Hi EWe.
Nice chart and I see a
potential double top also. I use them for long term positioning in conjuction with macro indicators to ensure I'm with the major trend.
At the moment the US is in dire straits with the virus (unless conspiracy and distrust is your MO). To give you a sense of the magnitude of the surging problem, take a look at this schematic of US war deaths. The current body count for COVID19 is
280k (updated as of today ) and projected to be
471k by March next year (below projection) or 4-5k deaths per day from start of Dec.
Add up the total for all wars with the exception of the Civil War and you get ~
472k. So the issue is significant and will be disruptive to economy because states will be forced to take aggressive measures to arrest its proliferation. I doubt there will be a national shutdown given the politics, but it can only be pushed so far before its plain as day this thing is real and surging.
The point is, the economy is already significantly disrupted with the unemployment still twice the rate before entering March and its likely this 'surge' will push on this number again.
https://tradingeconomics.com/united-states/unemployment-rateAdd to this the expiration of employment payments and the eviction moratorium at the end of this month and there a significant social economic diaster pending. If additional stimulus is not made (unlikely given the circumstance but not to be unexpected given the political environment but will delay not cease) its more probably than not, which in turn is good for equities, PMs and crypto (given the reason for their ascent).
The problem with this inescapable outcome is a large chunk of the money that usually sits in bonds or interest bearing instruments, will start chasing other
risk on asset classes to ensure they don't (a) lose money at maturity and (b) compete with the market (hedge funds, pension funds, etc). This will likely be the reason for the equity blow off before everyone wakes up to the fact that valuations, and in particular in a COVID19 environment which is suppressing cash flow and denting balance sheets, does not make sense. There is a large percentage of zombie companies in the US not generating enough cash flow to service debt.
* If stimulus is not forthcoming now, we will have a sell off, including liquid assets PMs and BTC - margin calls.* # the vaccines are great but distribution and population inoculation will be to latent. #
The question is, when they run, where will this money go. If treasury bonds are already paying negative rates on 17 trillion dollars globally, then a rush to them will only suppress yields and make them more unattractive. Unlikely scenario unless people are happy getting less back at maturity than they put in.
It could also move into the USD as it traditionally does, but the USD appears to be in a secular reversal cycle (below) after breaking key support - next stop 88.25 ish. Here is an excellent article on the why which also include BTC involvement in a new system:
https://www.lynalden.com/fraying-petrodollar-system/The money will go into hard assets like RE, PMs, commodities and Crypto (government digital and 3rd party such as BTC).
(20min delay)
