Apologies for the click-baity title, but I did want to get your attention to make (once again) my point that inflation is ON now and that the FED has actually pivoted while many are watching and don't see it that way. Let me explain.

Back when the FED started raising rates rapidly I grew worried that at this unprecedented pace of rate hikes, something would break. I stated this all along through each of my post. Foolish people and businesses simply do not have the acumen to hedge against the rapidity of dried-up liquidity in the markets. I did not know the banks would become the first culprit exposed in their foolish investment endeavors. But here we are.

Banks are failing because of their own stupidity and guess who gets to pay for it once again? That's right, you and I do through the continued devaluation of our U.S. dollar.

"But the dollar's getting stronger", you emphatically retort.

Yes. It was. As the FED moved to increase rates in a reactionary manner, as they always are, the dollar did gain strength and is currently fairly strong, relatively speaking. However, things will soon change and many do not even know it as they are focused on the wrong indicator, FED rate hike action and future interest rates. While this is certainly still important, it does not tell the whole story.

As you know, I have been calling for a pause or pivot from the FED soon. That pivot has already come. "How so?", you asked. The FED has not articulated strong indicative language regarding a pause or pivot. That's true. But while the banks were failing, the FED did begin to guarantee depositors their money due to 'systemic risks'. I've heard this before (think 2008 and the BIG 3).

In guaranteeing depositors their funds, the FED mushroomed its balance sheet by roughly $300 billion dollars last week alone! And this may just be the beginning! Incredible.

This is the pivot that I was looking for from the FED. So, while everyone else continues to focus on what the FED will do next in terms of interest rates, savvy investors have already spotted the change and recognize that it's now inflation ON!

This subtle (or not so subtle, pending perspective) change in direction correlates with three important thesis points that I have been making all along:

[*] That something will break

[*] That the FED will pause/pivot

[*] That we will see a blowoff top in the US stock market

It also aligns with current technicals.

As you can observe from the chart above, price action has retested our macro-downtrend line precisely as anticipated, has bounced from there as anticipated, and is currently trending up as anticipated.

I do believe this is the beginning of our blowoff top with a price target of US500 to be at or around $5,500 to $6k by early to late fall. Maybe early winter. Timing is difficult.

Best to you all,

Stew

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a year ago · stewdamus