Double Or Nothing In Trump Casino

Two trading days until Trump is inaugurated on the MLK holiday. I've read no pundits warning that next week is the locus of disaster.

Let's pick up where we left off...

In my prior blog post which was last Friday I described a market on the verge of meltdown. Momentum Tech had the worst week since March 2020. So what happens this week - CPI/PPI and the impending inauguration are the catalyst for a massive short covering rally ahead of next week.

I use the bank index to show the Elliott Wave pattern that most aptly describes the market at this critical juncture. What we see from a technical perspective is that banks peaked back at Thanksgiving along with the NYSE oscillator (lower pane). Then they collapsed (blue '1') and began to rally back having bottomed with the market back on December 20th just ahead of the Santa Rally. Then, as we know, it was a weak Santa Rally that imploded back to the origin (blue support line) prior to this week's rocket ride higher. Today was the start of earnings season kicked off by the big banks. In addition, banks are expected to be a key beneficiary of the Trump Administration. And yet for all that, the leading sector is STILL below the all time high in December.

And now the oscillator has round-tripped back to two months overbought.

Now we check in with Momentum Tech to see what has transpired in that sector.

Last week, as it was in August, the highest momentum Tech stocks imploded due to the hotter than expected jobs report. Likewise, Monday was the low point for the crash. Since Monday this week the market has had a rocket ride higher.

What we notice however, is that back in August inflation expectations collapsed along with stocks. This time, inflation expectations have remained near the highs. In addition, this is the third lower high for Momo stocks.

Another chart I've shown on Twitter is that Trump is entering office with inflation expectations at a 25 year high. Whereas when he entered office in 2017, inflation expectations were at a multi-decade low, only surpassed by the pandemic.

Which means that Trump will be fighting the Fed all year, and what he doesn't know is that this problem is out of Powell's hands. If Powell lowers interest rates on the short end, then the long term bond yields will explode higher.

What Trump will soon learn the hard way is that the bond market is about to take control of the White House.

Which gets us to global markets which won't be taking the day off Monday.

Here we see the Chinese Yuan clinging to all time lows as the Chinese government learns the hard way that they can't stimulate the economy AND support the currency at the same time.

And next week, Trump will come out swinging blasting one country after another with massive tariffs intended to implode their economies and currencies.

Which he believes will give him more leverage in negotiations.

All of which gets us to the final chart and the trillion dollar question.

Is the Artificial Intelligence Trump Super Idiocracy Bubble the beginning, or is this the end?

And I will tell you with 100% biblical certainty, this is not the beginning.