I have spoken on how central banks will be cutting rates likely to 0, and also implementing another QE program (will not be called QE but will still be stimulus). This will all be done to force money into stocks as there will be nowhere to go for yield. This is still coming.
What people need to realize, is this system all depends on confidence. It is what is keeping it going. Central banks cannot use the term QE for the new stimulus because QE was a 1 time desperate policy by central banks to prevent another 1920’s-30’s like global depression. If QE is brought up again, then market participants will realize that this is the new norm. QE did not work, central banks failed and everyone depends on central banks being the buyers of last resort. No more free market capitalism.
I have spoken on the US-China trade deal and why China holds the cards. They have no elections and have a good control over their people. They just need to wait it out for a weaker US President who will come from the Democrat side. Again, the Russians and Chinese loved Obama because they ran circles around him. He weakened America geopolitically and allowed Russia and China to catch up militarily. The Chinese know that President Trump needs a higher stock market and needs to avoid a recession to win re-election. President Trump is now in a position of desperation where he will have to take a deal dictated by China now. That was and is the plan. Just imagine Joe Biden or Elizabeth Warren attempting to speak and deal with President Putin and President Xi.
President Trump’s twitter outburst had many people talking. The Chinese surprised the Americans with their new tariffs. It was unexpected. I believe President Trump’s advisors are not doing a great job. They probably told the President that this trade war would be won easily…but China is not backing down. The day before the tariffs, Larry Kudlow said that he got off the phone with the Chinese and the trade talks were going well. The day after everything changed. President Trump said he received letters from President Xi and thought of him as a friend…only to call him an enemy with the tweet outbursts.
President Trump’s outbursts show signs of desperation and maybe even fear. He knows now the Chinese are not laying down easily. I have outlined how China and Russia are attacking US Dollardemand. That is what they are preparing for. The Dollar will be backed by the US military, and quite frankly, America has thrown everything at Russia and China where the only thing left is war or kicking them out of SWIFT payment systems. On a side note, President Trump’s Trade Advisor is Peter Navarro, the man who authored the book titled “Crouching Tiger: What China’s Militarism Means for the World”. In the book he proposes military options for America to deal with China…like blocking China’s shipping lanes (hence why China is militarizing the South China Sea and creating the islands to protect their shipping lanes).
So the question needs to be asked. Have market participants and others lost confidence in President Trump’s ability to win this trade war? It seems like it, although I always thought China held the upper hand so was expecting this. Majority of the market did not.
Looking at the chart of US equities, I did outline the potential lower high that could happen. This is why PATIENCE is the most important skill for a trader. On the daily chart we have our initial down trend wave break BUT have not made any swings (lower highs). This is what defines a trend so we should expect at least two swings. We have not made one yet. Will 2940 be our first swing? A swing is only confirmed with a lower low (in the case of a downtrend), this is why I am watching for a break and close below 2825 zone. Again, patience for waiting for the final structure. This is what I am watching for this week. I expect to have a pretty crazy sell off and gap down on Monday opening…another Black Monday perhaps.
Another chart you should watch is the Russell 2000, which is more close to confirming a break and a lower high.