The Great Centralization Game
Weekly Plan 1.1.24
Alright traders, back to work!
Slightly abridged post this week but nonetheless some important views from my perspective. I share my 2024 views on Crypto, Bitcoin, Gold as well as Energy (Uranium and Oil). To make it easier to access the newsletter, I am sharing a 24 HOUR FREE trial.
Both Nasdaq and SPY had a banner year, rising about 55% and 25% respectively. The sentiment for next year amongst analysts is very positive, as well as several correlated markets, like Bitcoin and the tech stocks look poised to move higher.
In my previous weekly post I shared two very important levels from my perspective- 4850 and 4600.
A summary of my view is below-
I think as long as 4850 holds, we can revisit some of the levels around 4600-4630.
Further selling if we test 4600 will need a couple of weekly level closes below 4600, else we can rise to retest 4850 again.
What happens if we begin to close above 4850? I see this scenario be short term good for tech stocks and I can see the Nasdaq NQ, which is around 17000 now rise into 18500. So in this aspect, NQ 16000 could be an important level for the year.
So in this respect, I will assign a lot of importance to 4600 and 4850. To some extent, this 4600 level has same importance as my 4130 level back in October. I think there is ought to be some meaningful reaction if this level is tested again.
Ultimately however my view is that once we take out 4600 on the downside, I expect a test of the 2022 lows around 3500 on the S&P500 index. Please read the IF statement again.Conversely, as long as 4600 holds, we could see more range bound action here again at these levels.
I am NOT predicting that we can not go higher here than 4850. It is possible given the dynamics I am about to share. I am predicting that we will probably close at or even lower in 2024 than the Summer 2023 lows around 4000-4100 area.
There is a lot of entropy unfolding outside of the day to day levels and ups and downs in the US stock markets.
Momentum traders do not give it much thought and most of the folks form their opinion bases on technicals alone. This has its pros and cons, and it is mostly a plus as long as one is nimble and takes a hands on approach.
However, for some one who is passive and uses the passive instruments, like ETP or Mega Cap stocks to express their views on markets, this could be problematic.
There are competing forces acting at the moment which are too big to ignore. There is a strong de-globalization headwind as well as domestically here in the US, the political unity of the unity party is at risk. This theme will probably play out over next 7-10 years.
In the US, the uni-party which can be thought of as ideological cohesion amongst elected republican and democratic law makers is strongly aided by the US bureaucracy. This can be often seen as a fine interplay between the law makers and the unelected officials, like the FED Chair.
The closest example that impacts those of us in the markets is the finely tuned relationship between the FED and the US Political class. This is a very symbiotic relationship which has lasted the test of times. We are talking about several decades.
Now this relationship is threatened by an Executive branch takeover by a disruptor. A disruptor by its very nature does not play by the same rulebook as its predecessor. If this happens, the cozy relationship between the political class and the bureaucrat class and all the benefits that come with it are at risk.
Whether 2024 is going to be the year that the disruption in this relationship happens or not is beyond scope of this newsletter. However, we can safely assume that the relationship is too important to be risked and thus there will be substantial effort on both sides to safeguard it.
There are many ways to do it but one of the ways that impacts us as market participants is the actions of the FED to not rock this boat too hard.
Gone are the years when there used to be true price discovery in these markets. At time of this post, the markets are very synthetic and are orchestrated by the FED to a large extent. The price for this is something we all pay - in terms of our buying power, it gets eroded every year even as we chase the markets higher. The ultimate price for this will be the debasement of the US Dollar which for now seems to be safe.
The FED is a political animal, even though none of us ever voted for it, so it will do what is in its powers to safeguard the interests of whoever is in power.
I think what I said is not too far fetched and I can think this way without wearing my tinfoil hat.
Right?
One manifestation of this phenomenon is the incredulity at what is being reported by the official state agencies when it comes to key metrics like inflation. The official message from those in charge is that the inflation has been won over. And if you look at the trajectory of official metrics like CPI and PPI, you will be a fool not to believe it.
Now how much of that passes the smell test in real life for average person is beyond this blog. The affordability of key every day services and items is quite abysmal. Whether it is housing, food, energy or health and insurance services. At the same time, the wages have been going up but have not quite caught up to make everyone’s day to day affordability a little better.
So to me, any one thinking that there is a collusion between the FED, the agencies in charge of defining and then measuring what the inflation is, and the current political powers, can be forgiven for harboring such thoughts.
This is the Great Game. Those in power consolidate their power playing this game. It is in their best interest to keep the general population, like you and I, to be content and happy and nothing makes an American happier than to see his or her 401K rally 25000 dollars in a year (assuming an average 100k balance).
As an average person, we rarely take a long term view, longer than a year or so. We are often distracted by current news, wars, conflicts around the world, which in many cases are created by groups of people who take a 5-10 year view to bring about a seismic change in the country and the world around us. Taking a longer term view may not be useful in daily or weekly trades, but it can be helpful to prepare in the long run. If we take a longer term view, we may lose out on a 1000s of dollars in the short term but we may gain or save hundreds of 1000s down the road. At least this is my personal view.
If you think that what I just said so far has some merit, then you would also agree that this partnership, relationship or if you prefer collusion, will continue thru most of 2024. Now this is important and may help explain why the markets around us have been resilient.
Now NOTE that I am NOT saying that there is going to be a disruptor who is ultimately going to win in 2024. A few months ago I predicted that the Democratic party will retain power in 2024. I still believe this to be the case. When I make this case, I can assure you I am neither a voting democrat nor a republican. I am not political and barely adhere to any school of thought. However, I tend to lean into candidates who have the potential to change the status quo.
Right now the thought of having a disruptor, for instance a Trump or another flavor of him in 2024, is such an anathema in the US elite circles that I do not see a disruptor like him take power in the 2024. Now your counter could be that IF free and fair elections are held in 2024 then the incumbent party is for sure to be defeated due to anti-elitist populist sentiment here in the US.
To me that is a big IF and I have very strong reasons to believe that the Democratic Party will retain power in 2024. Note that this does not mean I am calling for a Biden reelection. It may look very different than any one of us can imagine.
My goal is to share out of the box thinking with folks here in this Substack. I agree that the odds of what I am describing look very bleak in this moment, but can we agree that no one can for certainty say this will NOT happen? The way the US system is organized at the moment, all but ensures there is no room for an outsider or disruptor, and atleast in 2024, I do not see any chance of a disruptor being able to overcome this system, this machine if you will. Let me know your thoughts and why you think I am going to be wrong?
“If voting mattered in a democracy, they will make it illegal”.
~ attributed to Mark Twain
This could be a theme for first few months of 2024 and one of the main reasons for my levels and context that I shared earlier.
This is also pertinent when it comes to what I am going to share in a few minutes about the likes of TSLA 0.00%↑ NVDA 0.00%↑ & the likes of MARA 0.00%↑ and COIN 0.00%↑ .
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Let us talk about TSLA now
Tesla has had a great 2023. It is up about 150%.
One of my tremendous calls for TSLA was being bullish on it at 100 and 138 shared here in the newsletter.
Most recent I have had a bearish bias on TSLA around 270.
It is now languishing here in this small range for many months now, trading recently at 247.
I am now expecting about a 10-15% move in TSLA within first few weeks of 2024. Which way this move will be?