Weekly Market Overview January 24, 2021

Jan 23, 2021

The past few weeks I've been going on non-stop about the most obvious bull market in $NQ/QQQ and why we aren't even close to putting in a major market top there. If you missed it, you can go check my tweets the last few weeks or check out previous emails. I'd rather spare your inbox from the same song, it's bullish! Scroll to the bottom of this email to get my price targets.

Here's some posts 




And back to December


You get the idea

Being a good thinker means you need to take both sides of every argument and thoroughly examine each, which is hard to do, but the more you do it, like anything else, the better you get at it. 

Try this...

Take yourself out of the Twitter echo chamber of "market is extremely extended here" chatter and instead consider that we are at the beginning of the biggest expansion to the US Economy since the end of World War II. 

If this is true, how would you deploy capital? What decisions would you make about our future?

Here's a chart of $SPX from end of WWII to 1980 where it gained over 500% in those 35 years.

I share this chart with you to help in this thinking exercise because I want to think about what happened before the END of WWII in the United States. 

There was an entire generation of investment aged people who had already experienced the Roaring 20's, the 1929 Stock Market Crash, The Great Depression, Welfare and Pearl Harbor before the actual declaration of the deadliest war in history.

These were people who had been there, done that. They were young optimists who were getting fantastically wealthy through the 1920's, levering up, they could do no wrong when it came to the stock market, until that fateful day in 1929 when the market peaked and spent the next two years falling over 80%, then rebounding for a nearly 300% rally from their lows (leaving most market participants in the dust) before peaking AGAIN and selling off another 56%. 

Any way you measure it, the 1930's were brutal.

There's nothing like government producing 9,000 aircraft a month to stimulate an economy with unemployment non-exitant, if you weren't in a fighting hole over seas, you were building tanks, planes or rockets!

This caused a 130% spike in the $SPX from 1942 to the end of the war.

As the war ended, 15 years after the great depression and the troops came home. Suddenly all that government spending dried up and we had to rebuild our own society, in a different way than Europe and Asia was rebuilding. 

It took about 24 years for the effects of the Roaring 20's and the Great Depression to bring the $SPX back to the 1929 highs, but when it did it went on a tear that lasted until the real lost decade from 2000-2013.

The difference from a lost decade to the next lost decade in $SPX terms was growth of about 5800% for measurement. 

Since the last "lost decade" the $SPX is only up 153% or 422% since TARP, which was just under $1 Trillion dollars of government stimulus.

As of today the US Stimulus effort is about $6.5 Trillion Dollars, which won't be the end of it. The country's infrastructure needs to be improved, we need to invest in drastically improving the healthcare system, research and development is falling far behind, and we have an administration at the beginning days with a big checkbook, control of house, 51/50 control of the senate and a booming stock market. 

While it's true that this is scary territory they basically have no choice but to print money, and they will need another federal stimulus after this one. 

What if we are actually at the beginning of another 5800% bull run?

Most investment age market participants only know a few things.

They've lived through Dot Com bubble in 2000

They've lived through the Global Financial Crisis in 2008

They've lived through Coronavirus in 2020

And the market kept going up!

This is all fun to write about and think about but my job isn't to write about these macro thesis, my job is to clarify what the market is most likely to do next.

Price Targets Near Term

  • $NQ $14,270
  • $ES $3,976
  • $RTY 2458
  • $GC $2,411
  • $ETHUSD $2,760

There are no target dates for these but I will say, for $NQ we'll likely see 14,270 by about the time we flip in to Bull Volatile regime, meaning there's a high likely that we get at least 10% higher move from there. 

Our single best tool to understand the markets it our work in Price Action, stack on top of that SQN, the incentives of a regime, and even more stimulus on top of stimulus. 

You may not believe any of what I've covered above and are as beared up as you can be. Not to worry, the bears will have their day this year as well. 

Bear Quiet and Bear Volatile regimes are tradable and useful, with Bear Volatiles providing multi generation risk/reward opportunities. 

Our next Bear Volatile regime will usher in the next stimulus, that's how Bear Volatile works.

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