Fundamentals

As the Fed begins to move to raise interest rates, the economy is going to slow down. In California, to fill your gas tank can cost more than $6 a gallon. It is the highest it has ever been. Inflation is here. It is almost a tax on economic activity. We are coming out of a pandemic with short supplies, because everyone reduced their inventories as a result of the pandemic. Demand has been much higher than expected. Then Russia invades Ukraine and eliminates about 30 percent of the food production in the world.

Now we have a geopolitical crisis that is worsening the supply-chain situation. We have shortages of zinc, palladium, and the price of food is rising quickly. Soybeans (S_1:COM) are at 17.59 a bushel, and it looks like soybeans are ready to take off to a whole new level: Beans in the teens. Twenty-dollar soybeans are in the realm of possibility. Wheat reached 13.63. Wheat (Teucrium Wheat Fund (WEAT)) came back down and now is roaring back up in a new cycle. Wheat will probably reach $14 or $15 wheat, and the fundamentals support that technical analysis.

Until we can replace the lost grains and raw materials from Ukraine and Russia, prices are going to skyrocket. We also have an energy crisis, as Russian oil and gas comes off the market.

The Fed’s Dilemma

Amid all of these pressures, the Fed cannot raise interest rates without pushing the world into an economic recession. The damage had already been done, as the 10-Year Note rose from 0.33 percent in 2020 to more than 3 percent now. That move has already affected weak borrowers who used the free money provided by the Fed to build a bubble in various markets. As rates have exploded, we have seen tremendous deleveraging in digital currencies. Once the dust settles, the survivor of the digital asset realignment will be Bitcoin (BTC-USD).

Economic landscape

We are living in a complex time. In some areas, we have stagflation, in others inflation, and in others hyperinflation, such as in food commodities and energies. We appear to be near a major bottom in commodities, digital assets, and precious metals. It is offering tremendous opportunities, since this volatility allows you to invest when many assets are at bottoms. Many markets appear to be getting ready for a major move to the upside. If you know how to monetize this crisis, you can greatly improve your financial situation.

To Taper Or Not To Taper

The Fed balance sheet is around $9 trillion. The Fed is talking about tapering: taking money out of the system. In this environment, we do not see how the Fed can do that. The Fed is behind the curve. The market is dictating the interest rate. The 10-Year Note is already way, way up in the past couple of years. The Fed does not control that rise.

Standard Deviation And Reversion To The Mean

Gold

Gold – SPDR Gold Trust ETF (GLD) – completed the daily target at $1861 for May 27, 022. The weekly Variable Changing Price Momentum Indicator (VC PMI) Sell 1 level of $1867 was also completed. Gold has completed a reversion to the mean and has met the daily pattern. When the daily pattern is completed, it goes neutral. There is resistance now in the gold market. The artificial intelligence in the VC PMI identifies the patterns and levels where it is best to trade; the extremes above (Sell 1 and 2) or below (Buy 1 and 2) the mean price for the day, week, month or year. Gold closing below the Sell 1 level begins to identify the reversion to the mean.

Silver

Silver – iShares Silver Trust ETF (SLV) – also made a new high of $22.47, meeting the daily Sell targets before coming back down, which activated the daily short targets of $22.15 and $21.94.

If you are long in the NASDAQ (QQQ), we recommend that you take some profits, hedge or lock in profits.

VCPMI Artificial Intelligence

The VC PMI helps eliminate the emotional input into trading. You want to use a robotic approach to eliminate that emotion. The VC PMI can replace the emotion of execution so you can focus on high probability trades. It is not right 100 percent of the time, but it provides you with entry and exit points for high probability trades in the 90 to 95 percent range. You can use the VC PMI for day, swing or position trading.