Chris says the first leg of the upside move in
stocks appears nearly completed, and here’s where Chris says the stock market
is headed next…
Near December 21,
2018, our research team began a series of posts indicating the US Major Indexes
should be set up for the “Ultimate Bottom” low that we suggested would take
place after the US Elections (November 2018) and which would launch an upside
price rally. Today, we are writing to announce that the first leg of this
upside move appears to be nearly completed.
It is critical to
mention here that as of only a day go the short-term market trend from a
technical standpoint has turned up. So, getting long before this point would be
trying to catch a bottom which is tough and risky to do. The good news is that
we are expecting a second leg higher after we get some rotation to the
downside.
Using our Adaptive
Fibonacci Price Modeling system, we can see that the current prices of the ES
and NQ are very near to the immediate Fibonacci Price Target Zone. You
will see from the following charts that both the ES and NQ are already within
this zone and/or very near to what we believe will be immediate
resistance. This means we should expect a bit of price rotation near
these levels before another upside leg takes place driving prices higher.
This first Daily ES
chart shows the Fibonacci Target Zone clearly in Green. You can see how
price has rallied up to near this level and may even rally a bit further before
rotating downward a bit. Remember, price rotation in a trend is very
healthy for normal markets. When price moves extensively in one direction
or another is somewhat unhealthy and dangerous. When price moves up or
down in rotating waves or price cycles, this is a very healthy means for the
price to establish support/resistance and to wash out groups of traders that
may be biased in the markets.
This Daily NQ chart shows a very similar, although more narrow, Fibonacci Target Zone. The result is virtually the same as the ES chart. Price should attempt to establish some resistance within this zone and the potential for a downside price rotation increases near this level. We are expecting a downward price move, possibly toward the BLUE Fibonacci downside target square level, before the price rally resumes to drive prices above recent highs and into the next leg higher.
If you have followed our analysis, on September 17, 2018, we predicted 4~5 months into the future what would likely happen. Our call for an “Ultimate Low” price reversal after the Nov 2018 elections appears to be setting up perfectly. Although we did not predict this extreme low price level in that research post, the overall expectations we had in September were nearly perfect.
If the remainder of our analysis continues to play out as accurately, we should be setting up for a very big move to the upside over the next couple of months. It will likely be paired with decent earnings data from the US, moderately strong economic data and the resulting economic improvements of a China Trade Deal and the resolution to the US Government Shutdown. The issues in Europe are set to reach a peak somewhere near March or April 2019. We expect the US markets to be trading several percents higher by that time.
Pay attention to these markets moves. 2019 is poised to be a very exciting and profitable year for skilled traders and wise investors.
US Govt Debt Bomb Has Much More Gunpowder Than Most Americans Realize
Even with the govt shutdown, the debt bomb gets larger. We saw a big one-day jump in the national debt just this week. Here’s why that’s a problem…
The U.S. Federal debt bomb continues to increase, even with the government shut down. In just one day, the U.S. public debt increased $50 billion on Jan 15th. While the total outstanding Federal debt has now reached nearly $22 trillion, it doesn’t include all U.S. government debt.
That’s correct… there’s a lot more debt than Americans realize sitting on the balance sheet of the U.S. Government. For example, there are other obligations such as U.S Government Agency Debt that isn’t well-known. According to the USGovernmentSpending.com website, U.S. Agency debt is the amount of outstanding debt issued by federal agencies (such as FHLB and GNMA) and government-sponsored enterprises (such as Fannie Mae and Freddie Mac). The amount of U.S. Agency debt
Then we have also to include State and Local Debt that is not apart of the U.S. Federal public debt. California holds the highest amount of State Debt in the country at $155 billion followed by New York at $141 billion. You can check out the debt of each state here: Compare State Debt.
Okay, let’s start adding up all the U.S. Government debt and put it into perspective. The total U.S. Federal debt is $21.97 trillion while U.S. Agency debt comes in at a whopping $9.26 trillion and State-Local Debt is $3.1 trillion:
Thus, total outstanding U.S. Government debt is a staggering $34.3 trillion. So, there is an additional $12.4 trillion of debt on the U.S. Government balance sheet, which turns out to be more than half of U.S. Federal Debt. A trillion here and a trillion there really starts to add up.
According to Statista.com, total U.S. Federal Debt will reach $22.5 trillion by the end of fiscal 2019 (Sept 30th) but will continue to increase to $30 trillion by 2025. I have also included my estimated average interest expense paid by the U.S. Treasury for its outstanding public debt. Remember, this only consists of the current $21.97 trillion of Federal Debt.
If interest rates continue to rise slowly to the same level it was in 2010; then the U.S. Treasury will be forking out $900 billion a year just to service its debt:
So, if we include all of this debt and compare it to the U.S. GDP, it is substantially higher than the current 104% stated by the Federal Reserve. By incorporating ALL debt, the total U.S. Government debt to GDP figure is more like 166%. Of course, the accountants at the U.S. Treasury and Federal Reserve don’t want to include all of this debt because it makes the financial ratios much worse.
Unfortunately, the U.S. Federal Debt won’t be going down anytime soon. On the other hand, forecasts for just U.S. Federal Debt suggest we are going to reach $30 trillion by 2025:
According to Statista.com, total U.S. Federal Debt will reach $22.5 trillion by the end of fiscal 2019 (Sept 30th) but will continue to increase to $30 trillion by 2025. I have also included my estimated average interest expense paid by the U.S. Treasury for its outstanding public debt. Remember, this only consists of the current $21.97 trillion of Federal Debt.
\The data put out by the TreasuryDirect.gov website has shown that the interest expense the U.S. Treasury has paid for the first three months of fiscal 2019 (Oct-Dec) was $164 billion, a hefty 12% more than the $147 billion paid during the same period last year. If we estimate that the U.S. interest expense in 2019 is going to increase by 12% for the entire year, that turns out to be $580 billion… very close to the estimated $562 billion shown in the chart above.
Now, some individuals might not agree with my estimated 3% average interest rate by 2025, but we must remember that the low 2.2% rate in for 2016 took place when the Fed Funds Rate was 0.25%. So, when the Fed lowered its interest rate down to nearly zero, the lowest the average interest rate paid for U.S. Treasury Debt was 2.2%. Hell, my 3% interest rate by 2025 might be too conservative.
Either way, the U.S. Debt Bomb is much higher than most Americans realize. When the U.S. economy finally starts to implode investors need to understand that ASSET values will evaporate while DEBTS stay the same. That is a recipe for disaster.
As I have mentioned in several of my articles and videos, Gold and Silver are not backed by debt, which is why they will be some of the best safe havens when the value of most assets disintegrate.
No comments:
Post a Comment