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Preparing for the Greatest Depression

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According to James Knightley, Chief Economist at ING, "The agreed fiscal relief package will undoubtedly help mitigate some of the negatives but unfortunately, it won’t be able to fully offset the effects of people staying at home as many businesses face tighter restrictions or are even forced to close." Obviously 900B, 4% (2 weeks) of GDP, can't offset the effects of lockdowns/catastrophic debt levels. With winter around the corner, and lockdowns littering the globe, I suspect this is only the beginning of what may turn out to be the greatest depression in our history. I believe global markets are about to crash, the likes of which we've never seen, and here's what my wife and I are doing to prepare:

- As some of you may know, my wife and recently moved. At our new place, we're saving $400 per month on rent.
- We've just sold our car, which was costing us about $800 per month between payments, insurance, and gas. With the cost of alternative transportation included, that's already $900 per month savings.
- In just a few short months, we've successfully reduced our monthly spending by about 30%.
- We don't socialize at restaurants or bars anymore, for many reasons, but mainly because we know we'd be blamed for killing grandma by the community.
- We don't shop as often, because we've chosen to pay off debt instead, and increase savings (Gold, Silver, Platinum, Tips, Cash).
- Our Christmas spending this year was down about 50%, notwithstanding the rising cost of goods and services.
- This is our new norm, and all the extra cash flow and lower debt levels, feels absolutely incredible guys.

I don't know what anyone else is doing, but I imagine many other households are becoming more lean, and are paying off debt/saving money instead of spending. If we see even a fraction of households in the US cut costs, like my wife and I did, GDP (the real economy), is going to get smacked even harder. Having said that, I do suspect many households will continue to trust in the FED, and their seemingly reliable governments, and won't pay down debt, won't save, or stop shopping on credit. This is really unfortunate, and is only going to exacerbate the problem, leading to mass insolvencies when rates eventually do rise.

Global Market Update:
- US majors are mixed at the open
- Vix is getting hammered after a strong rally to 31.50 yesterday
- European markets are in the green, with DAX and Euro Stoxx 50 lagging behind
- Asian markets are solidly in the red
- USD is holding onto a 90 handle
- Gold is down marginally to $1,871
- Q3 GDP up 33.4% vs exp. 33.1%
- GDP deflator 3.6% vs exp. 3.6%
- At 10AM we get Consumer confidence & Existing home sales numbers (exp 6.8MM)

Thanks for your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.

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As you can see below, we have a massive bearish haronic playing out on the daily. We've aready seen the short term haronic play out, and now it's time for the Titanic of harmonic's to crumble:

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Vix is off the lows, but is still seeing strong resistance around the 25 level:

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The Put/Call ratio is back near historic lows (.35), which means investors are positioned incredibly bulllish. Yesterday we saw a .59 handle, and today, all negative sentiment has seemingly disappeared:

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Ouch, consumer confidence just came in ugly at 88.6 vs exp 96.5. Existing home sales also came in lower than expected at 6.69MM vs exp 6.8MM. Stocks are rallying on the bad news:

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We're now back at the ever popular 368 level, where many of the moving averages converge across multiple timeframes. We should see some resistance here...

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Convincing rejection at the 368 level, as expected:

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A new research presentation by a masters student at John Hopkins University, just came out identifying, inter alia, the following, "Surprisingly, the deaths of older people stayed the same before and after COVID-19." Also, "the total decrease in deaths by other causes almost exactly equals the increase in deaths by COVID-19."

Judge for yourselves what this could imply. Here's the presentation: youtube.com/watch?v=3TKJN61aflI

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Vix has erased most of the day's losses, and we're now back at a 25 handle:

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Apparently John Hopkins removed the COVID study we discussed above from their newspaper in November, because apparently it supported "dangerous inaccuracies that minimize the impact of the pandemic." Lol.

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Here's a link to the letter from JHU on why they removed the presentation: jhunewsletter.com/article/2020/11/a-closer-look-at-u-s-deaths-due-to-covid-19

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Outside reversal candle on the weekly is clear as day:

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After a heavy sell-off in yesterday's cash market, the Dollar is looking strong again today, and is up .65%:

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The bulls are really struggling here to recapture the 368 level. We have 3 key moving averages (21 EMA, 50MA, 100MA), guarding the gates on the hourly:

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21 period EMA on the hourly was just captured briefly, and the bulls are now testing the 100MA (368.16). Let's see if bears issue another rejection...

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Another rejection:

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Losses accelerating here in the final hour of trade. Let's see if the bears can capture the 50 period MA on the 15m. It's been defended by the bulls for 2 days:

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3rd test on the 15m. Bears are definitely here now, look at that beautiful little spike in volume as we enter the final 30 minutes of trade:

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Dollar is catching a (rare) bid:

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Here we go, bears have recaptured the 50 period MA on the 15 minute, and there's really no floor below us. The next (real) support is the bottom of the channel. But, if the bulls can recapture this MA before the close, they may make a run for it, and take us higher into the close:

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Final 15m cande of the day, and the bulls have successfully recaptured 367 (50MA). Let's see if the bears are done for the day, or if they show up to take us to 366. Right now I'm having a flash back of the November gap parade. This morning's price action looked an awful lot like a short squeeze to me. A few gap up's and we're back above 370. However, I would say that with jobless claims out Thursday, I think markets are in for a shock. Lockdown's don't treat the labour market very well..

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* Correction above: Jobless claims are out tomorrow.

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Final minute of trade: Volume is increasing here as the bulls and bears fight it out for 367 (50MA). Right now it looks like the bulls have it:

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That's all folks! It was a lazer show today across the majors, with the algos fighting to decide which direction to take us. The bulls held onto the 50MA on the 15m, but failed to win the battle for 368. Absent a gap up overnight, 368 is in the history books. Let's see how things shape up tomorrow morning after jobless claims. I suspect it's not going to be good.

Have a great night everyone! Thanks for your time today. Cheers, Michael.