Bonds & Stocks Nearing Time for 3 – 6 Month Lows; Jan/Feb ’23 = Cycle High.
Outlook 2022/2023 – A New Currency War Begins
09-29-22 – The year 2021 completed the latest 40-Year Cycle of Currency Wars and ushered in a new one. Cycles never ‘end’; they just transition to a new phase after completing a previous one. This particular 40-Year Cycle dates back to (at least) the 1200’s in Europe and (at least) the late-1600’s in the Americas.
In each case, it pits the interests of paper/fiat (often debt-backed) currency against hard currency (usually Gold or Silver). That has timed everything from the rise and inevitable fall of the Continentals (1776 – 1781) to the return to a Gold Standard after a contentious election focused on that topic (1896 – 1901) to the Jamaica Accord (global fiat ‘divorce decree’ from Gold) and subsequent plunge in fiats/surge in metals (1976 – 1980/81)… as well as intervening currency battles in 1816 – 1821, 1856 – 1861 & 1936 – 1941.
They all projected a future battle in 2016 – 2021.
In 2014/2015, INSIIDE Track published articles titled: 2016 – The Golden Year – explaining why Gold should bottom in late-2015, see its first sustainable surge (in many years) in 2016, and ultimately advance into late-2020/early-2021 before a topping process took hold. (insiidetracktrading.com/wp-content/uploads/2020/04/2016-The-Golden-Year-III.pdf).
The Dollar Index masked that degradation by spiking higher into early-2017 cycle highs and then setting a trading range (over the next 12 months) in which it would trade for 5+ years. It was not until those Gold cycles matured, in late-2020/early-’21, that the Dollar Index was projected to enter a new ~2-year surge and break out of its trading range.
In the midst of this latest 40-Year Cycle of Currency War, a new combatant emerged – cryptocurrency. It began with Bitcoin and quickly evolved to dozens of other ‘coins’. All that set the stage for parabolic advances – first in Gold and then cryptos – in 2020/’21.
Late ‘20/early-’21 saw Bitcoin come back to life, in the ‘spring’ of its latest season. It remained hot through the majority of 2021 – its ‘summer’. It wasn’t until late-’21 that ‘fall’ set in… and did it ever ‘fall’!?! That led to the now infamous ‘crypto winter’ in 2022.
However, during each month of that ‘fall’ and ‘winter’ (since Dec ‘21), INSIIDE Track has remained steadfast on one pivotal and decisive cycle – projecting Bitcoin to plunge into Sept ‘22 before a bottom would by cyclically ready to take hold. Weekly cycles concurred and projected a bottom by/on Sept. 23. Cycles would begin to turn positive on Sept 26 – 30.
Digital Dollar
The month of September was expected to be a transitional one with respect to digital/crypto currency – in particular Bitcoin. However, while most of the focus is on Bitcoin, Ether, and other cryptocurrency, the discussion of a developing ‘digital Dollar’ continues to evolve. Two particular statements by Jerome Powell were closely timed with a pair of lows in cryptos – the June ‘22 low in Ether and the Sept ‘22 low in Bitcoin:
6-17-22 – “The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday, weighing in with generally positive remarks on a hot-button topic at the central bank that has left policymakers divided.
‘A U.S. CBDC (central bank digital currency) could… potentially help maintain the dollar’s international standing,’ Powell said in introductory remarks to a research conference held by the central bank on the international roles of the dollar…
Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.” Reuters.com
9-28-22 – “Federal Reserve Chairman Jerome Powell says the U.S. central bank is looking at whether to issue a digital dollar with a “very broad scope.” He noted that the Fed is collaborating with Congress and the executive branch on whether to issue a central bank digital currency.
Federal Reserve Chairman Jerome Powell provided an update of the central bank’s digital dollar work Tuesday during a panel discussion on digital finance hosted by Banque of France…
Powell explained that the Federal Reserve is looking very closely at “the potential costs and benefits” of issuing a central bank digital currency (CBDC) in the U.S. He detailed: ‘We are looking at it very carefully. We are evaluating both the policy issues and the technology issues, and we are doing that with a very broad scope.’
However, Powell clarified: “We have not decided to proceed and we don’t see ourselves making that decision for some time.” The Fed chairman explained:
“We see ourselves as working in collaboration with Congress … but also with the executive branch which brings expertise to many of the issues that we have to deal with here…. At the end of the day, we will need approval from both the executive branch and Congress to move ahead with a central bank digital currency,” elaborating:
‘We see this as a process of at least a couple of years where we are doing work and building public confidence in our analysis and in our ultimate conclusion.’ … Powell concluded: “That’s where we are, we’ve got a lot of work to do.” News.Bitcoin.com”
It is cyclically-significant that this topic is coming to the foreground as first Ether and then Bitcoin go through cycle lows. As the entire crypto arena is given more credibility, and as both Ether & Bitcoin have tested and held their 2DGR retracement levels, a bottoming phase could begin to take hold.
This is in perfect sync with the onset of a new 40-Year Cycle of Currency War and the future completion of a ~14-year Dollar Index advance. Hold on tight!…
Stock Indices continue to decline from their mid-Aug ’22 highs, peaks that fulfilled a myriad of upside targets in most indexes with many reaching their ultimate 2 – 3 month upside objectives and fulfilling related expectations from the mid-June ’22 projections for ‘the largest rally of 2022’.
It is important to reiterate the significance of those mid-Aug peaks since they set the stage for the drops to new 2022 lows that have now been seen.
At that time, the DJIA surged right to its ~34,200/DJIA objective – the final multi-month upside target for its mid-June & mid-July ’22 buy signals – likely setting its expected 3Q ’22 peak without being able to turn its weekly trend up (that price action was the key factor).
It peaked in between a pair of key weekly cycles – topping one week after a recurring 14 – 15 week high-high-high Cycle Progression but in line with an overriding 33-week high-high-(high) Cycle Progression (that was 1 – 2 weeks shy of a precise ~8-Month Cycle, which is typically ~34/35 weeks).
Simultaneously, the S+P Midcap 400 also peaked in mid-Aug ’22 – within days of a ~21-week low-high-low-high-high-high-(high) Cycle Sequence while fulfilling an over-arching 41 – 43-week low-low-low-high-(high) Cycle Progression and completing a full .618 rebound of its Nov ’21 – June ’22 decline… without turning its weekly trend up. That projected a drop to new lows.
Reinforcing those indexes, the DJTA topped in mid-Aug ‘22 in perfect sync with a 20-week high-high-(high) Cycle Progression while completing successive advances of 33 days each (wave equality).
Not only were those successive rebounds equal in duration, they were equal in magnitude – with both rebounding ~2,600/DJTA points. It was a textbook ‘wave ‘4’ bounce equals wave ‘2’ bounce’ that set the stage for a wave ‘5’ decline to new intra-year lows (now being fulfilled).
Most other indexes failed to turn their weekly trends up during that rally (into mid-Aug ‘22), signaling subsequent drops back to their mid-June lows. That has now been fulfilled… ushering in a pivotal period…
Wave ‘5’ Lows Imminent?
For multiple reasons, a low at this time – and near current levels – could usher in a longer-lasting consolidation phase before the next decline. That is reinforced by the overall wave structure in most indexes – that are now fulfilling a type of wave ‘5’ declines. However, a bottom must take hold near current levels for that to be the case!
That means that a subsequent ‘a-b-c’ rebound (a rally that is one degree higher in magnitude than the mid-June – mid-Aug ’22 rallies) could unfold and ultimately take many indexes back to their mid-Aug ’22 highs – levels that represent the wave ‘4’ rebound peak on the way down. They are now viewed as the ‘4th wave of lesser degree’ resistance and/or upside targets ONCE a low has been confirmed…
Bonds & Notes have dropped to new multi-year lows after rallying into, and peaking during, early-Aug ’22 – the latest phase in a ~12-month cycle that has timed highs in July/Aug ’18, July/Aug ’19, July/Aug ’20 & July/Aug ’21 – and attacking upside targets at 145 – 150/US & 122-00 – 124-00/TY.
That was expected to time a multi-month peak and spur a new wave down, corroborated when Bonds & Notes turned their weekly trends down. They have since fulfilled that and are matching the duration of their 2016 – 2018 declines – an indication this decline could be nearing a multi-month bottom.
On a broader basis, they are moving in lockstep with inflationary expectations for 2020 – 2022 and with analysis for a multi-year peak in mid-2020 followed by a 2 – 3 year decline.
Within that context, several factors continued to point to Sept ‘22 as the ideal time for a peak in multiple inflation factors – some of which are already validating that outlook. Many commodities, and the GSCI, have already peaked and turned down.
Related economic indicators, (CPI, PPI, PCE, etc.) will not be able to validate or negate this outlook (for a Sept ’22 peak) for another month or so, but related markets are expected to begin confirming in the coming weeks. Oct ‘22 could be revealing.
Looking out over the next 3 – 6 months, the most likely time for the next multi-month peak is in 1Q ’23. That is the next phase of a 17 – 18 month low-low-high-high-(high?; Jan/Feb ‘23) Cycle Progression and a ~5-month high-high-(high?; early-Jan ‘23) Cycle Progression…
Longer-term investors and hedgers could have liquidated long positions in Bonds & Notes in 3Q ‘20 and sold intermediate rallies in 3Q/4Q ‘20 and added to short positions in Aug ‘21, in sync with trading strategies described in INSIIDE Track.
3 – 6 month traders could have covered a portion of these short positions in June and could now cover another portion of those shorts at this time.” TRADING INVOLVES SUBSTANTIAL RISK!
Bonds & Notes fulfilled analysis for a rebound peak in late-July/early-Aug ’22 followed by another drop to new lows (and corresponding rise in interest rates). That is nearing fruition and Bonds (along with Stock Indexes) are nearing the time and price levels for decisive, 3 – 6 month lows. Inflation cycles should ultimately push interest rates higher into March/April ‘23… but these sell-offs are nearing the time (Oct ’22) for a pivotal low in Bonds… at the same time stocks are showing completion of a full Elliott Wave downtrend.
2021/2022 was expected to usher in a dramatic shift in multi-decade cycles – timing everything from now-validated War Cycles (late-2021 into late-2025), European Unification Cycles (2022 – 2025), Drought Cycles that peak in 2021/22 and shift to Deluge Cycles in 2022/23, Agriculture Cycles that time 80-Year shifts (beginning in 2022/23), Currency Wars (2021)… and Interest Rates.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.