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In light of Powell’s comments last night, very little was revealed that was new.

He continued to assert that inflation was running too high and needed curtailing. This was despite requests by the interviewee for a period of ‘catchup’ wage price inflation, given that people had been made poorer by delayed responses in wages increases, when compared to cost-of-living increases, pushing disposable income and buying power to record lows. Powell re-iterated that inflation needed to be contained for real, organic, positive wage growth to occur in real terms.

The stock market, however, has decided to consider this as business as usual, with nothing new, shocking or hawkish, and the Dow, SPY and the NASDAQ have set out on a Santa rally.

There appears to be a sentiment of risk-on, that is showing support for risk assets, despite, in our view, most of the macro risks being to the downside in terms of a multitude of potential minefields such as, valuations, concerns surrounding Credit Suisse, wild card possibilities of “Russian hacks” (a popular story perpetuated by the World Economic Forum), escalation in Russia/Ukraine conflict. There is also the possibility of a pandemic MKII, which has seen monkeypox be rebranded “mpox” possibly to reduce the amount of mockery, that has been given towards those that are perpetuating the fear of the new disease of the moment.

DOW JONES 1D: already deep into Santa rally confidence
On top of all these downside risks, central bank digital currencies are being ‘trialled’, across the Western Banking system. Personally, I consider this a possible drill, the 12-week period which is involving transnational entities – banks on the western axis, America, Europe and the UK. This shows that a very high state of readiness for CBDC’s has already been established for the rollout of this Surveillance Dragnet data money.

All that is missing is the appropriate problem, subsequent reaction for the solution to be rolled out. As a result, we are exceedingly cautious. This sounds like “perma-bear-dom” to many, but for the short term we even expect Bitcoin to get a slight bid. So, there might be almost a fatigue of all the bearishness and bankruptcies in the crypto space for “Bull Trap” rallies.

This ‘fatigue of bearishness’ is showing quite clearly in the indices, which is seeing the best performing Dow not very far off previous highs now at around 34,000, following highs around the 36,800 level, just 6,4% off highs.

The chart below highlights that as we run into Q4, the pivot in interest rate policies will probably be news event-driven and that is when the bulk of a downside move would subsequently be realized for equities and potentially crypto.

In other words: risk-off could reassert and the biggest part of the moves actually occurs, as has occurred previously, [see Elliotwaves chart below] at the point that the pivot to interest rate cuts start to occur. So, with all the risks that are out there; the amount and rate of those interest rate increases, plus the lagging effect; plus the level of indebtedness, it would be quite salient to assume that at some point during the first half of next year, we will have a crisis. This would see movement away from tightening and a prompt reversal to interest rate cuts which would see the major part of the move to the downside actually take place.

Interest rate cuts do not initially pump the market at all. In fact, the inflection point, as shown by the chart below, of a reversion to cuts is usually event and fear-driven and is associated with chronic sell offs. After a long series of cuts and quite likely in this case quantitative easing, new stimulus and potentially a roll out of a whole new financial system. This could actually see us have a far longer problem, and greater reaction period, before the full solution is implemented – the birthing of a new financial system with CBDC’s & UBI.

The FED pivots. Real Crashes Occur, after the rates pivot downwards (Chart credit: Prechter/Alessio)
We are sticking our heads out & placing them on the block and calling for the “Great Reset” to take place during the course of next year. Many of the associated calamities that need to be engineered to occur alongside this reset and the subsequent rollout of the solution post the citizenry’s response. Likely occurring during the second half of next year.

Overall, this is a bearish call. I consider the indices a macro short as they take on a short-term Santa rally. Whilst Bitcoin may be traded long for a short spell along with other risk related assets, the medium to longer term is far more precarious with all risk to the downside. Inflation will come down very slowly unless we get a major demand-killing event, which would be absolutely lethal for all risk-on assets.

BTCUSD 1D: Short term Bitcoin Rally potential
Either way, we foresee a crisis event coming, which gets ever more likely as the Fed tightens. If they tighten in December again, even if at a slower rate, we foresee further collapses in the housing market and potentially other banking related crises. Other risks adding fuel to the fire could involve issues with China and Taiwan, Russia and Ukraine etc..

In short, buying and securing your wealth outside of bank accounts should be the highest priority to many, securing real, tangible physical wealth in an environment where digital wealth can be vaporized.