The new year started off with a bang, don’t expect it to get quiet any time soon, reports Jeff Greenblatt.
Welcome to 2020, the year started with a bang. Leo Zagami, who covers European politics, the Vatican and the banking cartel, reports that folks in that universe expect this year to be unlike any other. Part of their thought process is a type of numerology called gematria. Apparently, they’ve been targeting 2020 for a long time.
It didn’t take long for them to be proven correct.
So, if you think the recent events concerning Iran are one-off, it’s very likely an error in judgement because this sort of thing is going to be the new normal. So, what is the average trader to do? It’s imperative to understand as far as the markets are concerned these are the best of times and worst of times.
It’s important to realize the Federal Reserve has injected trillions into the system since September and it looks like they’ve made Richard Duncan a prophet. The author of The Dollar Crisis stated governments have the power to postpone the day of reckoning for months if not years.
It looks like they’ve kicked the can down the road as far as the Repo market is concerned. But the Fed has no power over rogue regimes. In other words, we have a market that wants to go higher but traders are going to have to do better at navigating around these land mines. While it’s true the Iranian ‘retaliation’ was likely more symbolic in nature, the first thing President Trump warned about in his speech Wednesday morning was the Iranians would never have a nuclear option under his watch.
How many out there believe the Iranians are going to stand down as far as uranium enrichment is concerned? I could also name at least five other situations that are bubbling right under the surface that could impact financial markets in the coming weeks and months.
But for now, it does appear gold may have had a headline type of high. The headline is backed up by a reading where the current high is 88 days removed from the prior high and it falls in on the Gann calendar at the 288dg vibration. Thus far, it’s good enough for an interesting reactionary red bar with an upper tail (see chart below). Is this the top? Not likely, but it could represent the end of this phase of geopolitical indigestion for the time being. Crude oil is off its high as well. A certain amount of that retreat could be credited to war drum fears but if it keeps falling, at a certain point it would signal weaker economic growth.
How to navigate these rough seas
First, as the Cboe Volatility Index (VIX) is very low, the crowd remains very complacent. Turning on the television to find the media constantly tell you how wonderful things are and you should go on a buying binge isn’t the thing to do in an environment like this. Markets are near all-time highs simply because the Fed bailed them out. That being said, one does have to respect the bull.
On the other hand, the next baby black swan could be lurking just around the corner. Traders had better have a great strategy and be on the top of their games as far as risk/reward ratios are concerned. That means when you take a trade, you should know what your edge is and keep a stop loss right where the pattern suggests you will be wrong.
Let’s look at what the Dow Jones futures (YM) was doing during the Iranian retaliation. The 15-minute YM chart shows a 59-bar drop while the 30-minute chart (below) shows two downward thrusts.
The move up is really the B wave in what is an ABC down. The B wave is 388 points, which is 59% of the final 655-point drop. Additionally, the 28,739 high has a 1.39/72% retracement, inverse ratio to the prior high. Do you see the level of precision? This doesn’t mean we have a crystal ball, far from it. It means we have a very high probability edge and if the trader is wrong for whatever reason, that is where the stop loss goes. It’s imperative you engage the pattern as close to the signal as possible. Candlestick formations are a great help.
The Kairos methodology of square out vibrations isn’t the only method of precision. The point is in an environment like this, a high degree of precision and accuracy is going to be required. The problem right now is with all the complacency flooding the market due to the Fed’s easy money policies, it’s easy for traders and investors to overlook the enormous geopolitical risk. On top of that, it’s very important to be able to identify potential intermediate level turns as well. Don’t fall into the trap of normalcy bias. Just because the stock market had one of its best years on record doesn’t mean 2020 will be more of the same. And just because the markets have been able to absorb a couple of potential shocks (impeachment, geopolitical provocations etc.) without a major sell-off doesn’t mean that will always be the case.
Markets are very tricky, just when you get used to a trend, that’s when it decides to do something else.
