In December 1996, former Fed Chairman Alan Greenspan coined the term ‘irrational exuberance’ when he warned that the stock market was getting carried away. Today we have the same situation: The credit cycle is much closer to an end than a beginning.
The Fed won’t shrink its balance sheet. Some think the Fed wants to get rid of Trump, which is why it is raising rates. But this can be countered by other means. If the Fed really wanted to crash the economy and markets, it would shrink the balance sheet.
The economy and markets are so fragile the Fed might be able to get away with jawboning. What usually happens when the Fed starts talking like this is that speculators/hedgers short stocks, which provides new fuel for the perpetual short squeeze. And that’s likely the Fed’s ploy. It talks tough while raising rates, which is expected in a new presidential term, providing it with ammo when the markets finally break.
The silver price remains on lockdown. At some point hedge funds will sell en mass again, and the silver price will plunge again. It’s amazing watching this lunacy happen (Trump, silver, the stock market) when you know it will all end badly. Traders have the memory of goldfish these days, so if the world doesn’t end next week, they won’t have a reason to keep their positions.
Under such conditions, the COMEX silver futures buyers, SLV call buyers, CBOE Volatility Index call buyers, and so on, won’t have reason to continue holding their positions. This means relief would lead to weakness in precious metals and strength in stocks as events continue to unfold, with the mainstream media changing the focus to keep society’s mindless goldfish entertained.
These idiots will keep returning until they have their cash taken away, because the news is getting worse by the day. The daily VIX chart, which shows prices are itching to blow above the 200-day moving average, is proof. It wouldn’t be so bad if players remained constrained to the cash markets like the old days; however, today’s traders are so desperate (because they can’t afford to trade the cash markets anymore), that the focus is in the options markets, which is how prices are managed so easily via the machines.