Wall Street’s Next Big Test

Here’s How They’ll Ace It… [Morning Reckoning] December 12, 2023 [WEBSITE]( | [UNSUBSCRIBE]( [SEVEN PREDICTIONS SUMMIT]( Wall Street’s Next Big Test Baltimore, Maryland December 12, 2023 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Plus: An important update on my latest gold trade! As the year-end melt up continues, I can’t help but reminisce about the insane rallies we enjoyed during the height of the Covid Bubble. The holiday rally of 2020 featured a massive crypto rally and subsequent NFT frenzy, meme stock silliness, and unbelievable gamma squeezes that launched stocks into the stratosphere into early 2021. It was one of those rare market moments where no analysis, charting, or common sense was required to rake in astronomical gains. If you had a brokerage account and could scrounge up a few bucks, you had a great shot to grab some of the “free money” flying around… Of course, all periods of irrational exuberance end the same. Meme stock mania and most of the gamma squeezes peaked and abruptly reversed during the first quarter of 2021. The crypto market faltered shortly after, while tech-growth pounded the final nail in the bubble’s coffin in Q4. Most self-proclaimed market geniuses gave back most (if not all) their hard earned gains as the grinding bear market of 2022 emerged. Today, we’re more than two years removed from the great growth apex. But we’re beginning to see signs of life from some in these former bubble stocks and sectors. If you’re looking for strong trade candidates, most of the familiar players from the Covid Bubble are back in the spotlight. The crypto rally is accelerating this week as Bitcoin makes a run above $40K (it was threatening to break below $25K as recently as mid-September). Short squeezes are triggering across the market’s most beaten-down stocks. And many of the formerly hot tech-growth names are breaking out of big bases following nearly two years of abysmal performance. [Offer Pending: Please confirm your address…]( Your name is on a list of people eligible to claim the [“most dangerous book in America.”]( We with only 500 copies left, we may run out of stock soon. So, here’s how to claim your copy: - [Click this link]( [to watch Jim's short message .]( - Review your account information. - Confirm you’d like to accept Jim’s offer. And I’ll get your copy of the most dangerous book in the mail right away. [Simply click here and learn how to claim your copy.]( [LEARN MORE]( Tech Growth Snaps Back During the summer months, we discussed the resurgence of the ARK Innovation ETF (ARKK) – and how many of its beaten-down components were nearing significant base breakouts. The decimated tech-growth names looked as if they were finally catching higher as market conditions slowly improved. Many of these stocks began the base building process in late 2022. After several head fakes and retracements, investors were starting to see these stocks sustain breakout moves and actually extend higher. By July, ARKK had rallied 60% since the beginning of the year. But the stocks fueling the run weren’t all “easy” trades to ride in Q1 and Q2. In fact, the ARKK comeback has been anything but a straight line. The initial snapback began right as the calendar flipped to January. ARKK rocketed higher by nearly 50% before it flamed out at the start of February, giving back much of its year-to-date gains just as quickly as it rallied. Even more concerning was a brief drop below $35 in May as ARKK tested its March lows. The fund had already slipped below its 200-day moving average and appeared destined for lower prices. But a big breakdown never materialized. That $35 test held, and ARKK managed to vault off its 200-day moving average following the regional banking crisis scare. It steadily pushed higher – quickly approaching its August 2022 relief rally highs. Yet once the summer momentum faded, the ARKK stocks encountered some serious turbulence. By late October, ARKK had dropped 30% from its 2023 highs. Some of the individual components were even cut in half as investors worried the market was slipping toward another ugly breakdown. It was another big test for these former Wall Street darlings. They would either find support and bounce – or tumble into oblivion. Of course, we all know what happened next. Thanks in part to an abrupt sentiment shift, the market’s heating up as the year winds down. The tech-growth names have done more than just bounce. These stocks are popping left and right – and there’s still time to capitalize on their powerful breakouts. While ARKK still has some work to do, it’s nearing a major breakout level at $50. If it can post a convincing move about this level, it could sustain a bigger rally into 2024. If the recent rally is any indication, it’s ready to make the move. ARKK jumped 35% in November, notching its best monthly performance since its inception in 2014, Benzinga reports. I never would have guessed last month was ARKK’s strongest ever – especially looking back on its incredible pandemic ascent. Even before the Q3 correction, we’ve talked about keeping an eye out for individual tech-growth stocks completing big bases. Now, it’s time to strike as the year winds down. Not every tech-growth stock is going to be a big winner. But the ones that are able to harness this newfound momentum will provide fast returns heading into 2024. What’s Going On With Gold? Gold futures quickly shot above $2,100 to kick off December trading. And I’ve told you a quick jump to $2,600 is possible before gold even thinks about consolidating… once we get through some of the whipsaw action. But gold has somehow fallen back into its range below $2K once again. The VanEck Vectors Gold Miner ETF (GDX) is also struggling. What gives? I’ll take you through the charts[this morning at 11 a.m. Eastern on Top Trades Live!]( I’ll discuss the maddening action we’re seeing in precious metals right now. You’ll also get to see some of my favorite actionable trade setups for the week. [Click here to join me!]( Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Over 62 And Collect Social Security? Take Action Immediately!]( [Click here to learn more]( [If you’re over the age of 62 and currently collect Social Security, you need to prepare now]( . Because Biden has given our country the worst inflation in decades – and many warn things will only get worse from here. Worse yet, the Social Security check you receive now may not keep pace with inflation… [Which is why, if you don’t act now, you could fall behind in the months ahead]( . Is your retirement at immediate risk? [Click here now to get the simple, step-by-step actions to survive inflation]( . [LEARN MORE]( In Case You Missed It… The Four Pillars of Modern Civilization Sean Ring, Editor [Sean Ring] SEAN RING Good Morning Reader, Before we get started, I wanted to point your attention to our latest YouTube video. I interviewed Alex Krainer, founder of Krainer Analytics and creator of I-System Trend Following. We talked about trend trading and current market trends to get ahead of. Check out that video by clicking below: [yt img]( This week, I wrote a piece for the Rude Awakening titled “[Back to the Caves, Peasants!]( In it, I quoted Michael Shellenberger, author of Apocalypse Never. He recently gave an interview with Tucker Carlson in which he derided those who would attack the four pillars of civilization. "We know that the pillars of civilization are cheap energy, meritocracy, law and order, and free speech, and all four of those pillars are currently under attack," said Shellenberger. The subconscious mind immediately recognizes and accepts truth. As long as private property is included in the category of law and order, I’m on board. All freedom springs from private property, which is why the other team quotes (and misinterprets) Proudhon all day long. After all, if property can be stolen, it must exist in and of itself first in the possession of an owner and, therefore, cannot equal theft. It’s also why many Americans will never forgive Jefferson for changing the Declaration of Independence’s words from “life, liberty, and property” to the more cheerful but far more vague “life, liberty, and the pursuit of happiness.” In 1689, John Locke argued in Two Treatises of Government that political society existed to protect "property," which Locke defined as a person's "life, liberty, and estate.” Jefferson would have done posterity a world of good had he been a bit less lavish with his words. Civilization has always been built upon certain foundational elements enabling growth, sustainability, and prosperity. These components fuel our world's physical and economic engines and shape our societies' moral and intellectual framework. In this Morning Reckoning, let’s dive into civilization’s pillars without knocking them over. Cheap Energy: The Dynamo of Progress The first pillar, cheap energy, is the lifeblood of modern civilization. In its absence, the machinery of economic progress grinds to a halt. From fossil fuels to renewable sources, cheap energy powers our homes, industries, and transportation. It’s the driving force behind economic growth and technological advancement. Access to affordable energy is so pivotal that it directly correlates with a nation's quality of life and economic development. Unfortunately, we’re witnessing what happens to a country when it shuns cheap energy for political points. [chart img 1] Credit: [Capital Economics]( Germany stupidly went along with US sanctions against Russia and is paying for it dearly. They were never going to work, for myriad reasons I stated in the Rude and for three, in particular, my erstwhile colleague Jim Rickards wrote about in Strategic Intelligence: - The target country must have a small- or medium-sized economy with little robustness or resiliency to sanctions. - The target country must have limited access to alternative payment channels and few allies in any effort to obtain hard currency. - The target country must have limited hard currency reserves or gold with which to evade or wait out sanctions. How bad is the German economy currently? Let’s read what Capital Economics has to write about it: German economy still very weak - The rise in the Ifo Business Climate Index (BCI) in November mirrors the increase in the Composite PMI released yesterday but leaves the index deep in contractionary territory. It does not change our view that GDP will contract again in Q4 and will remain in near-recession conditions in the first half of 2024 too. - Separate data released this morning by the Federal Statistics Office confirmed that GDP contracted by 0.1% q/q in Q3 after flatlining over the first half of the year. - The outlook remains poor for the German economy. We expect GDP to contract again in Q4 and growth to remain sluggish at best thereafter. Higher interest rates and a softening labour market should weigh on investment and household consumption in the coming months, and the constitutional ruling on the debt brake could lead to an additional, sharper-than-intended fiscal consolidation next year. Sanctions support will go down in German history as the most asinine government decision of the early 21st century. (The hysterical decision to close down its nuclear power stations after the Fukushima disaster in Japan is a close second.) With cheap energy, Germany is a powerhouse. Without it, it’s a damp squib. Historically, civilizations that harnessed energy effectively, whether through windmills, water wheels, or coal-fired steam engines, often led to innovation and wealth. Pursuing more efficient and sustainable energy sources continues to shape global politics and economics. Meritocracy: The Ethos of Fairness and Excellence Meritocracy, the second pillar, is the principle that positions talent, effort, and achievement as the basis for progress and recognition in society. It’s a cornerstone for fairness and is instrumental in nurturing talent and hard work. In a meritocratic system, individuals are given opportunities based on their abilities and merits rather than their social status or background. This system encourages a culture of excellence and innovation, as people are motivated to develop their skills and contribute effectively to society. Meritocracy is significant because it fosters a sense of justice and equality, which is essential for social cohesion and stability. It also drives economic efficiency and productivity, as the most capable individuals are positioned in roles where they can make the most significant impact. The most glaring example of the lack of meritocracy must surely be in US college admissions. There are so many colleges to choose from, and almost no one is going to the right school for themselves. Why? Because the process is no longer meritocratic. Have a look at this: [char img 2] Credit: [@TheRabbitHole84]( Helping is good. Pandering is not. The US no longer has the world’s best universities, just the most expensive ones. Law and Order: The Framework for Stability and Justice Law and order form the third pillar, providing the legal and moral framework essential for the functioning of society. This pillar encompasses the laws that govern behavior, the institutions that enforce these laws, and the judicial systems that interpret them. The rule of law is fundamental in safeguarding rights, ensuring justice, and maintaining social order. It creates an environment where individuals can exercise their freedoms while respecting the rights of others. In societies where law and order are strong, citizens feel safer, businesses operate more efficiently, and governments function more effectively. This pillar is critical in upholding democracy, protecting property rights, and ensuring that society operates in a predictable and orderly manner. Without it, there is a risk of chaos, injustice, and the breakdown of civil society. There are so many examples to choose from. But I’ll save myself a thousand words by merely posting a picture of Minneapolis during the riots, where precisely zero people were arrested. [tmz news img] Credit: [TMZ]( Free Speech: The Vehicle of Expression and Innovation The final pillar, free speech, is a fundamental human right. It allows for the exchange of ideas, debate, and dissent. Free speech is crucial for the development of a society as it fosters an environment where creativity and innovation can flourish. It enables questioning the status quo, essential for scientific advancement, social progress, and the fight against injustice. Moreover, free speech is integral to the functioning of a democratic society. It ensures that governments remain accountable to their citizens and empowers individuals to participate in politics. Societies that uphold free speech tend to be more resilient, adaptive, and progressive. Conversely, the suppression of free speech can lead to stagnation, oppression, and social unrest. Luckily, there’s some hope: [elon musk img] Wrap Up These four pillars — cheap energy, meritocracy, law and order, and free speech — are fundamental to the flourishing of modern civilization. Cheap energy powers our economies and innovation; meritocracy ensures fairness and rewards hard work and talent; law and order provide the necessary framework for societal stability and justice; and free speech fosters an environment of creativity, accountability, and progress. Together, these pillars support a society that is not only economically robust and efficient but also just, fair, and conducive to the well-being and development of its citizens. As we navigate the complexities of the 21st century, fighting those who’d knock down these pillars is essential to building a resilient, dynamic, and prosperous civilization. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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