Bearish Engulfing

...on the daily chart of the USD last Thursday could be a signal for a market change? However, the weekly chart shows a continuous rise and breaking over the resistance level at 105. What gives? This is not harmony in the market. King Dollar did fall back into the 105 range and then, it touched 107. By hanging at highs, it could go higher. The question: Can it hold price? So, what else do we see?

Last week...

...we concluded that a short bounce is possible. If it appears, it should reach its peak this Friday. Nevertheless, the price action of the dollar will be the determining point. Now, consider the price action in the oil contract. Oil broke out above the 93-resistance level. It also gathers steam from the aspect that a golden cross of the 50-day moving average over the 200-day moving average with stronger volume on the upside as opposed to weaker volume on the downside. This is impressive when you throw into the equation the strong dollar. If oil pierces $95, then $100 oil comes with a new resistance level of $105. The Fed may not include energy in their phony matrix inflation formula, but we do. This oil price action says inflation is not going away. 

New Dilemma

If inflation persists as we indicated, how does the Fed address the problem? At the moment, commercial real estate is in do-do land. They have loans coming do that they originally received with low interest rates. During this period, COVID-19 caused havoc. Workers left the office. Many of these rentals left the commercial building. Income has gone negative. Many commercial property owners have let their buildings go to bankruptcy court. Now, they face higher interest rates that will make commercial projects lose their position. A conservative estimate puts the figure at $4.6 trillion by 2026. Joel Litman, an influential money manager says, "Credit is the key to market direction." We cannot argue about his point. The signs of higher interest show themselves in the fact that last month, 57 companies went bankrupt. 

- 2 out of 3, ain't bad...

Meatloaf sang the hit, but Powell can't sing. If he stands pat, the damage will continue. If he raises rates, it will get worse. His only way out is to lower rates and admit defeat. Admit the Fed does not know what they are doing. Neither will happen because ego, big money and the status quo are at stake. All this adds to our meme, End the Fed!               Peace.