Conviction, Guts Finally Paying Off in Bullion

With its weak point ‘A’ low and its obviousness, the pattern shown should not be considered reliable for predicting a precise top. However, it can still serve us in several ways. For one, the easy move through p has shortened the odds of a rally to at least D=135.90. Also, a pullback to the green line would trigger a ‘mechanical’ buy sufficiently enticing that we should not want to miss it.  And if p2=123.76 shows stopping power, that would validate the pattern itself and its target.

I hesitate to call Bitcoin’s laborious 36% selloff from the $126k top in mid-October a correction, since there’s a good chance it’s in a bear market and that it will never exceed that high. That will almost surely be the case if stocks have entered a bear market. It would likely be the worst since the 1930s, creating an investment environment in which a purely speculative hobgoblin such as Bitcoin could never survive, let alone flourish. Trump’s MAGA narrative would also be a casualty, since merely scraping by, rather than achieving greatness, would become the central concern of most Americans.  Regarding the weekly chart that I’ve displayed this week, it leaves little room for doubt that Bitcoin’s selloff will continue down to at least d=73,076. Moreover, a rally from current levels to as high as the green line (x=112,993) would trigger a ‘mechanical’ short, presumably amidst high-fiving by Bitcoin fans excited by the possibility of new record highs.

T-Bonds have been treading water since Trump took office. His eagerness to stimulate growth with a gusher of fiscal spending and consumer credit has increasingly weighed on fixed-income markets. However, this has been more or less offset by the President’s ability to attract buyers of Treasury debt from outside the U.S.  The chart says this precarious balance is about to end with a fall in bond prices and a corresponding rise in long-term yields. At a minimum, TLT is headed down to the red line, a midpoint Hidden Pivot support at 78.05. If yields on the long bond were to rise commensurately, they would hit 5.33%, up from a current 4.79%.

That might not seem like much, but it would squeeze the last breath from a consumer economy already suffocating from debt fatigue and persistent inflation. The already shaky housing and auto sectors would collapse, presumably led by a stock market that is filled mostly with hot air. Nor are there any guarantees that the red line on the chart will hold. If it doesn’t, and TLT falls to the next logical plateau at 62.23, the damage this would do to the U.S. economy and to our way of life is distressing to imagine.

Any spike in rates would be short-lived, since it would quickly deflate the economy into deep recession. Since this would be fundamentally a deleveraging event, investors should not be looking for opportunities at this moment; rather, they should secure their capital in safe-haven assets such as Treasury paper, bullion and utility companies with strong dividend histories. The burgeoning healthcare sector’s ability to withstand hard times is not a given, since it thrives now only on the illusion of prosperity. _______ UPDATE (Dec 14): Friday’s vicious reversal, which featured the gap-down penetration of a ‘hidden’ midpoint support, implies that TLT’s steady progress toward the 78.05 target identified above remains on-track. More immediately, look for this phase of the bear market to achieve the 85.75 target shown. A corresponding move in long-term rates would push them to 4.95% from a current 4.86%.

Microsoft spent the last two days of the week churning a weak ‘mechanical’ buy signal. It is considered weak because the pullback to the green line where we typically do our buying followed a high along c-d that barely reached the midpoint Hidden Pivot, let alone the ‘sweet spot’ midway between p and p2.  How the stock treats the signal has consequences for the broad averages, since the company trades with a value of around $3.6 trillion. If MSFT dips below c=464.89 without punching through p, that would add to the evidence that stocks are in a bear market. _______ UPDATE (December 14): Traders and the, um, ‘investment community’ spent the week screwing the pooch, so nothing has changed in the analysis above.