At Some Point, We Are Revisiting That Blue Line

All eyes are on the Fed today.

The Fed is expected to announce its tapering schedule for its current $120 billion per month Quantitative Easing (QE) program. The Fed has been hinting at its plan for months, via both Fed officials and media proxies.

The current proposal appears to be a $10-$15 billion per month tapering program, starting in November 2021. This is a very rapid scheme that would bring its QE program to a complete end by mid-2022.

By way of comparison, during the Fed’s last QE taper (that pertaining to QE 3 in 2017), the Fed reduced the pace of its then-QE program by $10 billion every THREE months, with the pace stopping at $30 billion per month.

Again, the current proposed tightening is much faster and aggressive than the last.

The big question is how the markets digest this. The last time the Fed attempted to taper a major QE program, it ultimately blew up the corporate debt markets resulting in stocks collapsing 20% in a matter of weeks.


Description automatically generated

Will the Fed blow things up again?

It’s quite possible, particularly when you consider that stocks are currently in their largest bubble in history by some measures… financial leverage is extraordinarily high… and we are seeing the types of mania associated with major market tops.

At the end of the day, the stock market is EXTREMELY overstretched above its 50 -month moving average. The only time it’s been more stretched was before the 1987 Crash and during the Tech Bubble.


Description automatically generated

At some point we are revisiting that blue line. The market always does.

By the way, the 50-MMA is currently at 3,141 while the S&P 500 is at 4354.

The big question is WHEN will this happen?

To figure this out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

Best Regards

Posted by Phoenix Capital Research