will be normal the value of an iPhone to be $ 3,000 ,
inflation without sales, what is it called?
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supere SammyHas
@SammyHas, I think this is where most will be mistaken. The only thing the masses do not believe in right now is the idea that "cash is king". It will make many people lose everything as they continue flooding every other asset class with money thinking those are the safe havens. We are in a deflationary environment where no matter how much money is printed, the only prices that will truly inflate in the end are core essentials such as food. The everything else bubble shall pop. The final target should be 'stagflation' but that should still be years away.
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Extremely well done.
I know you're onto something here.
Big picture paints potentially dangerous risk environment with rates this low, and inflation beginning to rise.
Something unforeseen ?
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