Zach Scheidt Says Something's About to Break (Again)

There's a battle raging in the market right now. But not the market you're probably watching... [The Rude Awakening] April 20, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Zach Scheidt Says Something's About to Break (Again) - The Fed has at least one more hike to go at this May meeting. - The Street expects the Fed to cut rates soon after this last hike. - Zach gives you a great way to protect yourself from long-term bond risk. [The 3rd and Final US Currency Earthquake Has Started]( [Click here to learn more]( Thanks to President Biden’s Executive Order 14067, a former advisor to the CIA and Pentagon predicts the 3rd Great Dollar Quake has begun. The first was Roosevelt confiscating private gold in 1934. The second was Nixon abandoning the gold standard in 1971. Now, Biden’s plan could pave the way for “retiring” the US dollar. Your dollars could soon be confiscated – or made worthless. [Click here to see how to save your investment and retirement accounts](. [Click Here To Learn More]( [Sean Ring] SEAN RING Greetings from an overcast morning in Northern Italy! Good friend and colleague Zach Scheidt will launch a new service shortly. I’ll have more details for you soon. In the meantime, Zach kindly wrote this piece that’s important for you to read… especially if you like investing in bonds. Remember, Silicon Valley Bank went under because it didn’t manage its interest rate risk correctly. (In bond world, interest rate risk is price risk.) And that was on T-bonds! But if Silly Valley’s non-existent risk management team had read this piece, the bank would’ve remained solvent. Read on for some excellent advice on managing your bond risk correctly. And I’ll see you tomorrow. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Urgent Notice From Paradigm CIO Zach Scheidt!]( [Click here to learn more]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [Click Here To Learn More]( Something's About to Break (Again) [Zach Scheidt] ZACH SCHEIDT There's a battle raging in the market right now. But not the market you're probably watching... No, I'm not talking about the new banking crisis, company earnings, or even the stock market. One of the safest investments you could possibly make — an investment that millions of retirees are currently holding — is about to be a casualty of this high-stakes battle. Today, I want to show you what's going on behind the scenes and make sure you're protected from what could be a catastrophe for your retirement. A Tale of Two Bond Markets We all know that the Federal Reserve has been hiking interest rates. Higher rates are the Fed's only effective weapon against inflation. At the last Fed meeting, Jerome Powell and his colleagues raised interest rates by another 0.25% and indicated that the Fed would keep rates high until inflation is under control. Here's a chart of the Federal Funds rate, a good proxy for short-term market interest rates. [SJN] The Fed keeping rates high to fight inflation is one side of the battle. On the other side, we've got Wall Street traders who are looking farther into the future. These traders expect the U.S. economy to enter a recession soon. When this happens, Wall Street believes the Fed will flinch — you've probably heard people talk about the Fed's upcoming pivot — and allow interest rates to move lower. Here's a chart of long-term interest rates as measured by the 10-year U.S. Treasury yield. [SJN] Please notice two things in the chart above... First, the trend has been rangebound over the past several months. And since the beginning of March, long-term rates have actually pulled back even though the Fed was tightening. By keeping long-term rates low, Wall Street traders are effectively calling the Fed's bluff and expecting the Fed to cut rates quickly once the economy enters a recession. But if you've been paying attention to Powell's statements and actions, you should know that he’s not bluffing. And this conflict sets up a major risk for your retirement. What Happens When Powell Shows His Hand? In poker, there's a showdown point in each hand that typically happens when one player makes a bet, another player calls that bet, and then both players show their hands to see who wins. As Chair of the Federal Reserve, Powell is essentially making a bet by telling the market he will keep rates higher for longer. And by keeping long-term interest rates lower, the market is essentially calling that bet and telling Powell to prove it by keeping rates high. Here's the thing... Powell has plenty of resolve to keep rates high. And the Chair has carefully studied history, specifically the period of high inflation we had back in the 1970s. Over and over, Powell has referenced this period, telling the American public that he will not repeat the mistake of cutting rates too quickly and allowing inflation to return. Whether you agree with him or not, it's clear that the Fed Chair has absolutely no intention of wavering from this stance. So as investors, we have to wonder what will happen to 10-year rates if we enter a recession and Powell does notimmediately cut rates. Wall Street is in for a big surprise and will have to adjust its stance on long-term interest rates. Here's why that should matter to you and your retirement... When long-term interest rates are revised higher, bond prices will trade lower. If you're holding long-term Treasury bonds in your retirement account, those bonds will be worth less, possibly for years to come. Protect Yourself from Long-Term Bond Risk The risk of lower long-term bond prices frustrates me to no end. I hate to see retirees make what’s considered a safe investment, only to get hurt by Wall Street's brinksmanship. Yes, if you hold these long-term bonds until they mature in 10 or 20 years, you'll get your money back and the interest you've been promised along the way. But there are two major drawbacks to this approach. First, if you need the money in the interim, you'll be out of luck. You'll have to sell your bonds at a lower price and realize a loss on your investment. Second, while you're holding your long-term bonds and waiting to get your money back, inflation will continue to degrade the value of the money you will eventually receive. So in 10 or 20 years, that $1,000 per bond may not be worth all that much! Instead of holding bonds and waiting for Powell to show his poker hand, here's what I suggest. Sell your long-term Treasury bonds at what is currently a relatively attractive price. Then use the cash to buy short-term treasuries that mature in 6 months, 12 months, or 18 months. You could use bank CDs as well, as long as you don't have more than $250,000 at any one bank. When those investments mature, chances are good that long-term interest rates will be higher, which allows you to buy bonds at a lower price and get better long-term returns. Today's interest rate battle requires you to take action to protect your wealth. I hope you'll adjust your retirement savings so you're not caught in the crossfire! Here's to living a Rich Retirement, [Zach Scheidt] Zach Scheidt In Case You Missed It… A Rolling Recession Means the Market Is Fine [Sean Ring] SEAN RING Good morning from a lovely sunny day in Asti! I watched this [CNBC interview with economist and market watcher Ed Yardeni](. Ed Yardeni has forgotten more about the market than I’ll ever know. He’s a treasure trove of financial and economic history. I find his analysis cogent and fascinating. And he’s unabashedly bullish. So it made me reconsider my current misery about the markets and the economy. Yardeni disagrees with the Fed and does *not* see a mild recession in the second half of this year. Yardeni thinks Jamie Dimon, JPM CEO, was too bearish when he called a “financial hurricane” last year. And he applauded JPM’s stunning results, as well. If my analysis is entirely different from Ed Yardeni’s, it’s time to rethink my research. So that’s what we’ll do today. The SPX First, let’s update our look at the SPX. We initially drew this chart for the January 24, 2023, Rude edition called “[One More Test For the SPX]( Here’s the new, updated chart: [SJN] The Recap This is the daily candlestick chart of the S&P 500. The blue line running through the candles is the 50-day moving average. The red line swooping over the top of the candles is the 200-day moving average. I put two blue dotted horizontal lines on the charts at 4,100 and 4,300. Second, the real test is not getting above the 200-day moving average. We’ve done that already. The real test is the 4,100 resistance level. To be sure, a resistance level is a price at which an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price. For completeness, a support level refers to the price level that an asset does not fall below for a period. The 4,300 level isn’t as big a deal for the reasons I’ll show you. Ok, let’s begin. [The 3rd and Final US Currency Earthquake Has Started]( [Click here to learn more]( Jim Rickards is widely considered to be the #1 living economist in America. Throughout the years, he and his team have issued a number of bold calls which turned out to be 100% accurate: - They predicted the 2008 housing crisis years in advance… - They predicted Brexit and Trump’s 2016 victory… - They predicted Covid-19, months before the first case originated in China… - And much, much more. But none of that compares to Jim’s urgent new prediction… [Jim predicts gold is now entering into a super boom phase, one which could last for years and push the price of gold to $15,000 an ounce or higher.]( In fact, Jim is so certain that he’s already bet a significant amount of his own money on gold – and today, he’s on a mission to show everyday investors like you how to get started. [To see the exact steps to take to profit as gold soars higher, click here now.]( [Click Here To Learn More]( Walking Through the Story Let’s start with the purple “A” on the chart. At this point, the SPX had fallen through 4,300. But then it hovered between 4,100 and 4,300 for about two weeks. It made three attempts (the arrows) to break to the upside but couldn’t get it done. It subsequently fell through 4,100 and bottomed out at 3,900. From there, we move to magenta #1. This is a consolidation pattern in the box - hovering around the 4,100 level. It looked like it would resolve itself to the upside for a time. But that wasn’t meant to be. There was too much selling pressure, around 4,100. We bottomed out this time at 3,650. Two months later (magenta #2), we saw a similar consolidation pattern which finally resolved to the upside. Alas, a week later, the SPX met resistance at the crossroads of the 200-day moving average and the 4,300 level (purple B). After a steep sell-off, the SPX challenged the 4,100 level at magenta #3. And it failed once again. Following that failure, a furious sell-off ensued. The SPX bottomed out at 3,500 (magenta #4), the secular low for this period. This is the level Ed Yardeni thinks will hold. By mid-November, the SPX rallied again above the 50-day moving average. Then, at magenta points 5 and 6, it again challenged the 4,100 level and failed both times. But then something different happened. We made a higher low. This was the first time in a long time we had some sort of technical confirmation that something had changed. You’ll also notice that the higher low was itself a consolidation pattern that resolved itself to the upside. And once the SPX got above the 3,900 resistance level, that resistance turned into a support level that the SPX had just bounced off of. In technical terms, that’s called a “reverse of polarity.” What’s Next? We ended our analysis in January at magenta point 8. We weren’t sure if that break of 4,100 was for good. And it wasn’t. We hit another snag and headed back down to about 3,825 (magenta point 9), which was a higher low once again. Now we’re back up at magenta point 10. We’re at 4,154. But this may be another false breakout. Here’s why I think it’s not… - The SPX price > SPX 50-day moving average (DMA) - The SPX 50 DMA > The SPX 200 DMA This is characteristic of a bull market. And those averages look like they’ll be upward-sloping soon, another positive sign. The next stop looks to me like 4,300. Interestingly, if we look at volume by price, we get this: [SJN] To explain: The green bars show where the most volume has occurred by price level. The longest green bar is between the 3,900 to 4,000 levels. We’re pretty well above that now. The second longest green bar is right where we are now. That’s roughly between 4,075 and 4,175. If we get above there, you can see little overhead supply. With that said, the first resistance level will probably be 4,300. I think this can be surmounted quickly. After that, the upside target right now is 4,899. Why is that so high? Here’s the point-and-figure chart for the SPX: [SJN] I won’t get into the weeds for the P&F charts today. But quickly, every time we go up a block, the block gets an “X.” When we go down three squares, each one gets an “O” in the next column, but not before that move is completed. (And when we go up again, the Xs go in the next column after that.) The blue lines on this chart are the trendlines. According to the P&F chart, the SPX never signaled to get short. That is, it never broke its uptrend line. In fact, according to P&F’s special counting techniques, the target for the SPX is way up at 4,899. I show you this because I use P&F charts to identify upside and downside targets. And this means we’ve got much, much higher to go (potentially) in the SPX. Wrap Up De-dollarization is still a thing. We’re wasting blood and treasure in Ukraine. Congress can’t spend enough money it doesn’t have to buy votes for its re-election. But none of that matters… yet. The market is looking up. Perhaps way up. And until we’ve got a definitive sell signal from somewhere, I’d hang on… tight. We still love gold, silver, Bitcoin, and natural resources. That hasn’t changed. Just add the broad stock market to that list. Have a great day ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. 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