Wow, what a week. The FED was playing with fire and broke the toy. Something economists like Warton professor Jeremy Siegel have been warning about since half of 2022, saying that the FED is wrong and tightening too much looking at the wrong data, which will backfire. Fast forward, and the banking system, the very backbone of the US economy, is crumbling. And now, the same morons who recklessly destroyed it are scrambling to fix it. When I was a child, I remember my parents went shopping and asked me if I wanted to go with them. I said no. And when they left, I was crying because they left me at home alone. The FED is like that child I once was.

The VIX structure above is interesting. I have not yet seen a pattern like this. I would interpret it as indecisiveness, confusion, and calm before the storm.

 

 

The markets literally crashed. It went from bullish to extremely bearish within two days. The bull trend narrative evaporated. And today was a scrambling day. Volatility went through the roof, and the market was going from bullish to bearish as the news about more banks failing and the government bailing them out hit the markets. Now the FED has what they wished for, except I don’t think they wished exactly for this. Everyone thinks the FED will cut the rates in their next FOMC meeting. And they really may do because despite them telling us that these banks were not significant and it is not a big deal, it can become a big deal very quickly. The companies that had money in these banks may fail to pay salaries to their employees, and they, in turn, may fail to pay their rent and lose their jobs. It can quickly become a domino, precisely like in 2008.

Tomorrow we will receive a CPI report. If the report comes in bad, the FED will be in a precarious position. They will need to raise the rates more, but they can’t unless they want to continue their unscrupulous devastation of the US and world economy.

Nevertheless, the market stopped at its support today after very volatile trading. But in light of the recent problems, it means nothing. We may easily slice below it and create new lows. If CPI comes in bad tomorrow, the market may fall further.

 

 

The daily Ichimoku chart is helplessly bearish with no hope on the horizon. The proverbial light at the end of the tunnel is just another freight train speeding toward us. It is time to become defensive. The weekly chart doesn’t offer much hope, either. It is still bearish and the market has a hard time breaching the cloud.

 

 

Powell is simply clueless, and he just does what he thinks may be needed at a particular moment in time without knowing what the consequences may be. He is like a doctor who has no clue about his patient’s illness and the potential medicine he may need, so he is just throwing drugs at him and observing which drug may be effective. But in the meantime, the patient dies. This illustrates it perfectly:
 
Jerome Powell testified in front of the banking committee last week.
 
COMMITTEE: “Do you see any systemic risk in the banking system because of the rapid rise of interest rates?”
 
POWELL: “No”
 
SIVB: “Hold my beer.”

 

 

Market expectation for tomorrow is negative. But it may not happen. If the CPI indicates easing inflation, the market will rally as it may perceive that the FED can stop the tightening. If it comes in bad, who knows what happens? Expect extreme volatility and stay on the sidelines.
 

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