Did the Ides of March warning time some major market tops?

Did the Ides of March warning time some major market tops?

We are in a major transition between two roughly 100-year long eras. Already, we have seen major changes in society – and markets – that were most definitely off the radar a few years ago from NFTs to cryptos to AI in markets and in gender issues in society. Our dear old NHS is apparently telling us that it is not only women who can have babies (that is one of the latest coffee-spluttering headlines I caught last week).

Some of the old certainties are giving way in this new phase of uncertainty – and that applies in markets as well. But are the old golden rules of investing giving way too? Is Buy Low, Sell High a dead end?

Manic bullish sentiment has always appeared at or near major market tops in the past – but is this rule now under threat? To me – not likely. Simply because when everyone has bought, who is left to buy to push prices even higher? Remember, while the MSM focus in bull markets is on the bulls/buyers, very little is said about the sellers in the trade. It’s the reverse in bear markets, of course.

We may have a test of this rule next week.

Did the Oscars just predict a nuclear war?

And the Oscar goes to — a film about atomic bombs! What?? I didn’t spot that in the list of romcoms. Popular culture has always shone a light on us and our general state of mind (if I can put it that way). During the Great Depression, feel-good Fred Astaire and Ginger Rogers escapist films took the public away from their tough lives for 90 minutes or so. Fred was always dancing in a tux and patent leather shoes – a form of dress rarely seen in the bread and soup lines of the day. And Ginger’s flowing gowns were also conspicuously absent there. A kind of fantasy, really.

More recently, the most popular films of the 1970s were gritty hard-nosed dramas reflecting the stagflation and a general feeling of hopelessness at the time. I recall visiting New York around 1972. Central Park was off limits as a very dangerous crime-ridden place. As was the Greyhound bus station in Manhattan with homelessness rampant (sound familiar?).

And fast forward to this century – stocks are flying high and the most popular films were recently of the fantasy genre immortalised by the Harry Potter franchise. And fantasy well describes many of the top films since – until now.

Incidentally, fantasy is well represented by the Net Zero drive (now faltering) It has become so brainwashed into people I am starting to go contrarian and wish for more CO2 ’emissions’ to boost crop production we may need to store if a nuclear winter is on the horizon. I am ready to buy a coal-powered steam car if anyone would produce it (sadly, no government subsidies likely).

And suddenly this year the Best Film is Oppenheimer – and how the first atomic bomb was developed. I once lived for a period in Los Alamos the New Mexico town where the scientific work was carried out – and I can say the ghost of the bomb was fully present.

But what a contrast – from Harry Potter fantasy and magic to atomic Armageddon in just a few years (passing through La La Land and Barbie along the way – more true fantasies).

But am I reading too much into the Armageddon connection with the ongoing Ukraine war and the recent hints that Russia may be contemplating using atomic weapons?

The Oscars have at least done one thing -they have highlighted the sudden switch from fantasy to reality in popular culture. So is the currently manic animal spirits in finance facing its own dose of reality?

Beware the Ides of March was the fateful warning given to Julius Caesar

And what an omen that was! Thursday was this year’s Ides (March 15th) as I reminded VIP Traders Club members and wondered if something equally dramatic would occur on Thursday. And right on cue, the impossibly vertical Bitcoin reversed on a dime and fell 10% in hours.

That sort of correction had not occurred in months. But note that it matched Nvidia’s 10% severe pull-back week ago which was also a record one-day loss for that share.

To see two almost coincident huge 10% corrections in BTC and Nvidia as the joint leaders in the current ‘irrational exuberance’ (aka animal spirits) is noteworthy, I believe. It very likely marks a major pause in their advances at the very least.

And on Friday, major stock indexes are taking note and are pulling back. This could get very interesting for we hibernating bears. So will we wake up now as the Ides of March omens of BTC and Nvidia whisper loudly in our ears?

Here is the Nasdaq with the strong mom div into the March 8 ATH at 19,700:

That will be my roadmap if the market can break down out of the wedge pattern which it may do this coming week. The market is testing the lower trendline on the Friday close and is off by 700 pts (4%). If this week continues the new downtrend. the reversal should be very swift.

In last week’s blog, I had a section titled Friday was very interesting and potentially landmark session for the US indexes – as The S&P rose to hit my upper tramline at 5,256. At the close yesterday, it had dropped to 5,180 and well inside my trading channel. I am using the 6,256 level as my line in the sand for bearish positions.

Thus, we bears finally have some glimmer of encouragement post the October lows- especially so as the former darling of the EV ‘revolution’ – Tesla -continues making new lows at $162 (down 60% off ATH).

Major tops in financial markets always appear in a succession of roll-overs. Tesla topped in November 2021 (over three years ago) as the company was ‘worth’ more than GM and Ford and most legacy makers combined. That was the extent of the manic panic to own a piece of the EV ‘revolution’.

Of course, it couldn’t last and at the time, I suggested that reality would strike in the form of huge China competition to come and also public resistance to EVs once the rich elite had done their virtue-signalling buying. We are now seeing that play out in spades. This is the chart I posted on 2 March:

chart courtesy www.elliottwave.com

’nuff said.

And last week, I highlighted this amazingly positive MSM headline to my VIP Traders Club members:  Every investor should own Nvidia – here’s why. Penned by a money manager who owns the shares – he is obviously talking his book!! That is as definitive as it can get – and maybe just maybe calling the top. 

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ANNOUNCEMENT

I have been providing my weekly blogs as open source since I started back in 2013 but now I have decided to make them available inside a paywall for a modest subscription. That switch will happen soon – please watch out for it. Regular readers will know that my blogs have very often contained useful and very timely actionable analysis on specific markets.

Just recently my Gold coverage has been well worth the price of admission! I identified a wave 3 of 3 of 3 up a few weeks ago when gold was trading well under $2,000. Now look at it in updated chart:

and this is not the only excellent campaign I am running. Crude oil has just broken up past my $80 target and the Ags/Grains seem to be following my bullish roadmap after nailing what should be major lows.

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If the Fed does cut interest rates this year, will shares be boosted as the bulls hope?

It is a demonstrable fact that the Fed always follows the rate changes imposed by the market. They never lead. So all the gallons of MSM printers’ ink is being totally wasted on the big question. Consensus is that the first cut will be in June and two more later this year.

With bullish expectations so elevated, we need to remind ourselves of Joe Granville’s maxim: When everyone believes something is obvious, it is obviously wrong.

And now the Fed has raised its previously sacrosanct 2% inflation target as it anticipates upward pressure on wages and on commodities (including my top pick Crude Oil). Older readers will recall a time when 2% was their ceiling, not the floor. Oh, happy days of yore! Stagflation is around the corner.

So will shares be boosted when rates decline? Not necessarily. Of course, when rates are sky high and shares are low, a rate cut would likely be viewed very positively in the stock market. But today, rates are not high and stocks are most definitely not low (to put it mildly). The high stocks are reflecting expectations for a fast growing economy based in rate cuts.

But is that likely? We are seeing vast numbers of layoffs in Big Tech (high paying jobs), more blue collar workers are needing two jobs to make ends meet, huge increases in credit card defaults and overdues, increases in car payment defaults and weakness in retail sales (Friday’s data was very weak).

Maybe the Big Tech layoffs are a result of AI taking over many human tasks – and/or a desire to cut overheads as managers see slower growth ahead.

And also in the macro picture, US money supply is falling as the Fed is still engaging in QT. That implies rates will stay high and could even go higher – totally against expectations.

So once again the Fed is caught between a Gibraltar-sized rock and a hard place. It cannot go against the market which is signalling stable to higher rates, and it cannot restart QE to flood the market with liquidity. If it does, it will signal the Fed has lost control and all credibility. And the commercial real estate (CRE) market remains depressed with the fate of many banks in jeopardy and in great danger of going under if rates stabilise or even move higher.

Stocks have such stretched valuations as a rubber band and when pulled too hard, it breaks. The big question is has that point now been reached? My wave 5 is very late in development.

Bear in mind that if rates do fall and that could be a reflection of a weaker economy when demand for loans is weak. Shares do not do well under these conditions – especially banks.

Cocoa remains the Nvidia of the commodities

In my post of February 24: What do Cocoa and Chips have in common? I highlighted the fabulous bull run Cocoa was enjoying. I opened my buying campaign last year when I identified a potentially very bullish triangle. In my post it had reached the astounding 45-year high of $4,000 a ton.

And since then, it has zoomed up by 100% more to the current $8,100 level. That is the power of an El Nino weather pattern which is cutting West African crop production by an estimated half at least.

This is devastating stock levels and with chocolate prices pretty inelastic, who knows where this will all end? We are in totally uncharted territory. But we are bound to see massive volatility ahead with huge up/down swings. But I believe it is too late to join the party now as risks are just too great.

And finally, the rising cocoa prices is part of the general uptrend in commodity prices about to be unleashed with its boost to inflation figures. T-Bond yields now seem poised to move sharply higher.

But what a ride!

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