Every All-Time High = One Step Closer to THE TOP – Amateurs Celebrate, Pros Prepare...
KR Opinion
It’s been a very interesting week. Early on, I realized the Fed is acting as if it has no data, and Powell certainly demonstrated that yesterday. The gaslighting is in full swing, and his bias against Donald Trump was blatantly obvious when he claimed there’s no predetermined interest rate drop for December—he’s just trying to reflect reality. There were several dissents within the Fed, but overall, earnings reports were positive, though with some mixed results. That’s essentially all we’ve had to go on. Normally, we should have PCE numbers and other data that market participants are accustomed to reacting to; however, that’s not happening now, which is a significant concern moving forward. Not to mention, a potential government shutdown could soon have significant economic effects.
This reminds me of that old Star Trek movie where Spock is inside the ship’s reactor, inserting a new crystal to save everyone. As Doctor McCoy yells that he’s dying in there, Spock says, “The needs of the many outweigh the needs of the few, or the one.” What’s fascinating—and what I’ve been quoting for years—is how we’ve seen the opposite: the needs of the few outweigh the needs of the many. That’s exactly what’s unfolding in the government shutdown talks. They’re highlighting how 20 million babies won’t eat, which is indeed an important issue, but they always weaponize the needs of the few to manipulate the bigger picture against the many. We’re seeing this on a large scale right now. The Fed, and Powell specifically, has been doing the same thing by gaslighting us into believing they lack data. They do have it—just like the inflation figures provided to Social Security last week. I’ve argued for a while that the Fed still compiles this information and has access to preliminary data; they’re not flying completely blind. But the markets—and all of us—are in the dark without it. Earnings have become the primary driver.
As I mentioned in the last few newsletters, ADP is launching a weekly employment report alongside its monthly report, indicating an increase in their efforts. Maybe other metrics will appear that we can respond to. However, the government shutdown is likely to become emotionally significant soon, which could increase volatility. I’ll post a chart of the S&P below. The algorithms on our wave tech metrics, especially for PMs, are starting to deteriorate, indicating that we’re entering a larger correction phase, with a strong likelihood that a top is already in place. I see many amateur traders enthusiastically pointing out that we hit another all-time high this week—which is true—but I always argue that every new high brings us closer to the ultimate top. Once that happens, the markets will decline, making this a risky situation, especially given the current loud rhetoric, combined with shutdown uncertainty, data gaps, and other issues.
We’ve got the Fed decision behind us, and now we’re in the dark. We’re ending the first month of Q4 trading today, October 31st, so this could be quite climactic. The short-term daily models (which I’ll share for the S&P below) clearly show that. We have some minor earnings ahead, but the overall pattern suggests we’re getting closer to potential declines. In fact, if we close near the week’s low—below 6,865 today—it would signal a minor reversal. The algos suggest we might trade back toward the 10-week moving average, now around 6,500, which would be a 200+-point drop in the S&P 500. I don’t expect that to happen immediately, but signs of a decline appear to be forming by mid-November. Then, as we enter the holiday season with thinner trading, more questions will come up, although some may be answered by year-end, possibly leading to further volatility
.I’m not fully bearish here, but I’m very cautious about what’s happening. The database is beginning to decline. I’ll share the intermediate models on Monday and discuss them then. I’m planning to post a couple of YouTube videos next week for clearer guidance. Just understand that this week mostly went as expected: we had Trump’s Asia tour, a truce between China and the US, and other positives. However, nothing has resolved the uncertainty in the air, and I expect we’ll be dealing with it for weeks. Things might get a little shaky moving forward.
