Transcription
Yeah. Heat warning. This video and all other videos on this channel are for entertainment purposes only. The content of this video and all other videos on this channel are the opinions of the creator only and do not constitute legal, trading, investment or financial advice of any kind. Investing carries a high level of risk and the majority of retail clients lose money. Do not invest in capital happens unless you understand the risk and you are prepared to lose it all.
Right. Hello and welcome to Camel Finance. I'm your boy Camel and welcome to the weekend's deep dive. Now on the weekend, we like to come back and reexamine the base case hypothesis of the channel which I use as a framework within which I can justify my positioning and my posturing which of course I'll show you as we get to the TA live positions and charts at the end of this as always.
Now I do want to run through this thing from the top down as we do every Saturday, but I think I want to more term this the shallow dive because I haven't got a great deal of updates in terms of the macro data sets. So, we can do a quick recap of that rather than waste too much time there. And then I actually want to zoom in on some of the alarm signals I use. Pay particular attention to the charts and just make sure that heading into the end of the year, we're still on the right side of the trade. So, if you're interested in following along with these weekends deep dives, please do hit that subscribe button. And remember, there are no midroll ads ever on this channel, so you can watch with your viewing uninterrupted. So, please do hit a like or a dislike if you appreciate no ads in the middle.
So kicking things off, the base case for the stocks was that at the lows we were too bearish. We had this blowoff tops to alltime highs come tumbling down in a global bare market and recession. And here's the key part that we would for a short period of time slip into asset price deflation. Since then, I think it's hard to say anything other than we have certainly been in a nearvertical blowoff top for some time here. Yes, we had this tariff tantrum shakeout back here, which I continuously point to as potentially this bear trap before the final move. And I do this every week, right? Right? I say if we use this as the tariff tantrum, we draw a line across the top. We must be somewhere in this FOMO neighborhood by now. Okay, somewhere up here. And if I hop back to this chart, as you can see, right, here's the all-time high, the tariff tantrum spill, or aka the bear trap. And by now, we've got to be approaching FOMO, if not a FOMO already.
So, as a quick update here for anyone that doesn't know, the rules of my system say once we make a new fresh price extreme, a new all-time high, then I'm permitted to reen the lowest low wick here and set this as our new line in the sand for profit taking. Now, we don't quite have that as of yet. So, we'll see how next week goes. But again, if we zoom out, I think it's hard to say anything other than this looks suspiciously like this whole chart right here. And as I said earlier on, I still make the case we are very much at FOMO or at least approaching it. So, as for the call, I'm going to take this one off and say so far so good. Okay. And of course, as ever, we're going to be long and strong until we have some breakdowns confirmed of our alarm signals, which we'll get to.
For Bitcoin, the idea was pretty simple, okay? that we have these weekly cycle lows and each one of these has yielded an average throughout this entire bull market of around 94% measured from low to high. The most recent weekly cycle fell a bit short here. As you can see, we only managed I say only about 69% from the low to the high for this weekly cycle. But as some of you eagle-eyed viewers pointed out, okay, if we average these three, we get about 94 or 95%. And then if we average these two here, you also get 94 95%ish. Have we got another 94% upside average gain out of this weekly cycle low? Have we just left behind that swing and are we getting ready for a turn here? If we pull up the breast indicator down the bottom, certainly looks like we have the makings of a reversal here. It's just a question of does this push to new highs or is this going to be a lower high bounce to let us out before then we head down for the next weekly cycle low left translate and fail into the final weekly cycle low which will also be the four-ear cycle low.
So, so far so good. I would say okay, all we really need to see is a push here. And even if we get significantly less than 70%, even if we get something like a 30 or a 40% push from here, that still puts us, if it's 30% off of the lows, approximately 100 104K, something like that. And if we could get 40% off the lows, it might be above 110K. So, I remain cautiously optimistic here that now is not the time for me to be exiting the spot position, heading for that 4-year cycle low as our next re-entry target. And I understand sentiment is destroyed here. A lot of people have quit. A lot of people have already sold. A lot of people are angry that I've refused to call the top at this point. But I just need to see a few more weeks of price action and then we'll be able to determine whether or not we are moving to new highs or whether that really was the top here and we'll be letting ourselves out on a lower high bounce. So again, if you've been here any length of time at all, you've heard me say that hundreds of times by now. And we continue to take this thing week by week and day by day.
So, as I said at the start, okay, if we're going to have that bare market, global recession, and here's the key part, slip into asset price deflation for a short period of time, we would expect to see the CPI inflation metric continue to be disinflationary before ultimately slipping into a short period of asset price deflation. Which brings me on to the next component of this base case hypothesis that anything you do to the M2 rate of change shows up in the inflation or the CPI with a lack. Okay? Now, because of the pandemic and the massive amounts of stimulus and QE we had, the M2 rate change exploded and whenever it explodes, okay, it has to come back to normalization. As it does, so I've been making the case over and over again, this is not very good, that we're going to be on our way down to a short period of asset price deflation over time. This has been a very contrarian idea for quite a long time, frankly. But when we take a look at a real time update of this chart, okay, you can see that right here, okay, this is the rate of change of inflation. It's still very much disinflationary. It doesn't look anything like a bottoms in. It doesn't look anything like inflation is sticky or any of these ideas or narratives are correct. In fact, it looks like this is still very much on its way down towards deflation eventually, which I speculate will occur sometime in the middle of next year. If it's a little earlier or a little later, I don't really care. The only thing I care about is either this eventually being proven correct, which will look something like this, or if it's invalidated, which will look something like this. Okay, a breakout above the top, then I will call the invalidation. But now though, true inflation, I still maintain this is nothing more than a counter trend wobble, just like the one that came before it, that ultimately resolved to a violent spill to the downside in the inflation. And I believe that's what's coming next for the CPI metrics, too.
Of course, we're still in this weird time where the government has gotten right to these inflection points and then either lost the data or shut down and decided it's not going to release it. And again, I'm still calling this very suspicious because if we use something like Now Cast, you can see inflation plummeted off a cliff. And this is right at the moment where again they refused to release the most recent CPI data prints. Kind of suspect to me, but you could call it incompetence if you want. Again, I'm still making the case that the whole CPI and inflation is sticky narrative is indeed a scop because right now if we look at shelter CPI shelter in blue, okay, inflation looks persistent and sticky and like the Fed needs to continue to be overly restrictive with its monetary policy. However, when we substitute for a real-time metric like ALRI, this thing has been deflationary for over a year and a half. Okay, so again I make the case this is a scop and it's just a manipulated CPI basket that is giving us these seemingly sticky prints. Here's another look. Okay, we take out the shelter component and we swap it for the real-time metric alrii. Look at headline and core well below 2% for a very very very long time. Okay, so yes, the bread in the supermarket might get more expensive and no, that is not going to change. But that doesn't mean that when we're measuring rate of change here that this is not well below the 2% and the Fed is indeed overly restrictive based on this. We did get a little bit of update to the inflation data this week. We saw PCE inflation come in which is mostly in line. So you can pause your screen and take a good look at that. Again, I'm going to continue to tick this one off until such time as my invalidations are hit.
As I mentioned, if we're going to have that global bare market and recession, then we would expect to see labor market deterioration, which brings me on to my next component of this base case hypothesis, which is that we would continue to see labor market deterioration. And again, we've got difficult data to deal with. Okay, first of all, the ADP certainly looks like plenty of job misses are still occurring. And again, this is suspicious timing because once more, the government seemingly has lost the data or lost a portion of it or is not going to be releasing it. And this, of course, is following a whole heap of revisions to the downside, including one that was the largest cut in history. And all of this, of course, at a time where we can see a bunch of these companies laying off employees at rates not seen since the GFC. So again, I make the case this is suspicious. And again, you can choose to call it incompetence if you want.
When we pull up the unemployment rate for the US, we can certainly see this thing is trending and has been trending towards deterioration for a very long time. Okay, so we can still take this wad off and say no invalidation has occurred yet. This thing has yet to do anything that fills me with confidence we're going to swerve recession and roll over or go sideways here. It continues to steepen. And again, you've got to keep in mind that at the hard right edge here, okay, we are working with data that is 3 months old. That's all we have because they will not release contemporaneous jobs data. So, we're working with 4.4%. Okay. And again, I point at this every week and say this looks a lot to me like this is a leadin before an accelerative sweep that we see synonymous with all prior periods of recessions, which you can now see shaded on the chart. We get the exact same look if we look at the unemployment rate for 16 to 24 year olds. Okay, it's actually sweeping faster than the normal unemployment rate. This is U6, the six-month moving average for the unemployment data. Again, you can see the same thing. Okay, trending towards deterioration. No sign of letup, no sign of rollover. And again, which is on theme with all of this jobs data, this is still 3 months old. For some reason, we've gotten right to this point here. And of course, right to this look at the hard right edge, and suddenly they won't give us the up-to-date data.
The one piece of jobs data or recession indicator that people could point at and say, well, this doesn't really look recessionary for a while was the SAM recession rule. Okay, this thing actually started to look like it had the makings of rolling over here. and in July actually made a low of 0.1 which broke the structure made a new lower low and allowed us to point to this and say this potentially looks like the first sign of letup like we might actually be able to swerve a recession here. However, since then in two prints it is more than doubled to 0.23 and again unfortunately for us we are rocking with data that is 3 months old. Remember for this thing to actually fire a recession signal we need it to rise by 0.5 percentage points or more relative to the minimum of the 3month averages from the previous 12 months. So, we don't actually have the recession indicator here just yet, at least based on the 3-month old data. But for all we know, this has spiked above the prior high, and thus it is actually signaling that a recession is right around the corner. So, this continues to be the challenge with doing this kind of deep dive. But, as ever, we'll just keep doing what we can do, which is taking it one day at a time.
We do know, however, we will be getting a 25 basis point rate cut at the moment this week on the 10th of December's meeting. Okay? So, no surprises there. We've been well on top of that. And we also know that we are getting to the stage where this is about to be the third rate cut of this most recent spout. Of course, we had that one cut back in September of 2024 before then remaining paused for a while. But we're now getting into the neighborhood where we get to find out whether or not these are cuts into normalization, right, and a soft landing, a return to baseline inflation whilst avoiding a recession, or whether indeed these are going to be cuts into a slowdown, which I make the case they are for several reasons. Number one, the labor market deterioration. Number two, the slowing of the economy. And number three, which we're going to get to in a minute, the yield curve inversion. None of which occurs during normalization cuts. But what we do know is if we exclude the one cut that was followed by months of pause back in September 2024, we are now getting into that neighborhood where we're about to see the 3month window. Okay, following that resumption of the cuts, and that is historically very bearish, if these indeed are recession cuts.
Now, I absolutely continue to make the case the average market participant is going to latch onto this narrative of cuts are coming and easing is here and the end of QT is upon us and the printer is just around the corner. And I believe all of this will be used as a narrative to reignite animal spirits whilst we catalyze that final euphoria and FOMO blowoff top moment, okay, that we were talking about right at the start. I believe all of this is going to be unprecedented, frankly. And over in a flash, flash of course in this context being a relative term. And I believe that the narrative here is going to be that all of this bull market has occurred on overly restrictive policy and now we're over the restrictions. We're bringing cuts to the table. Liquidity is coming, printer go bur and all of that kind of jazz, everyone will FOMO in at the top and then of course in line with the idea they will ban Congress from owning stocks at the top to let them all out just like they did with the Fed officials back here. So whilst we know cuts are coming and whilst we firmly believe the average market participant is going to become insufferable thinking that this is a new paradigm and we're reacelerating in the economy and that this is only just getting started. I think the reality is it's going to be much more akin to the recession cuts. But again time will tell. Okay.
As ever I don't care about I told you so or saying I was right or I was wrong. I simply care about staying on the right side of the trade. If this market is really where I believe it to be which is somewhere in this neighborhood here. Okay. then my only real job is to try to sell as close to the top as I possibly can. Okay? But if this thing is going to continue for much longer than I am anticipating, then I would much rather stay long and strong for a while longer rather than try to say, "Well, that must be the top and I'm selling here and oh, I'm locked out and I'm missing all of this just because I'm trying to stroke my own ego and say I told you so." Right? I don't care about being perpetually wrong. I'm happy to be long, strong, and wrong so long as I keep staying on the right side of the trade. But you've got to ask yourself, you know, do we number one look exactly like this setup, which I make the case we absolutely do. And number two then, okay, what do you think is going to drive this? Because I think it's going to be the market completely wrong about the liquidity story, completely wrong about how much liquidity and printing is coming. Because again, most market participants don't even understand we need rates at or near zero for quantitative easing to even become effective. And I also want to use this as an opportunity to point out that they don't typically do quantitative easing, okay, and helicopter money at the top of a euphoric blowoff top and a parabola, do they? They typically wait for everything to start to break and crash and then they step in here and stop the thing going to zero using helicopter money after they've already exhausted the other lever, which is slashing the rates to at or near zero. So, I suggest to you that it's probably much more likely the printer is not coming until here rather than this is going to continue for a while longer and then they're just going to open up the helicopter door and start tipping money out into the system. Right? So, me that just doesn't make sense. But again, feel free to make your own decision and counter trade me if you wish.
As I said right at the start, I also wanted to check this week on the alarm signals because whilst you can see a lot of people one foot out the door and a lot of people getting bearish and jittery out there, okay, there is no alarm signal in the form of spikes in the high yield credit spreads. Okay, spikes like this which occurred during the tariff tantrum or the 2022 bare market are synonymous with financially stressed conditions. But at the hard rate edge, we don't have that, right? We are still chilling back here. We can remain rangebound for a while. And the longer we go sideways or down, then the happier I am to say long and strong, no alarm signals yet, and we don't have to worry about the stock market breaking support anytime soon. Of course, if the stock market was to start losing support and these was to spike aggressively to the upside, then I think we could say, okay, looks pretty compelling that we have made a true top here, especially if we could get a breakout from this kind of level here. And an early warning sign would also come from a breakout in this kind of neighborhood. Okay, but so far we just don't have that.
And similarly, we can also use the inverted yield curves as an alarm signal. Now, a lot of people get this wrong because when the thing inverts, they scream recession. Okay, and that's not true. When the thing reverts back above zero, they all jump up and down, scream recession. And equally, that's not true. It is the acceleration, right? It's the blowout. It's the accelerative sweep to the upside that is synonymous with the tops coming in for the stock market. Similarly to the high yield credit spread, when these things start to pop to the upside, that's when you have to be concerned. That's when you have to acknowledge that any breakdowns or failed daily cycles that are occurring in the stocks are for real and it's time to actually head for the exit. Any kind of breakdowns or pullbacks that occur without such alarm signals firing are not exit the market signals and thus is a buy the dip environment. And so when we zoom in here, do we have accelerative sweeps on the 102 yield curve? Anything like the.com bubble burst, the GSC or the C19 pop? I would argue no, we do not. Okay, since April, we have been entirely rangebound here and we can remain rangebound indefinitely. We could also from here quite comfortably roll over and none of that to me would be any kind of alarm signal that we need to head for the exits. However, we get a trend line breakdown, some failed daily cycles in the stock market, and this thing starts to pop, as does the high yield credit spreads, then again, I submit to you, this is an alarm signal, and we need to think about being seriously defensive.
We can sharpen this, by the way, to my favorite alarm signal, which is the 10-year 3month yield spread like this. And this is where things start to get a little bit more spicy here, okay? Because we have had this squeeze, okay? But this is a much sharper signal. You really do not get much time to react here. Once this thing starts to move higher, it is really time to start paying attention. Now, if we zoom in here, we are attempting after having a squeeze to challenge this prior high. And now, again, it's important to point out here, okay, any kind of rejection here and sideways chop and range, no alarm signals fired, okay, no need to take any breakdowns seriously. And we still maintain we're in a by the dip environment. But if this thing starts to blow out to the upside, especially with a big accelerative sweep, just like we saw the C19 era, it would for me be a very alarming signal. it would be a tell from the market that the tops are much much closer than most people are willing to entertain. So, this is one of the primary reasons I wanted to make today's video to check on these alarm signals. And as you can see, okay, by the time we get to next weekend, we really do not want to see a new higher high, okay? Because if we do, it's going to speak to a riskoff type move.
I will say this, the VIX doesn't look concerning at all, okay? At least not for now. You can see it doesn't look anything like the tariff tantrum spill or the yen carry trade unwind. So, that's something, okay? But of course, it can change and it can change quickly. For the stock market, we're still long and strong. We're still adding on the way up using other things like the small caps and the semiconductors ETFs. And we're going to continue to do this until such time as we get some true breakdowns occurring. For gold, we are still positioned in the longerterm accounts via the mining ETFs since that weekly cycle low all the way back here. So, happy days, long and strong. We'll see what happens from here. We've got some short-term positions in the likes of SIJ and Silver, which continue to push higher. So, again, happy days there. Very close to our long-standing target of 60 bucks. And Bitcoin for now at least is still holding above its low. Now we are yet to break the trend line which I really want to see. We are also yet to cross the DSS breet on the bullish side down the bottom which we're going to need to see for a turn. Sometimes turns can take a while just like back here. This took a full month before we could actually leave behind a bottom, cross the bre and then move to the upside out of that weekly cycle low. So does that mean there's another couple of weeks here ahead before we can actually start to break this trend line and push to the upside perhaps. But so far the low is the low. Okay. And the low is still holding. So, we will see what this weekend brings and what next week brings as well.
So, in summary, I'm going to say that largely speaking, things are still going according to plan, right? I still very much maintain there's more upside ahead, at least until something changes. I don't think there's any alarming signals just yet, although we are teetering on the edge for the 10-year 3month yield spread. Not confirmed by the 102, which is a bit slower admittedly, neither by the high yield credit spreads blowing out. Sentiment doesn't seem to match at the moment. Seems quite bearish. Seems like the path for max paying would actually be higher as well. When you couple all of that with the fact we don't have any major breakdowns anywhere, any major failed cycles yet, I think we can still continue to say things are going according to plan. I still maintain we're going to finish the year strong. And then the only real challenge is we need to somehow get hold of this data, right? We could really use the Fed and the government releasing some of this data so that we knew how to position and could continue to have confidence that our read in the market and the macro is correct.
So, if you like what you saw today, consider hitting that subscribe button and following along. If you want to get started with all things cycles, there'll be a link you can click right here in the middle any moment now. And other than that, have a fantastic weekend. Until next time, take care from me. All the best. Cheers. Bye. Finance. Rocking the market with his contrarian scream. Trades like a pro. No fear, no shame. Sticking to his guns in his money game. He's a bad ass. Oh yes indeed. Camel finance got the markets key taking us stories on a bumpy ride.