Money Monday: The Soft Landing

Take Note:

• FTX’s Sam Bankman-Fried will not be testifying in front of Congress tomorrow – say’s he’s “too over-booked”
• December 13, 2022 (Tomorrow): November CPI data released
• December 14, 2022 (Wednesday): FOMC rates announcement
• Markets should be volatile this week on lower-time-frames

Jerome Powell might be onto to something

• It’s very possible Powell will get the “soft landing” he’s looking for
• The pain in the economy is on an individual level
  • Banks and financial institutions may pull out of this one ‘largely’ unscathed
• This is the first time the money supply is shrinking (-2%)
• Is this “recession” a deflationary recession?
  • Sure, prices are up, but with Fed Fund Rates as high as they are and the money supply shrinking, it’s very possible we’ll see commodity and product prices go down in the next year or two

S&P 500 / $SPX

• Historically, every time there was a Fed pivot to decrease rates, the economy rapidly crashed shortly after
• Usually the market does well and the Fed pivots to reduce rates and prices crash
  • Over 2021, asset prices did extraordinarily well, but the Fed pivoted to increase rates and prices didn’t crash, they corrected
• The market corrected at best ~26% possibly because Powell got ahead of the issue quickly
  • Powell also said he plans to reduce the rate of increases, but will continue to increase rates nonetheless
  • This move could be facilitating the soft landing he’s looking for
    • We haven’t see the ~50% recession like we’ve seen in 2000 and 2008 (yet)

The Money Supply

• Despite every other market correction and recession, the Fed was unable to fix the money supply to decrease demand
• The money supply since February 2022 has been decreasing – the first time this has ever happened since the start of the record in 1959
• This is good and bad:
  • Considering the amount of money “printed” during COVID lockdowns, a correction in the money supply like this is needed
  • However, this correction is coming at the expense of the middle class

The Cost

• Last week we looked at personal savings, wage growth, and inflation
• We can clearly see how Fed policies have driven demand down with the money supply
• If the Fed pivots to start decreasing rates, that’s when I would start worrying for an actual crash
  • It would be in the fed’s and the economy’s best interest to hold interest rates (+/-) where they are now at around 4% for the foreseeable future
  • Rate decreases should happen very gradually and very slowly

Bitcoin / $BTC

• Crypto will not swing up or down until investors get answers on the following:
  • FTX and what will happen to Sam Bankman-Fried
  • Genesis insolvency / bankruptcy
  • Are other exchanges like Binance and Coinbase still safe for trading?
• Three lines we need to pay attention to:
  • The black support line – tests here are bearish confirmations of a continued downtrend
    • Additional tests here also confirm my thesis that price should bottom at the $14k range
  • The blue resistance trendline is the general downtrend Bitcoin has been following since November 2021
    • The fact that price has broken out twice above this trendline in the last two months tells me investors are close to finding a bottom
  • The red resistance line – a breakout above this line would be bullish on many levels
    • A breakout would show significant price strength above two major lines of resistance
    • This price structure would also confirm accumulation

Friday Crypto Review: It’s Still a Downtrend

Money Monday: Waiting for the Next Buy Signals

Friday Market Recap: S&P Bounces Off Key Resistance