Patience, Grasshopper
Awaiting another buy point aboard this bubble
The previous letter spoke of waiting for a pullback to re-load longs for this, and since that time, nothing.
This past Thursday we has a day where new lows exceeded 4% of daily total issues, followed by a volume bar on Friday, all while we’re at 14 and 13 days, respectively, of the last 20 days in the DJIA being up. This overbought condition that has persisted since the last letter looks ready to crack. Right now.
There are two big mathematical/technical factors converging right now. The first, is that Red Compression (a proprietary indicator available through Vantage Point software https://www.vantagepointsoftware.com/ ) has began flashing a warning the past two weeks of an imminent, large move — a move on the magnitude of at least 10%.
The other is the indicator for Periods of Extreme Vulnerability has at least 5 weeks to go before we can possibly be under such a period. That is not to say serious market drops don’t occur when not in one of those periods, but, historically, that’s been very, very rare. I think a trader is far better off to look at any market drop that does not occur in a Period of Extreme Vulnerability as a wonderful time to be a buyer.
So we’re looking for a drop, which it looks like Friday was the first day of, from which to re-build a serious long position. We’ll wait until we get a good Volume Tunnel Signal; and/or VolDiff signal (the difference between Implied and actual volatility) to be our trigger.
Paid subscribers will be apprised after we get such a situation.
Now, as mentioned in the previous letter, asset prices are at insane valuations, historically5. If anyone caught the Jeremy Grantham Interview on CNBC this week - WOW!. He got baked pretty good. Not that I think Grantham is wrong — he’s absolutely correct about the historical valuations we’re seeing, and the bubble we’re in.
One of the great lessons to me from the Global IQ Test of 2020 was this → Government spending with the only intention being to roll over all existing debt is simply creating money out of thin air. Such money goes into inflated consumer good and/or assets. Pretty simple plumbing, and no matter how overvalued things may be, this rule still applies.
And we are running deficits galore in here, and tax receipts are just anemic compared to the past. This next chart, taken by pulling the nightly Treasury Statement’s payroll taxes paid for that day, and looking at things on a comparative, rolling basis:
In late ‘23, things broke in terms of tax receipts and it hasn’t gotten better. Spending continues unabated. We are on pace to rival the degree of spending we saw in 2020, and if not that extreme, then this will be the historical runner-up year.
This is not only beginning to show up in the inflation numbers, but a reason on we have such extreme valuations and the markets continue.
At some point, the reality of higher rates will break things, but for now, the party has some time to go, especially if we get a quick pullback such that there is time to run before the Next Period of Extreme Vulnerability -OR- we get a day with new lows/total issues on NYSE <.00325. Such an event would reset the clock on going into a Period of Extreme Vulnerability by at least a calendar quarter.
Lemnicoin
The European Patent on Lemnicoin https://lemnicoin.com is out. Among other things, this renders Lemnicoin able to permit it’s quantum-resistant and theft-proof qualities to be extended to Bitcoin, which is entirely vulnerable to these types of attacks. To use, someone needs at least one whole Lemnicoin for every bitcoin they have (rounded up to the integer). As there are only 10.5 million LEMNI that have ever been minted, and about double that number in BTC, I suspect that there may be a speculation play on LEMNI coming up. LEMNI Price It seems a small insurance to pay to have y9our Bitcoin quantum safe and wallet-theft proof.
Strategy