To The Moon

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Just last night, which is, the last trading day in May, the three giants who control the US economy met, one is Biden, the other is Federal Reserve Chairman Powell, and the other is the current Treasury Secretary and former Federal Reserve Chairman Yellen.

This meeting was led by Biden administration, but after such a high-level meeting, no decent news broke out,。

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​Obviously, this is a finding responsible person for inflation meeting. Biden wants to throw the responsibility of inflation to the Federal Reserve, so as to save his poor support rate before the November election. Unfortunately, it doesn't help. This meeting is almost useless except that the market, which finally started to rebound, loses its direction because of the resurgence of inflation concerns.

Come and listen to what Biden has said

The general meaning of Biden's speech is: Although his first task is to curb price increases, this is mainly the responsibility of the Federal Reserve. My principle of doing things is to respect the Federal Reserve and its independence. I have done this before and will continue to do so in the future.

This is not all Biden wants to express. Just one day ago, The Wall Street Journal rarely published a signed article by current President Biden.

The headline is as following picture​​

​The whole article can be summarized in three sentences: he will: first, let the Fed raise interest rates as needed; Second, reduce household costs by increasing the productive capacity of the American economy; Third, reduce the federal budget deficit.

The link is here:Https://www.wsj.com/articles/my-plan-for-fighting-inflation-joe-biden-gas-prices-economy-unemployment-jobs-covid-11653940654

This means that the path of interest rate normalization can proceed normally, the supply of products will not be hit, the market demand will continue to grow, and the federal government will not expand the deficit to stimulate the economy.

Is there such a fairy-like way? If so, it should have been used before the last economic crisis.

Biden seems to be playing hide-and-seek with the market, and the technique of drawing cakes is too unbelievable. When the market can't understand the Biden administration's statement, it is often the time when bad news is brewing. Do you still remember a sudden RRR cut before the introduction of strong supervision measures of  China last year? When the market can't understand some good news, it tends to develop on bad expectations.

Just like now, why do three important high-level figures meet at this time? And there is no substantial economic policy release? On the contrary, President Biden should emphasize the independence of the Federal Reserve and attribute the responsibility for inflation to the Federal Reserve?

The only possible explanation is that there must be something big wrong with the American economy, which will not be solved for a while and will affect the contest between the Democratic Party and the Republican Party in November.

I quickly scrambled the recent macro data, and found that the data was still so ugly, but it was far from saying that there was a sudden black swan.

Looking at the current inflation trend, the nominal inflation rate is indeed the highest since 1989.

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Let's take a look at the post-wage growth rate of workers eaten by inflation, that is, the real wage growth rate. After Biden took office in January 2021, it began to fall, and the red decline continued to expand

So, why is Biden washing? I'm afraid it's hard for him to get rid of the pot of inflation.

Secondly, it is worth noting that there is a terrible trend in the real estate sector.

House prices remain high and continue to rise

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​But at the same time, housing sales data are plummeting wildly​​

​Home mortgage data has collapsed

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​Imagine what Americans use to support such high housing prices. If the Fed keeps raising interest rates, will the housing market crash follow?

However, after checking the trend of the real estate sector in the next secondary market, it seems that it has not started to crash.

Finally, there is a huge scissors gap between food production and food prices

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​At present, the contradiction in food remains to be solved.

Fortunately, the price of crude oil is still at a high level and fluctuates, and there is no sign of breaking the position and rising. Although the EU has started the embargo, the waiting period, embargo time and measures in the embargo agreement are all serious injuries, which cannot have much impact on the price of crude oil.

Let's look at the latest US economic accident index in May, which has broken the position and dived. It seems that the recent macro data exceeding expectations has been very rare

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On the whole, The U.S. economy is still on the verge of recession, Apart from the crisis that has been priced in the market, there is no new black swan. The only thing to be careful is the sudden collapse of the real estate sector in the secondary market. If the house price is not taken over and the exposure to the broken capital chain is expanding, it will be the second Lehman crisis. Although it is dangerous now, there is no sign of outbreak.

We still adhere to the previous judgment, US stocks will continue according to the current rebound trend, the 20-day moving average is an important emotional turning point, but this period of market is still a bear market rebound

​Review: Are they all bargain-hunting bear markets? Are they all crazy?​

Finally, let's talk about where the Fed's put options are

Every bear market has a hidden Fed put option, which is the bottom area of the bear market. At that point, you can choose to sell put to collect royalties, and it is unlikely to fall further.

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From this technical chart, S&P has only reached the first Fibonacci resistance level.

The average decline in all previous bear market histories since 1950 is another 16 percentage points at the entrance to the bear market, or 16% after the S&P plunged 20 percentage points from a 52-week high, the averageThe bear market will fall by another 36% or so.

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Therefore, it is expected that the bottom of the bear market when the Fed really rescues the market (such as stopping raising interest rates, even cutting interest rates, or stopping shrinking the table) will be at the last Fibonacci resistance level, that is, 61.8%, around S&P 3200 points.

Don't forget, June 1st is the big day when the Fed starts to shrink its balance， Even if the bear market continues to jump upward, the situation will be quite volatile.

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