With the 50, stocks are being teed up for their tops

Dear Trading Diary: Question: If the Fed found it necessary to make their first rate cut in years by a mammoth 50 bps on Wednesday, and the market is expecting further large cuts every month, is this signalling a strong economy or a weak one? Supply/demand rules say that when the price of money drops, that signals weaker demand for loans – a weaker economy ahead. So with stocks and housing at nosebleed levels set when rates were higher, rate cuts now are more likely to re-stimulate inflation than not.

Odds are high we have seen the lows in the inflation data – and interest rates will have to be hiked to ‘fight’ it – and/or face a currency melt-down.

And what if a Black Swan suddenly appears to ruffle the feathers of the over-confident and complacent bulls (do bulls have feathers?)? In the real economy we are now seeing signs of a major reversal, as I have been outlining here in recent blogs. Just today we hear that the UK mood on the economy has suddenly turned very sour as they see looming tax rises to ‘plug the hole in the public finances’ with national debt now hitting 100% of GDP.

If taxes are hiked, that will have a very negative effect on sentiment and the economy.

And with about six weeks to the US General Election, US politics is heating up with no clear poll leader. The hugely fragmented politics there is almost certain to produce a hotly-disputed ‘winner’ that the other side will not accept – and their ejection may well turn violent. Perhaps the storming of the Capitol on January 6, 2021 was just the overture to the main drama to come.

European car manufacturers are starting to warn they may be forced to shut plants and make massive layoffs in light of the approaching huge EV target fines (“VW considers 30,000 jobs cut” headline today). Incredibly, Western eco politicians have passed a law mandating makers to sell a certain pc of their sales to EVs or face a massive fine for every ICE vehicle over the limit. Even that did not happen in the old USSR.

But the public don’t want them. Today we hear “German EV sales crash 69%” in one headline.

The European auto industry train is heading for an almighty derailment. But will the bone-headed politicians listen? With eco zealots like Milliband in charge, don’t hold your breath. They would rather see an economic collapse than admit they are wrong. We are stuck with them for five years – plenty of time to do untold damage.

As I have long maintained, the push to ‘decarbonise’ the economy will result in the biggest global economic collapse ever in recent history (post 1900). I firmly believe that was the intention of certain very influential individuals in the first place. They want to create such chaos and wealth destruction of the middle classes that their new world order can be imposed with little resistance. The eco politicians and eco warriors are just their ‘useful idiots’ who probably truly believe in the cause.

Of course the ultimate irony is this: global temperatures have risen lately (El Nino). But that effect is wearing off. What if they start falling now? Will the biased MSM even report that? What if we do get a 1960s style winter here in the UK with 15 ft snow drifts such as we see regularly in the US? How would that place their ‘evil CO2’ justifications with the public?

But for now, I am in the business of making profits and I used my Tramline analysis to take a small long Nasdaq position for VIP Traders Club. I am riding the final red wave 5 leg up

The Nasdaq ATH was set on 11 July and the decline has taken the form as per my wave labels. Provided we do not see a new ATH, this will remain my Best Guess. Already the current wave ‘c’ of 2 has just exceeded the ‘a’ wave high and can be considered complete. But with a large mom div, odds favour a further push up next week to complete the rally. But that should be it. I will take a look at reversing my position then.

With today being the Autumn Equinox (when reversals often occur), I am prepared for anything this week!

Update on my Gold campaign: The market on Friday pushed above my $2,580 target to close well above at $2,620. Annoyingly, it did first dip on Fed Day Wednesday to take out my stop on one of my long positions. And that throws up a crucial point about trading.

Because I will never trade without a protective stop (PS) for obvious reasons, I do run the risk of being stopped out on a brief dip if my stop is too tight. It is a balancing act. Because there is no guarantee the market will recover from that dip, protecting the profit is paramount.

Just as in life, some golden rules can be considered as guidelines (or even suggestions), I have the option of reinstating my position in these rare circumstances. I remain super-bullish and can justify this action. And as the market has recovered from that dip, I will continue to raise my trailing PS in the usual way.

Of course, choosing your PS is more an art than a science especially in fast-moving markets. I have yet to find a reliable method that offers me optimum protection in all circumstances. And yes, it is very annoying if your PS has taken you out just before the market recovers. But we all have an override switch (your brain!).

So now with Gold into new ATHs, we are all asking how high can it reach? In bull markets, we always see extravagant targets in the MSM. The $3,000 level is a popular one today. But if inflation comes roaring back, as I suspect, and stocks begin a major retreat, I can easily see Gold pushing well above $3,000 in a very lengthy bull run that could last for months. And ditto Bitcoin which should exceed its ATH over $72k and achieve the $100k valuation.

These are the two main inflation hedges today. And crude oil is another possibly lesser one.

In tandem, the US dollar will collapse and conform to my roadmap

We have just broken out of the triangle and heading south in wave 3 or C.

I have reinstated my bullish positions on the Gold Miners.

Update on my NatGas campaign: I have been long for a while and have been waiting patiently for my roadmap to play out and now I see very positive signs that it is.

Prices were hammered down last year by massive over-supply but into a long term support area under the $2 region. In the Spring, it just scraped along the bottom and I just waited for a sign it was about to move up because as we all know, the cure for low prices is low prices. Production was bound to be curtailed as producers’ margins were too weak to justify production.

But with demand unlikely to be adversely affected by the Net Zero push (in fact, its failure is boosting gas demand), I was confident a new bull phase was just a matter of time away.

And on 21 April I got my first signal with the large up gap That was the kick-off. And the failure to close that gap in early August was the final clue that the main trend had changed. That gap can now be called a ‘breakaway gap’ – a potent indication a strong rally phase lies ahead.

And late in the week, that vision is firmly in prospect with new highs. With the Northern Hemisphere winter looming and the relentlessly booming electrical power generating needs from gas, I maintain my bullish stance and will be adding on dips.

One other factor is the Biden ban on new production with ever-whacky California leading the war on gas. With demand increasing and production stalling, prices should respond. And they could respond hard.

You can always rely on governments to highlight the Law of Unintended Consequences. For the average person who is not on their gravy train, they effectively act as your enemy. With our UK Labour budget coming soon, we will receive full confirmation I am sure.