Possible Top in Stocks and Breakdown in Bitcoin – Ep. 318

Possible Top in Stocks and Breakdown in Bitcoin – Ep. 318

January 16, 2018
Buying Stocks with Both Hands
When I recorded my podcast on Friday, just looking at the technical action in the dollar and I was getting nervous that maybe we could have been setting ourselves up for some kind of holiday surprise; a big drop over the 3-day weekend that could have led to some real fireworks on Tuesday; and when the market started, everybody ignored the new low in the dollar and they were buying stocks with both hands, out of the gate.
The Market Could Not Hold the Gain
The Dow gapped up, and it kept going up; I think it opened up almost 200 points and the was up almost 280 points in the first half hour of trading. We went above 26,000. It was just 12 days ago we were at 25,000. That was the fastest 1,000 point move in the history of the Dow. Of course, 1,000 points doesn't mean as much when you're going from 25,000 to 26,000 as when we went from 1,000 to 2,000. Or even from 10,000 to 11,000, but still, it was very quick. In fact, if you look at the trading days, it was just 6 days, because one of those days was Martin Luther King Day, and we didn't trade. So in 6 trading days, the Dow rallied 1,000 points. Well you know what? It couldn't hold the gain.
Almost a 400-Point Swing
The Dow actually sold off, and at the low of the day it was down 100 pts, so almost a 400-point swing. We closed negative on the day. The Dow was actually the best-performing index. It was only down about 10 points; percentage-wise it was barely down. But the NASDAQ was down .5% and the S&P 500 was down .25%. So we'll see if we get some followthrough tomorrow, to this potential reversal. It wasn't a massive reversal (we didn't close way down, but we did close down).
Technicals are Looking Worse and Worse
Meanwhile, the dollar did close out on another new low. We didn't take out the overnight lows of Martin Luther King Day, when we were closed, but we closed very near the lows. The dollar index went off at 90.45; I think the low over the holiday weekend was 90.28. The dollar then started to gain back some of it losses early this morning and it surrendered them by the end of the day. But the technicals are just looking worse and worse for the dollar
Fed Box: Interest Rates, Inflation, Consumer Prices
This so far has not bothered the stock market crowd, because all they can see are positives. But if everything were positive, the dollar would be going up. People still don't understand what this is going to do to interest rates, inflation, consumer prices, and the box this puts the Fed in. How the Fed is damned if it does and damned if it doesn't. If it raises rates to put a floor under the dollar and a lid on inflation, then everything collapsed - we have a worse financial crisis than 2008 and the market implodes - or, the Fed doesn't do that because it's afraid of that and we get something worse. We get a currency crisis. We get a complete dollar implosion. We get hyperinflation.
A Goldilocks Moment
So we have probably never been this close to something this bad. Remember, think back to the days leading up to the 2008 Financial Crisis. Other than me, was anybody warning about anything? No, it was Goldilocks! Everything was perfect. It's even better now. Back then, they at least let me on television to give the other side. Now, they think, what's the point? Everything is so great, we don't even want anybody to be warning about the possibility of a problem because - "There is no possibility!".
Running Up the Deficits
What has happened since Trump has been elected. The market's up 40% since we elected Donald Trump. What has he done? Nothing. Has government been reduced? No! We haven't gotten rid of any agencies, we haven't gotten rid of any departments. All we did is cut taxes and the tax cuts have barely gone into effect yet. How did we finance the tax cuts? Running up the deficit.

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