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A large number of You can’t see my pain mental health awareness shirt companies have beat analyst expectations for their Q3 of 2021 earnings, but their stock prices have gone down significantly (10% to 20%). This is a sure sign that the market has already discounted the best case scenario for the time being. The Fed started tapering from bond buying (also known as money printing or injection of liquidity) in November of 2021. Every time the Fed has ended its quantitative easing (QE) program and started tapering, the S&P 500 contracted 18% to 20%. This is history. The U.S. Dollar had been consolidating for the past few months, but has now broken its resistance. The USD is what I’d call the stress barometer of the system, and a breakout to the upside is indicative of the stress in the system. Note that this makes sense because when the Fed tapers from bond buying, they are essentially strengthening the dollar. The S&P 500 index is trading at all-time highs because the large and mega-cap names are holding it up, but there is a lot of subsequent carnage (and increasingly so), which is a classic sign we’ve topped off in the market. The M2 money supply peaked in February of 2021, which coincided with the top in the most speculative parts of the market, including SPACs and Cathie Wood’s ARKK.
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