Chris Vermeulen: Ahoy! Batten Down the Hatches, Mates

Friday, October 26, 2018
By Paul Martin

SilverDoctors.com
October 26, 2018

Chris says to get ready for some crazy price trends in the US stock market, and he says that for both fundamental and technical reasons…

by Chris Vermeulen of The Technical Traders

Get ready for some crazy price trends in the US markets as investors react to earnings, housing data and overall re-evaluations of future objectives. As we warned on September 17 with this post and on October 1 with this post, we believed the future Q3 earnings weeks and the 2~4 weeks leading into the US Mid-term elections could be very volatile. We even suggested a 5~8% price correction was expected to start after September 21~24.

What we did not expect is the Federal Reserve to raise rates, again, on September 26 – just days before the Q3 Earnings season actually started. Our price models for the Fed Funds Rates have suggested that any move above 2% FFR would put pricing pressures on homes and other assets. This research we completed was first published in 2015 here. This was the first time we illustrated our Fed Funds Rate Adaptive Learning modeling systems results. The chart within this article that shows that our model expected the US Fed to begin increasing interest rates in 2014~2015 to levels near 0.75~1.25. From that point, a gradual increase towards 2.0 was expected prior to 2018~19. Our price modeling system then expected a decrease in the FFR from 2.0% to between 1.5~1.75%.

The reason our model expected this decrease in the FFR near current time is because the balance between growth of asset values, credit expansion and consumer’s ability to navigate efficiently within these constructs becomes very constrained above 2%. In other words, as soon as the US Fed raising rates above 2%, they risk blowing holes in the economic recovery simply because it will outpace consumers ability to borrow and repay in an efficient manner.

The Rest…HERE

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