Equities Roll Over

Thiel at Bitcoin Miami 2022

We aren’t sure where to begin this note, so maybe we will just jump right into the equities and see what technical damage has been done to the recent up move. We can’t help but think massive currency moves lie ahead and that the new digital frontier has caught every global central fiat printing bank with their pants down. We know the BOJ has a huge battle ahead as they have had negative real rates for like 3 decades now…We know the ECB is on levered tilt with their TARGET2 imbalance and we also know the FED is well behind the eight ball. The fractional fiat system is cracking and there really isn’t much the central banks can do about it at this point. We keep hearing about CBDCs, and as you know, these are not digital decentalized central bank money, therefore they are not comparable to Bitcoin blockchain technology. All in all not only do we have geopolitical problems, but we have structural fundamental monetary problems with real world structural supply demand problems. In a world of $9T Federal Reserve balance sheets, well let’s just say debt overhang is an understatement!

So back to the technical charts of the equities in particular lets look at the FAANGMTs, technically this is ripe for a rip lower. With Elon trolling Twitter now we can’t help but think some changes are afoot in tech land:

This chart leads into our Long ES vs Short NQ thesis:

There is a lot of room for diversification out of the tech majors into the broader market. We know fast money doesn’t agree with such safety in numbers but we feel this is the proper viewpoint given our fundamental back drop. Further probing the structural issues, the DAX has also hit a failure point and not taking out 15000 is an obvious tell, LOWER is on the horizon:

The bond market is telling the FED let’s just see how far we can tilt the scale of inversion shall we with the US Govt 10Y hitting 2.72% a whopping 225 bp above Fed Funds, you guys notice a gray vertical bar missing in the chart below right now? We sure do:

How fast can the FED play catch up? Well we think they will go 50bp next month and the reaction by the 10Yr should be yield dump as they catch down to the Fed Funds and start pricing in a recession. Our base case calls for a 1.50% Fed Funds max out with the US 10Yr dumping down to meet it 6-9 months out. This should mean that equities should stay well under pressure for the rest of the year. We feel that the FED cannot lower their balance sheet very much maybe a Trillion or little over that but that will be it. If they over do it then things get really ugly and they will lose their control, as if they already haven’t! With all that said, let’s look at the US Govt 10Y:

2.72% is huge its the break down point from the last time in 2019 so this is going to be an interesting battle here. With all this posturing in bonds and equities, lets look at that Yen chart. Last week we looked at the chart and thought decadal lows would force the BOJ to intervene, however taking a more broader outlook, maybe this time is different maybe they are already sterilized, maybe the Yen is do for a further drubbing and technically this is a massive head and shoulders break if we can close below 79.00:

This weekend was the Bitcoin Conference in Miami, where Peter Thiel gave a riveting opening speech tossing a few Benjamins into a crowd, saying “What is money, this fiat its kina hypnotic, this Crappy money!” Viva Bitcoin Maximalists, and we think Thiel and Musk are fully behind the digital decentralized revolution and if you haven’t watched his speech you definitely should, it is the future and we fully embrace this technology. Here is a link to his keynote address in Miami, Thiel Bitcoin Conference Keynote 2022

With that, let’s look at the settlements from Friday for Bitcoin and Ethereum:

As far as the rest of the markets we follow, here are Friday’s settles:

Till next time…

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